<PAGE> 1
FORM 10-Q
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-10831
ALC COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 38-2643582
(State of incorporation) (IRS Employer ID No.)
30300 Telegraph Road, Bingham Farms, Michigan 48025-4510
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (810) 647-4060
Indicate by check mark whether the registrant (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
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
As of August 1, 1994, the registrant had 33,595,007 shares of Common Stock
outstanding.
<PAGE> 2
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
----------- ------------
(Unaudited)
(In Thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 23,006 $ 1,819
Accounts receivable, less allowance for doubtful accounts of
$3,684,000 and $3,974,000 71,466 58,761
Other current assets 7,137 4,543
-------- --------
Total Current Assets $101,609 $ 65,123
Fixed Assets:
Communication systems $ 87,653 $ 81,752
Other equipment and leasehold improvements 33,674 29,785
Construction in progress 6,852 6,722
-------- --------
$128,179 $118,259
Less accumulated depreciation and amortization 75,052 69,918
-------- --------
Total Fixed Assets $ 53,127 $ 48,341
Cost in excess of net assets acquired 48,029 48,792
Deferred income taxes 10,240 10,240
Intangibles and other assets 27,240 21,045
-------- --------
Total Assets $240,245 $193,541
======== ========
</TABLE>
See notes to consolidated financial statements
<PAGE> 3
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
------------ -----------
(Unaudited)
(In Thousands)
<S> <C> <C>
Current Liabilities:
Accounts payable $1,213 $1,397
Accrued liabilities 25,830 16,855
Accrued network costs 41,943 33,482
Taxes other than income 10,472 11,592
Notes payable, capitalized leases and other long-term debt 285 392
-------- --------
Total Current Liabilities $79,743 $63,718
Long-term Liabilities:
Notes payable, capitalized leases and other long-term debt $3,433 $3,263
Senior Subordinated Notes 79,396 84,335
-------- --------
Total Long-Term Liabilities $82,829 $87,598
-------- --------
Total Liabilities $162,572 $151,316
Stockholders' equity:
Preferred Stock, par value $0.01; authorized -- 14,784,000
shares; issued and outstanding -- none
Common Stock, par value $0.01; authorized -- 200,000,000
shares; issued and outstanding -- 33,585,000
and 32,948,000 shares $336 $329
Capital in excess of par value 138,692 132,378
Paid-in capital -- Warrants 11,770 12,129
Accumulated deficit (73,125) (102,611)
-------- --------
Total Stockholders' Equity $77,673 $42,225
-------- --------
Total Liabilities and Stockholders' Equity $240,245 $193,541
======== ========
</TABLE>
See notes to consolidated financial statements
<PAGE> 4
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ -----------------
June 30, June 30, June 30, June 30,
1994 1993 1994 1993
-------- -------- --------- --------
(In Thousands Except Per Share Amounts)
<S> <C> <C> <C> <C>
Revenue $135,908 $104,233 $265,697 $206,077
Operating Expenses:
Cost of communication services $74,388 $56,824 $144,398 $112,291
Sales, general and administrative 32,451 29,575 63,682 58,090
Depreciation and amortization 4,263 2,826 8,290 5,680
-------- ------- -------- --------
Total Operating Expenses $111,102 $89,225 $216,370 $176,061
-------- ------- -------- --------
Operating Income $24,806 $15,008 $49,327 $30,016
Interest expense (net of interest and other income of $330,000,
$79,000, $695,000 and $131,000) 1,615 2,866 3,241 6,520
-------- ------- -------- --------
Income Before Income Taxes, Extraordinary Item and
Cumulative Effect of Accounting Change $23,191 $12,142 $46,086 $23,496
Income taxes 8,350 3,750 16,600 7,100
-------- ------- -------- --------
Income Before Extraordinary Items and Cumulative Effect
of Accounting Change $14,841 $8,392 $29,486 $16,396
Extraordinary Item:
Loss on early retirement of debt (net of
income tax benefit of $4,000,000) (7,490) (7,490)
Cumulative effect of change in method of accounting for
income taxes 13,500
-------- ------- -------- --------
Net Income $14,841 $902 $29,486 $22,406
========= ======= ======= ========
Earnings per common and common equivalent share:
Income before extraordinary item and cumulative effect
of accounting change $0.39 $0.23 $0.77 $0.46
Extraordinary item:
Loss on early retirement of debt (0.21) (0.21)
Cumulative effect of change in method of accounting for
income taxes 0.38
-------- ------- -------- --------
Net Income $0.39 $0.02 $0.77 $0.63
========= ======= ======= ========
Weighted Average Common and Common Equivalent Shares 38,282 35,635 38,289 35,058
========= ======= ======= ========
</TABLE>
See notes to consolidated financial statements
<PAGE> 5
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
------------------------
June 30, June 30,
1994 1993
----------- -----------
(In Thousands)
<S> <C> <C>
Operating Activities
Net income $ 29,486 $ 22,406
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 5,430 4,775
Amortization of intangible assets and bond discount 2,942 1,678
Gain (loss) on sale of assets (98) 3
Cumulative effect of change in accounting principle (13,500)
Loss on retirement of debt, net of tax 7,490
Increase in accounts receivable and
other current assets (15,298) (8,803)
Increase in current liabilities 15,564 8,340
--------- --------
Net Cash Provided by Operating Activities $ 38,026 $ 22,389
Financing Activities
Payments on revolving credit facility $ (9,931)
Proceeds from subordinated notes 84,335
Payments on long-term debt $ (490) (19,409)
Proceeds from issuance of common stock 2,811 3,305
Retirement of senior subordinated notes (72,380)
Retirement of subordinated notes (5,017)
--------- --------
Net Cash Used in Financing Activities $ (2,696) $(14,080)
Investing Activities
Expenditures for fixed assets $ (10,241) $ (4,418)
Proceeds from sale of fixed assets 121 4
Change in other non-current assets 206 (1,907)
Purchase of customer base (4,229)
--------- --------
Net Cash Used in Investing Activities $ (14,143) $ (6,321)
--------- --------
Increase in Cash and Cash Equivalents $ 21,187 $ 1,988
Cash and cash equivalents at beginning of period 1,819 112
--------- --------
Cash and cash equivalents at end of period $ 23,006 $ 2,100
========= ========
Interest paid $ 3,883 $ 5,770
========= ========
Income taxes paid $ 8,952 $ 2,188
========= ========
</TABLE>
See notes to consolidated financial statements
<PAGE> 6
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Six Months Ended June 30, 1994
(Unaudited)
<TABLE>
<CAPTION>
Paid-in capital
Common Stock Capital in -- Warrants
---------------- excess of --------------- Accumulated
Shares Amount par value Shares Amount deficit Total
------ ------ --------- ------ ------ ------- -----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 32,948 $329 $132,378 4,266 $12,129 $(102,611) $42,225
Exercise of stock options 278 3 1,013 1,016
Tax benefit from exercise of stock
options 3,151 3,151
Exercise of warrants 359 4 2,150 (359) (359) 1,795
Net income for the six months
ended June 30, 1994 29,486 29,486
------ ---- -------- ----- ------- -------- -------
Balance, June 30, 1994 33,585 $336 $138,692 3,907 $11,770 $(73,125) $77,673
====== ==== ======== ===== ======= ======== =======
</TABLE>
See notes to consolidated financial statements
<PAGE> 7
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1994 AND 1993
- - ---------------------------------------
NOTE A -- MANAGEMENT'S REPRESENTATION
The consolidated financial statements included herein have been
prepared by ALC management, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
note disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. Certain prior year amounts
have been reclassified to conform to current year presentation. In the opinion
of ALC management, all adjustments considered necessary for a fair presentation
have been included and are of a normal recurring nature, and the accompanying
consolidated financial statements present fairly the financial position as of
June 30, 1994 and December 31, 1993, and the results of operations and cash
flows for the three and six month periods ended June 30, 1994 and 1993.
The balance sheet at December 31, 1993 has been derived from the
audited financial statements at that date but does not include all of the
information and accompanying footnotes required by generally accepted
accounting principles for complete financial statements. It is suggested that
these consolidated financial statements be read in conjunction with the
financial statements and notes included in the Company's Form 10-K for the
fiscal year ended December 31, 1993.
NOTE B -- PURCHASE OF CUSTOMER BASE
During July 1993, the Company acquired the specialized 800 customer
base of Call Home America, Inc. for $15.5 million plus a payment to be made in
August 1994 based on revenue in April, May and June 1994. The Company recorded
a liability of $4.2 million related to this payment.
NOTE C -- LONG TERM DEBT
In April 1994, the Company acquired, on the open market, $5.0 million
of its 9.0% Senior Subordinated Debentures at the Company's approximate book
value.
NOTE D -- SUBSEQUENT EVENT
In August 1994, the Company completed a series of contracts which will
result in a reduction of the Company's Michigan network costs by over $2
million per year. The transactions included loans of approximately $9 million
in exchange for notes receivable to be
<PAGE> 8
0NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
repaid over 5 years and a 15% minority ownership position in a
company owning this Michigan-based digital fiber optic network.
<PAGE> 9
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company reported net income of $14.8 million on revenue of $135.9
million for the three month period ended June 30, 1994. This compares to
income before extraordinary loss (related to early retirement of debt) of $8.4
million on revenue of $104.2 million for the same period in 1993. For the six
months ended June 30, 1994, the Company reported net income of $29.5 million on
revenue of $265.7 million. This compares to income before extraordinary item
and cumulative effect of an accounting change of $16.4 million on revenue of
$206.1 million for the six months ended June 30, 1993. Gross margin as a
percent of net revenue remained relatively constant for both the three and six
months ended June 30, 1994 compared to the year earlier period. The Company's
continued strong performance was reflected by the increase in operating income
of $9.8 million for the three months and $19.3 million for the six months ended
June 30, 1994 over the same periods one year earlier. The improved operating
results for 1994 were primarily due to an increase in long distance traffic and
operating expense reductions as a percent of revenue.
OPERATING RESULTS AS A PERCENT OF REVENUE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue 100.0% 100.0% 100.0% 100.0%
Communication svcs. (54.7) (54.5) (54.3) (54.5)
------ ------ ------ ------
Gross Margin 45.3% 45.5% 45.7% 45.5%
Sales, gen'l & admin. (23.9) (28.4) (24.0) (28.2)
Depreciation & amort. ( 3.1) ( 2.7) ( 3.1) ( 2.7)
------ ------ ------ ------
Operating income 18.3% 14.4% 18.6% 14.6%
====== ====== ====== ======
</TABLE>
Results for 1993 included both the cumulative effect of the change in
method of accounting for income taxes which resulted in an increase in income of
$13.5 million in the first quarter of 1993 and an extraordinary loss on the
early retirement of debt of $7.5 million, net of tax, recorded in the second
quarter of 1993.
Billable minutes have continued to increase since the third quarter of
1990 when compared to the same quarter in the prior year. Billable minutes have
continued to grow, reaching record levels for the fourth consecutive quarter.
The increase in billable minutes results from traffic growth generated by new
customers, minutes from the acquisition of a customer base, increased sales
productivity, the introduction of new products and
<PAGE> 10
increased minutes per customer offset by billable minutes lost through
attrition of existing customers. The results of operations for the three
months ended June 30, 1994 reflect a continuation of the trend of strong
financial performance as indicated by a 76.8% increase in income before the
extraordinary item and the cumulative effect of the accounting change from the
comparable quarter of 1993.
REVENUE
Revenue increased by 30.4% and 28.9% for the three and six months ended
June 30, 1994 from the comparable periods of 1993. Billable minutes again
reached the highest level in the history of the Company, increasing by 41.4%
and 37.2% for the three and six months ended June 30, 1994 over the comparable
period in 1993. The first full month revenue from new sales in the second
quarter of 1994 was significantly higher than the same period one year earlier.
The Company's revenue per minute of 17.5 cents continues to be strong, though it
has decreased from the prior year quarter level of 19.0 cents primarily due to
changes in the sales mix. Reseller revenue has continued to grow significantly
from prior year periods. This growth includes the impact of a major customer
whose revenue has increased substantially in the last six months to a
level of approximately 8% of total revenue in the second quarter. Although
reseller revenue per minute is lower than regular commercial traffic (between
11 cents and 12 cents per minute), the increased reseller traffic has a
positive impact on operating income due to low incremental sales, general and
administrative costs.
The provision for uncollectible revenue was 1.5% and 1.7% of gross
revenue for the three and six months ended June 30, 1994 and 1.5% and 2.0% for
the same periods of 1993. Strong controls and procedures have enabled the
Company to improve the collection process and provide earlier detection of
credit risks.
OPERATING EXPENSES
The Company's primary cost is for communication services, which
represents the costs of originating and terminating calls via local exchange
carriers (primarily Bell Operating Companies). Also included in communication
services are the costs of owning and leasing long-haul transmission capacity.
The cost of communication services increased $17.6 million and $32.1
million during the three and six month periods ended June 30, 1994 compared to
the same periods in 1993. This cost, however, remained relatively constant as
a percent of net revenue for the comparable periods. By the use of high volume
fixed price leased facilities to transmit traffic and lower prevailing unit
prices for
<PAGE> 11
such capacity, the Company has successfully reduced its long-haul transmission
costs as a percent of revenue.
Sales, general and administrative expenses increased by 9.7% and 9.6%
for the three and six month periods ended June 30, 1994 from the same periods
one year earlier (but was significantly reduced as a percentage of revenue).
The increase reflects increased commissions, new sales channel program costs
and other expenses related to greater sales activity. 1994 results include a
$1.2 million addition to pre-tax income, recorded in the first quarter of the
year, resulting from the favorable settlement of a state telecommunications
excise tax dispute.
Depreciation and amortization increased 50.8% and 46.0% from the second
quarter and the first half of 1993 to the same periods in 1994. This is
primarily due to the amortization of the costs related to the acquisition of
the Call Home America customer base.
INTEREST EXPENSE
Net interest expense decreased 43.6% and 50.3% for the three and six
months ended June 30, 1994 compared to the same periods in 1993. This resulted
from principal payments in 1993, reduced interest related to the replacement of
the 1992 Notes with the 1993 Notes, increased interest income due to higher
cash balances, the elimination of borrowings under the Revolving Credit
Facility as well as capital lease expirations.
INCOME TAXES
The effective tax rate increased from 30.2% for the first half of 1993
to 36.0% for the first half of 1994, due to the increase in the federal income
tax rate and the increase in taxable income (which results in a decrease in the
impact of the Company's annual available $10 million net operating loss
carryforward on the effective tax rate).
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1994 and 1993, the Company generated
positive cash flow from operations of $38.0 million and $22.4 million,
respectively. The positive cash flow reflects sixteen consecutive quarters of
increased revenue and operating profits compared to prior year comparable
quarters.
The positive cash flow from operations resulted in working capital of
$21.9 million at June 30, 1994 compared to $1.4 million at December 31, 1993.
The increase in working capital is largely attributable to: (a) the increase
in accounts receivable due to the increase in revenue and (b) the increase in
cash attributable to the increased cash flow, offset by the increase in
<PAGE> 12
accrued liabilities and accrued network costs also related to higher traffic
volumes.
In addition to the positive cash flow from operations, the Company's
liquidity position is further strengthened by the availability under the
Revolving Credit Facility ("Facility"). The Facility provides for borrowings
up to $40.0 million based on the level of accounts receivable and expires June
30, 1995. Under this Facility, the Company is able to minimize interest
expense by structuring the borrowings under three alternatives. The effective
rate under the Facility during 1993 approximated 5.8%. There have been no
borrowings under the Facility during 1994. As of June 30, 1994, the Company
had borrowing availability of $40.0 million and no balance outstanding.
Further evidence of the Company's strong liquidity position was the
Company's ability to finance the purchase, in April 1994, of $5.0 million of
the Company's 1993 Notes from cash flow from operations. Additionally, in
August 1994, the Company completed a series of contracts which will result in a
reduction of the Company's Michigan network costs by over $2 million per year.
The transactions included loans of approximately $9 million in exchange for
notes receivable to be repaid over 5 years and a 15% minority ownership
position in a company owning this Michigan-based digital fiber optic
network.
Because the Company has chosen to lease rather than own its
transmission facilities, the Company's requirements for capital expenditures
are modest. Capital expenditures totaled $10.2 million for the first half of
1994 and are expected to be $20 - $25 million for the year ended December 31,
1994. Capital expenditures during the first half of 1994 included projects for
enhanced efficiency and technical advancement in the network, information
systems and customer service. Future investment requirements for capital
expenditures relate directly to traffic growth which necessitates the purchase
of switching and related equipment. In addition, a major component of the
capital budget relates to technological advancements as the Company continually
updates its network capabilities to offer enhanced products and services.
Management believes that the Company's cash flow from operations will
provide adequate sources of liquidity to meet the Company's anticipated short
and long term liquidity needs.
<PAGE> 13
PART II: OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
During the second fiscal quarter ended June 30, 1994, a Proxy
Statement dated April 12, 1994 was furnished to the Company's stockholders in
connection with the uncontested election of directors as well as approval of
the ALC Communications Corporation 1994 Non-Employee Director Stock Option Plan
at the Annual Meeting of Shareholders held May 12, 1994.
(a) Election of directors
In accordance with the Certificate, each outstanding share of ALC
Common Stock is entitled to one vote. The affirmative vote of a majority of
all the votes entitled to be cast by all holders of the ALC Common Stock is
required to elect in the aggregate seven members of the Board of Directors.
The name of each director elected at the meeting, and a separate tabulation
with respect to each nominee, are set forth below:
<TABLE>
<CAPTION>
Class Nominee Votes for Votes withheld
- - ----- ------- --------- --------------
<S> <C> <C> <C>
Common Michael E. Faherty 27,532,475 90,103
Common Richard D. Irwin 27,531,518 91,060
Common Marvin C. Moses 27,531,555 91,023
Common William H. Oberlin 27,530,564 92,014
Common Richard J. Uhl 27,532,960 89,618
Common John M. Zrno 27,530,172 92,406
</TABLE>
(b) Approval of Company's 1994 Non-Employee Director Stock Option Plan
Number of votes cast FOR such approval 21,353,422
Number of votes cast AGAINST such approval 6,228,146
Number of ABSTENTIONS 41,010
Number of BROKER NON-VOTES 0
<PAGE> 14
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-K
EXHIBIT INDEX
[refer to definitions at end of Index]
<TABLE>
<CAPTION>
Incorporated Page
Exhibit Filed Herein by Number
Number Description Herewith Reference to: Herein
- - ------ ----------- -------- ------------ ------
<S> <C> <C> <C> <C>
3.1 ALC Amended and X
Restated Bylaws
May 12, 1994
10.1 ALC Amended and X
Restated 1986 Option
Plan
May 12, 1994
10.2 ALC Amended and X
Restated 1990 Stock
Option Plan
May 12, 1994
10.3 ALC 1994 Non-Employee X
Director Stock Option
Plan
May 12, 1994
10.4 Stock Option X
Grumman Hill
May 12, 1994
10.5 Amendment/Advisory X
Agreement with Stock
Option
May 2, 1994
10.6 Termination/Advisory X
Agreement with Stock
Option
May 12, 1994
10.7 Amended & Restated X
Fiber Optic Lease
Agrmt. between MSM
and Allnet
August 1, 1994
(CONFIDENTIAL TREATMENT
REQUESTED)
10.8 Digital Service X
Agrmt. between MSM
and Allnet
August 5, 1994
(CONFIDENTIAL TREATMENT
REQUESTED)
11.1 Computation of X
Earnings Per Share
</TABLE>
DEFINITIONS: ALC: ALC Communications Corporation
ALLNET: Allnet Communication Services, Inc.
GRUMMAN HILL: Grumman Hill Associates, Inc.
MSM: MSM Associates, Limited Partnership
The Registrant hereby agrees to furnish the Commission a copy of each of the
Indentures or other instruments defining the rights of security holders of the
long-term debt securities of the Registrant and any of its subsidiaries for
which consolidated or unconsolidated financial statements are required to be
filed.
Exhibits 10.1 through 10.8 are included pursuant to SEC Regulation S-K, Item
601(b)(19).
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the second quarter of 1994.
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALC COMMUNICATIONS CORPORATION
(Registrant)
By:/s/ Marvin C. Moses
---------------------------
Marvin C. Moses, Executive
Vice President and Chief
Financial Officer
By:/s/ Marilyn M. Lesnau
---------------------------
Marilyn M. Lesnau, Vice
President, Controller and
Chief Accounting Officer
Dated: August 12, 1994
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED BYLAWS
OF
ALC COMMUNICATIONS CORPORATION,
A Delaware Corporation
As of May 12, 1994
ARTICLE I
Offices
Section 1.1 Registered Office. The
Registered office of ALC Communications Corporation (the "Corporation")
in the State of Delaware shall be at The Prentice Hall Corporation Systems,
Inc., 229 South State Street, Dover, Delaware 19901 or any subsequent address
in Delaware of The Prentice Hall Corporation Systems, Inc. and the name of the
registered agent at that address shall be The Prentice Hall Corporation
Systems, Inc.
Section 1.2 Principal Executive
Office. The principal executive office of the Corporation shall be located at
Suite 350, 30300 Telegraph Road, Birmingham, Michigan 48010 or such other
place within or outside of the State of Delaware as the Board of Directors of
the Corporation ("Board of Directors") from time to time shall designate.
Section 1.3 Other Offices. The
Corporation may also have an office or offices at such other place or places,
either within or without the State of Delaware, as the Board of Directors may
from time to time determine or as the business of the Corporation may require.
ARTICLE II
Stockholders
Section 2.1 Annual Meetings. An
annual meeting of stockholders shall be held for the election of directors at
such date, time and place, either within or without the State of Delaware, as
may be designated by the Board of Directors from time to time. Any other
proper business may be transacted at the annual meeting.
At an annual meeting of the stockholders, only such business shall be conducted
as shall have been properly brought before the meeting. To be properly brought
before an annual meeting, business must be (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (b) otherwise properly
<PAGE> 2
brought before the meeting by or at the direction of the Board of Directors, or
(c) otherwise properly brought before the meeting by a stockholder. For
business to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice must be received at
the principal executive offices of the corporation: (1) not less than 60 days
in advance of such meeting if such meeting is to be held on a day which is
within 30 days preceding the anniversary of the previous year's annual meeting
or 90 days in advance of such meeting if such meeting is to be held on or after
the anniversary of the previous year's annual meeting; and (2) with respect to
any other annual meeting of stockholders, on or before the close of business on
the 15th day following the date (or the first date, if there be more than one)
of public disclosure of the date of such meeting. For the purposes of this
Section 2.1, the date of public disclosure of a meeting shall include, but not
be limited to, the date on which disclosure of the date of the meeting is first
made in a press release reported by the Dow Jones News Services, Associated
Press or comparable national news service, or in a document publicly filed by
the corporation with the Securities and Exchange Commission pursuant to
Sections 13, 14 or 15 (d) (or the rules and regulations thereunder) of the
Securities Exchange Act of 1934, as amended. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (a) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name, age and business and residential address,
as they appear on the Corporation's records, of the stockholder proposing such
business, (c) the class and number of shares of the Corporation which are
beneficially owned by the stockholder, and (d) any material interest of the
stockholder in such business. Notwithstanding anything in these Bylaws to the
contrary, no business shall be conducted at an annual meeting except in
accordance with the procedures set forth in this Section 2.1. The chairman of
the annual meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting and in
accordance with the provisions of this Section 2.1 and if the chairman should
so determine, the chairman shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
Section 2.2 Special Meetings. Special
meetings of stockholders may be called at any time for any purpose (a) by the
Chairman of the Board, if any, with the consent of a simple majority of the
Board of Directors, (b) by the President, with the consent of a simple majority
of the Board of Directors or (c) by a simple majority of the Board of
Directors, to be held at such date, time and place, either within or without
the State of Delaware, as may be stated in the notice of the meeting.
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Section 2.3 Notice of Meetings.
Whenever stockholders are required or permitted to take any action at a
meeting, a written notice of the meeting shall be given which shall state the
place, date and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called. Unless otherwise provided
by law, the written notice of any meeting shall be given not less than ten nor
more than sixty days before the date of the meeting to each stockholder
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
given when deposited in the United States mail, postage prepaid, directed to
the stockholder at his or her address as it appears on the records of the
Corporation.
Section 2.4 Adjournments. Any meeting
of stockholders, annual or special, may adjourn from time to time to reconvene
at the same or some other place, and notice need not be given of any such
adjourned meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken. At the adjourned meeting the Corporation may
transact any business which might have been transacted at the original meeting.
If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder
of record entitled to vote at the meeting.
Section 2.5 Quorum. At each meeting
of stockholders, except where otherwise provided by law, the Certificate of
Incorporation or these Bylaws, the holders of a majority of the outstanding
shares of each call of stock entitled to vote at the meeting, present in person
or represented by proxy, shall constitute a quorum. Notwithstanding the
foregoing and the sentence which follows this sentence, the presence by proxy
or in person of not less than the holders of thirty-three and one-third percent
of the outstanding shares of the Common Stock of the Corporation shall be
required in order that a quorum be deemed constituted. For purposes of the
foregoing, two or more classes or series of stock shall be considered a single
class if the holders thereof are entitled to vote together as a single class at
the meeting. Once a quorum shall exist at any stockholders' meeting, such
quorum shall be deemed to exist throughout the meeting regardless of whether
the holders of shares shall thereafter leave the meeting in sufficient number
that the number of shares remaining represented at such meeting shall be lower
than the number which would originally have been required to establish such
quorum. In the absence of a quorum the stockholders so present may, by
majority vote, adjourn the meeting from time to time in the manner provided by
Section 2.4 of these Bylaws until a quorum shall attend. Shares of its own
capital stock belonging on the record date for the meeting to the Corporation
or to another corporation, if a majority of the shares entitled to vote in the
election of directors of such
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other corporation is held, directly or indirectly, by the Corporation, shall
neither be entitled to vote nor be counted for quorum purposes; provided,
however, that the foregoing shall not limit the right of the Corporation to
vote stock, including but not limited to its own stock, held by it in a
fiduciary capacity.
Section 2.6 Organization. Meetings of
stockholders shall be presided over by the Chairman of the Board, if any, or in
the Chairman's absence by the President, or in the President's absence by a
Vice President, or in the absence of the foregoing persons by a chairman
designated by the Board of Directors, or in the absence of such designation by
a chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in his or her absence the chairman of the meeting may appoint any
person to act as secretary of the meeting. The person presiding at any meeting
of any of the Corporation's stockholders shall have the power to make rules and
decisions (i) as to whether and to what extent proxies present at the meeting
shall be recognized as valid, (ii) as to procedures for the conduct of such
meeting, and (iii) to resolve any questions which may be raised at such
meeting. The person presiding at any meeting of any of the Corporation's
stockholders shall have the right to delegate any of the powers contemplated by
this Section 2.6 to such other person or persons as the person presiding deems
desirable.
Section 2.7 Voting; Proxies. Unless
otherwise provided in the Certificate of Incorporation, each stockholder
entitled to vote at any meeting of stockholders shall be entitled to one vote
for each share of stock held by him or her which has voting power upon the
matter in question. If the Certificate of Incorporation provides for more or
less than one vote for any share on any matter, every reference in these Bylaws
to a majority or other proportion of stock shall refer to such majority or
other proportion of the votes of such stock. Each stockholder entitled to vote
at a meeting of stockholders or to express consent or dissent to corporate
action in writing without a meeting may authorize another person or persons to
act for him or her by proxy, but no such proxy shall be voted or acted upon
after three years from its date, unless the proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states that it is irrevocable
and if, and only as long as, it is coupled with an interest sufficient in law
to support an irrevocable power. A stockholder may revoke any proxy which is
not irrevocable by attending the meeting and any proxy which is not irrevocable
by attending the meeting and voting in person or by filing an instrument in
writing revoking the proxy or another duly executed proxy bearing a later date
with the Secretary of the Corporation. Voting at meetings of stockholders need
not be by written ballot and need not be conducted by inspectors unless the
holders of a majority of the outstanding shares of all classes of stock
entitled to vote thereon present in person or by proxy at such meeting shall so
determine. At all meetings of
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stockholders for the election of directors or otherwise, all elections and
questions shall, unless otherwise provided by law, by the Certificate of
Incorporation or these Bylaws, be decided by the vote of the holders of a
majority of the outstanding shares of all classes of stock entitled to vote
thereon present in person or by proxy at the meeting.
Section 2.8 Fixing Date for
Determination of Stockholders of Record. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. If no record date is fixed: (1) the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of busines on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held; (2) the record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first written consent is expressed;
and (3) the record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 2.9 List of Stockholders Entitled to Vote.
The Corporation's Secretary shall cause to be maintained a stock ledger of the
Corporation. The Secretary shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof and may be inspected by any
stockholder who is present.
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Section 2.10 Consent of Stockholders in
Lieu of Meeting. (a) Any action required to be taken at any annual or special
meeting of stockholders of the Corporation, or any action which may be taken at
any annual or special meeting of the stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and shall be delivered to the
Corporation by delivery to its registered office in Delaware, its principal
place of business or an officer or agent of the Corporation having custody of
the book in which proceedings of meetings of stockholders are recorded.
Delivery made to the stockholders are recorded. Delivery made to the
Corporation's registered office shall be made by hand or by certified or
registered mail, return receipt requested. (b) Every written consent shall
bear the date of signature of each stockholder who signs the consent and no
written consent shall be effective to take the corporate action referred to
therein unless, within sixty (60) days of the date the earliest dated consent
is delivered to the Corporation, a written consent or consents signed by a
sufficient number of holders to take action are delivered to the Corporation in
the manner prescribed in paragraph (c) of this Section.
(c) In order that the Corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten (10) days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. Any stockholder of record seeking to have the stockholders
authorize or take corporate action by written consent shall, by written notice
to the Secretary, request the Board of Directors to fix a record date. The
Board of Directors shall promptly, but in all events within ten (10) days of
the date on which such a request is received, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by
applicable law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation in accordance with paragraphs (a) and (b) of this Section. If no
record date has been fixed by the Board of Directors and prior action by the
Board of Directors is required by applicable law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the date on which the
Board of Directors adopts the resolution taking such prior action.
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(d) Within five (5) business days after receipt of the earliest dated consent
delivered to the Corporation in the manner provided in this Section, the
Corporation, shall retain nationally recognized independent inspectors of
elections for the purposes of performing a ministerial review of the validity
of consents and any revocations thereof. The cost of retaining inspectors of
election shall be borne by the Corporation.
(e) At any time that stockholders soliciting consents in writing to corporate
action have a good faith belief that the requisite number of valid and
unrevoked consents to authorize or take the action specified has been received
by them, the consents shall be delivered by the soliciting stockholders of the
Corporation's registered office in the State of Delaware or principal place of
business or to the Secretary of the Corporation, together with a certificate
stating their belief that the requisite number of valid and unrevoked consents
has been received as of a specific date, which date shall be identified in the
certificate. In the event that delivery shall be made at the Corporation's
registered office in Delaware, such delivery shall be made by hand or by
certified or registered mail, return receipt requested. Upon receipt of such
consents, the Corporation shall cause the consents to be delivered promptly to
the inspectors of election. The Corporation also shall deliver promptly to the
inspectors of election any revocations of consents in its possession, custody
or control as of the time of receipt of the consents.
(f) As promptly as practicable after the consents and revocations are received
by them, the inspectors of election shall issue a preliminary report to the
Corporation stating: (i) the number of shares represented by valid and
unrevoked consents; (ii) the number of shares represented by invalid consents;
(iii) the number of shares represented by invalid revocations; and (iv) the
number of shares entitled to submit consents as of the record date. Unless the
Corporation and the soliciting stockholders agree to a shorter or longer
period, the Corporation and the soliciting stockholders shall have five (5)
days to review the consents and revocations and to advise the inspections and
the opposing party in writing as to whether they intend to challenge the
preliminary report. If no timely written notice of an intention to challenge
the preliminary report is received, the inspectors shall certify the
preliminary report (as corrected or modified by virtue of the detection by the
inspectors of clerical errors) as their final report and deliver it to the
Corporation. If the Corporation or the soliciting stockholders give timely
written notice of an intention to challenge the preliminary report, a challenge
session shall be scheduled by the inspectors as promptly as practicable. A
transcript of the challenge session shall be recorded by a certified court
reporter. Following completion of the challenge session, the inspectors shall
issue as promptly as practicable their final report and deliver it to the
Corporation. A copy of the final report shall be included in
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the book in which the proceedings of meetings of stockholders are required.
(g) The Corporation shall give prompt notice to the stockholders of the
results of any consent solicitation or the taking of corporate action without a
meeting by less than unanimous consent.
(h) This Section shall in no way impair or diminish the right of any
stockholder or director, or any officer whose title to office is contested, to
contest the validity of any consent or revocation thereof, or to take any other
action with respect thereto.
Section 2.11. Nominations. Subject to the rights
of any class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation to elect Directors under specified circumstances,
nominations for the election of Directors may be made by the Board of Directors
or a committee appointed by the Board of Directors or by any stockholder
entitled to vote in the election of Directors generally. However, any
stockholder entitled to vote in the election of Directors generally may
nominate one or more persons for election as Director at a meeting only if
timely written notice of such stockholder's intent to make such nomination or
nominations has been given either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the Corporation. To be timely, a
stockholder's notice must be received at the principal executive offices of the
corporation: (1) not less than 60 days in advance of such meeting if such
meeting is to be held on a day which is within 30 days preceding the
anniversary of the previous year's annual meeting or 90 days in advance of such
meeting if such meeting is to be held on or after the anniversary of the
previous year's annual meeting; and (2) with respect to any other annual
meeting of stockholders, on or before the close of business on the 15th day
following the date (or the first date, if there be more than one) of public
disclosure of the date of such meeting. For the purposes of this Section 2.11,
the date of public disclosure of a meeting shall include, but not be limited
to, the first date on which disclosure of the date of the meeting is made in a
press release reported by the Dow Jones News Services, Associated Press or
comparable national news service, or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Sections
13, 14 or 15(d)(or the rules and regulations thereunder) of the Securities
Exchange Act of 1934, as amended. Each such notice shall set forth: (a) the
name, age and business and residential address of the stockholder who intends
to make the nomination and of the person or persons to be nominated; (b) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; (c) a description of all arrangements or understandings between
stockholder and each nominee and any other person or persons (naming such
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person or persons) pursuant to which the nomination or nominations are to be
made by the stockholder; (d) such other information regarding each nominee
proposed by such stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission, had the nominee been nominated, or intended to be nominated, by the
Board of Directors; and (e) the written consent of each nominee to serve as a
Director of the Corporation if so elected. The chairman of the meeting shall
refuse to acknowledge the nomination of any person not made in compliance with
the foregoing procedure.
ARTICLE III
Board of Directors
Section 3.1 Powers; Number;
Qualifications. The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors, except as may be otherwise
provided by law or in the Certificate of Incorporation. The Board of Directors
shall consist of seven members. Directors need not be stockholders.
Section 3.2 Election; Term of Office;
Resignation; Removal; Vacancies. Each director shall hold office until the
annual meeting of stockholders next succeeding his or her election and until
his or her successor is elected and qualified or until his earlier death,
resignation or removal. Any director may resign at any time upon written notice
to the Board of Directors or to the President, or the Secretary of the
Corporation. Such resignation shall take effect at the time specified therein,
and unless otherwise specified therein no acceptance of such resignation shall
be necessary to make it effective. Except as otherwise provided by law, or in
the Certificate of Incorporation, any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote with respect thereto at an election of directors.
Except as otherwise fixed pursuant to the provisions of the Certificate of
Incorporation relating to the rights of the holders of any class or series of
stock having a preference over the Common Stock as to dividends or upon
liquidation to elect additional Directors under specified circumstances, newly
created directorships resulting from any increase in the number of Directors
and any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall only be filled by the
affirmative vote of a majority of the remaining Directors then in office, even
though less than a quorum of the Board of Directors.
Section 3.3 Regular Meetings. Regular
meetings of the Board of Directors may be held at such places within or without
the State of Delaware and at such times as the
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Board may from time to time determine and, if so determined, notice thereof
need not be given.
Section 3.4 Annual Meetings. An
annual meeting of the Board of Directors shall be held each year at which the
Corporation's officers shall be appointed. The annual meeting of the Board of
Directors for any year shall take place after the annual meeting of the
Corporation's stockholders for such year. The exact time and place for such
meeting may be established by the Board of Directors by resolution and if it is
so established no notice of such meeting need be given to any director. If no
annual meeting of the Board of Directors shall have been called by resolution
of the Board of Directors on or prior to the date on which the annual meeting
of the Corporation's stockholders shall occur, then the annual meeting of the
Board of Directors may be called in the manner provided in Section 3.5 with
respect to special meetings.
Section 3.5. Special Meetings. Special
meetings of the Board of Directors may be held at any time or place within or
without the State of Delaware whenever called by the Chairman of the Board, if
any, by the President, or by a majority of the members of the Board of
Directors. Reasonable notice thereof shall be given by the person or persons
calling the meeting.
Section 3.6 Telephonic Meetings
Permitted. Members of the Board of Directors, or any committee, as the case
may be, may participate in a meeting of the Board of Directors or such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Bylaw shall constitute presence
in person at such meeting.
Section 3.7 Quorum; Vote Retired for
Action. At all meetings of the Board of Directors a majority of the entire
Board of Directors shall constitute a quorum for the transaction of business.
The vote of a majority of the directors present at a meeting at which a quorum
is present shall be the act of the Board of Directors unless the Certificate of
Incorporation or these Bylaws shall require a vote of a greater number. In
case at any meeting of the Board of Directors a quorum shall not be present,
the members of the Board of Directors present may adjourn the meeting from time
to time until a quorum shall attend.
Section 3.8 Organization. Meetings of
the Board of Directors shall be presided over by the Chairman of the Board, if
any, or in the Chairman's absence by the President, or in their absence by a
chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in the Secretary's absence the chairman of the meeting may appoint
any person to act as secretary of the meeting.
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Section 3.9 Action by Directors
Without a Meeting. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors, or of any committee thereof, may be
taken without a meeting if all members of the Board of Directors or of such
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 3.10 Compensation of Directors.
No director who is an employee of the Corporation or any of its subsidiaries
shall receive any stated salary or fee for his or her services as a director.
A director who is not an employee may receive such compensation for his or her
services as a director as is fixed by resolution of the Board of Directors.
Members of any committee of the Board of Directors may receive such
compensation for their duties as committee members as is fixed by resolution of
the Board of Directors. All directors and members of the committees of the
Board of Directors shall be reimbursed for their expenses incurred to attend
meetings.
ARTICLE IV
Committees
Section 4.1 Committees. The Board of
Directors may, by resolution passed by a majority of the whole Board of
Directors, designate one or more committees, each committee to consist of one
or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not he, she or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in place of any
such absent or disqualified member. Any such committee, to the extent provided
in the resolution of the Board of Directors, shall have and may exercise all
the powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of dissolution,
removing or indemnifying directors or amending these Bylaws; and, unless the
resolution expressly so provides, no such committee shall
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have the power or authority to declare a dividend or to authorize the issuance
of stock.
Section 4.2 Committee Rules. Unless
the Board of Directors otherwise provides, each committee designated by the
Board of Directors may adopt, amend and repeal rules for the conduct of its
business. In the absence of a provision by the Board of Directors or a
provision in the rules of such committee to the contrary, a majority of the
entire authorized number of members of such committee shall constitute a quorum
for the transaction of business, the vote of a majority of the members present
at a meeting at the time of such vote if a quorum is then present shall be the
act of such committee, and in other respects each committee shall conduct its
business in the same manner as the Board of Directors conducts its business
pursuant to Article III of these Bylaws.
Section 4.3 Audit Committee.
(a) Authorization. The Corporation
shall have an Audit Committee. The Audit Committee shall be a committee of the
Board of Directors and shall be subject to the provisions of Section 4.1 of
these Bylaws.
(b) Duties. The Audit Committee shall;
(i) recommend to the Board of Directors annually a firm of independent public
accountants to act as auditors of the Corporation; (ii) review with the
auditors in advance the scope of their annual audit; (iii) review with the
auditors and the management, from time to time, the Corporation's accounting
principles, policies, and practices and its reporting policies and practices;
(iv) review with the auditors annually the results of their audit; (v) review
from time to time with the auditors and the Corporation's financial personnel
the adequacy of the Corporation's accounting, financial and operating controls;
and (vi) perform such other duties as shall from time to time be delegated to
the Committee by the Board.
(c) Membership. No director shall
serve as a member of the Audit Committee while he or she is a full-time
employee of the Corporation or any of its subsidiaries. Within the limitations
prescribed in the preceding sentence, the membership on the Audit Committee
shall be determined by the Board of Directors as provided in Section 4.1 of
these Bylaws.
ARTICLE V
Officers
Section 5.1 Officers; Election. As
soon as practicable after the annual meeting of stockholders in each year, the
Board of Directors shall elect a President and a Secretary. The Board of
Directors may also elect one or more
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Executive Vice Presidents, one or more Vice Presidents, one or more Assistant
Secretaries, a Treasurer and one or more Assistant Treasurers and may give any
of them such further designations or alternate titles as it considers
desirable. Any number of offices may be held by the same person.
Section 5.2 Term of Office;
Resignation; Removal Vacancies. Except as otherwise provided in the resolution
of the Board of Directors electing any officer, each officer shall hold office
until the first meeting of the Board of Directors after the annual meeting of
stockholders next succeeding his or her election, and until his or her
successor is elected and qualified or until his or her earlier death,
resignation or removal. Any officer may resign at any time upon written notice
to the Board of Directos or to the President or the Secretary of the
Corporation. Such resignation shall take effect at the time specified therein,
and unless otherwise specified therein no acceptance of such resignation shall
be necessary to make it effective. The Board of Directors may remove any
officer with or without cause at any time. Any such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
Corporation, but the election of an officer shall not of itself create
contractual rights. Any vacancy occurring in any office of the Corporation by
death, resignation, removal or otherwise may be filled for the unexpired
portion of the term by the Board of Directors at any regular or special
meeting.
Section 5.3 Powers and Duties. The
officers of the Corporation shall have such powers and duties in the management
of the Corporation as shall be stated in these Bylaws or in a resolution of the
Board of Directors which is not inconsistent with these Bylaws and, to the
extent not so stated, as generally pertain to their respective offices, subject
to the control of the Board of Directors. The Secretary shall have the duty to
record the proceedings of the meetings of stockholders, the Board of Directors
and any committees in a book to be kept for that purpose and shall have custody
of the corporate seal of the Corporation with the authority to affix such seal
to any instrument requiring it. The Board of Directors may require any
officer, agent or employee to give security for the faithful performance of his
duties.
ARTICLE VI
Indemnification of Directors, Officers,
Employees and Other Corporate Agents
Section 6.1 Right to Indemnification.
To the extent not inconsistent with that certain Stock Contribution Agreement
dated as of December 19, 1985, each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a
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"proceeding"), by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director or officer of the
Corporation, is or was serving at the request of the Corporation as director,
officer, employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, or was a director, officer, employee or agent of a foreign or
domestic corporation which was a predecessor of the Corporation or of another
enterprise at the request of such predecessor corporation, whether the basis of
such proceeding is alleged action in an official capacity as a director,
officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorney's fees, judgments, fines, ERISA excise
taxes of penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, except as provided in
Section 6.2 of this Article VI, the Corporation shall indemnify and such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section 6.1 shall be a contract right and
shall include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation Law requires, the payment of
such expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Section or
otherwise. The Corporation may, by action of its Board of Directors, provide
indemnification to employees and agents of the Corporation with the same scope
and effect as the foregoing indemnification of directors and officers. This
Article VI shall create a right of indemnification which relates to any
proceeding whether it arose in whole or in part prior to adoption of this
Article VI (or the adoption of the
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comparable provisions of the Bylaws of the Corporation's predecessor
corporation).
Section 6.2 Right of Claimant to Bring
Suit. If a claim under Section 6.1 of this Article VI is not paid in full by
the Corporation within thirty days after written claim has been received by the
Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than
an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper to the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant
has not met such applicable standard or conduct, shall be a defense to the
action or create a presumption that the claimant has not met the applicable
standard of conduct.
Section 6.3 Nonexclusivity of Rights.
The right to indemnification and the payment of expenses incurred in defending
a proceeding in advance of its final disposition conferred in this Article VI
shall not be exclusive of any other right which may person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, any Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
Section 6.4 Insurance. The
Corporation may maintain insurance, at its expense, to protect itself and any
director, officer, employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any such expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
Section 6.5 Liability of Directors. A
director of the Corporation shall not be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
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not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
ARTICLE VII
Stock
Section 7.1 Certificates. Every
holder of stock in the Corporation shall be entitled to have a certificate
signed by or in the name of the Corporation by the Chairman of the Board of
Directors, if any, or the President, or a Vice President, and by the Treasurer
or an Assistant Treasurer, if any, or the Secretary or an Assistant Secretary,
of the Corporation, certifying the number of shares owned by him or her in the
Corporation. Any or all signatures on the certificate may be a facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the date of issue.
Section 7.2 Lost, Stolen or Destroyed
Stock Certificates; Issuance of New Certificates. The Corporation may issue a
new certificate of stock in the place of any certificate theretofore issued by
it, alleged to have been lost, stolen or destroyed, and the Corporation may
require the owner of the lost, stolen or destroyed certificate, or his or her
legal representative, to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.
ARTICLE VIII
Miscellaneous
Section 8.1 Fiscal Year. The fiscal
year of the Corporation shall be determined by the Board of Directors.
Section 8.2 Seal. The Corporation may
have a corporate seal which shall have the name of the Corporation inscribed
thereon and shall be in such form as may be approved from time to time by the
Board of Directors. The corporate seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any other manner reproduced.
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<PAGE> 17
Section 8.3 Waiver of Notice of
Meetings of Stockholders Directors and Committees. Whenever notice is required
to be given by law or under any provision of the Certificate of Incorporation
or these Bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting or
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice unless
so required by the Certificate of Incorporation or these Bylaws. Unless either
proper notice of a meeting of the Board of Directors, or any committee thereof,
has been given or else the persons entitled thereto have waived such notice
(either in writing or by attendance as set forth above), any business
transacted at such meeting shall be null and void.
Section 8.4 Interested Directors;
Quorum. No contract or transaction between the Corporation and one or more of
its directors or officers, or between the Corporation and any other
corporation, partnership, association or other organization in which one or
more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the Board of Directors or committee thereof which authorizes the contract or
transaction, or solely because his, her or their votes are counted for such
purpose, if: (1) the material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are known to the Board
of Directors or the committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or (2) the material facts as to his or her
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or d(3) the contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
Section 8.5 Form of Records. Any records
maintained by the Corporation in the regular course of its business, including
its stock ledger, books of account and
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minute books, may be kept on, or be in the form of, punch cards, magnetic tape,
photographs, microphotographs or any other information storage device, provided
that the records so kept can be converted into clearly legible form within a
reasonable time. The Corporation shall so convert any records so kept upon the
request of any person entitled to inspect the same.
Section 8.6 Amendment of Bylaws.
Unless otherwise provided in the Certificate of Incorporation, these Bylaws may
be amended or repealed, and new Bylaws adopted, by the Board of Directors, but
the stockholders entitled to vote may adopt additional Bylaws and may amend or
repeal any Bylaw whether or not adopted by them.
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EXHIBIT 10.1
ALC COMMUNICATIONS CORPORATION
1986 OPTION PLAN
AS AMENDED AND RESTATED AS OF MAY 12, 1994
PART 1: IDENTIFICATION OF THE PLAN
Section 1.1 Title. The Plan described herein shall be known as the
"ALC Communications Corporation 1986 Option Plan" and is referred to herein as
this "Plan".
Section 1.2 Purpose. The purpose of this Plan is (i) to provide
certain key employees of the Company and its subsidiaries with an additional
incentive to promote the Company's financial success and (ii) to provide an
incentive which the Company may use to induce able persons to enter into or
remain in the employment of the Company or a subsidiary.
Section 1.3 Adoption of this Plan. This Plan was initially approved
by the Company's Board of Directors on December 5, 1986 and was approved by the
Company's stockholders on May 26, 1987.
Section 1.4 Defined Terms. Certain terms used in this Plan have the
meaning indicated for such terms in Section 11.1 of this Plan.
PART 2: ADMINISTRATION OF THE PLAN
Section 2.1 Committee's Powers. This Plan shall be administered by a
committee (herein called the "Committee") composed of persons appointed by the
Company's Board of Directors in accordance with the provisions of Section 2.2.
The Committee shall have full power and authority to prescribe, amend and
rescind rules and procedures governing administration of this Plan. Each
action of the Committee which shall be within the scope of the authority
delegated to the Committee by this Plan or by the Company's Board of Directors
shall be binding on all persons.
Section 2.2 Committee Membership. The Board of Directors shall have
the power to determine the number of members which the Committee shall have and
to change the number of membership positions on the Committee from time to
time; provided, however, that the Committee shall always consist of not less
than two members. The Board of Directors shall appoint all members of the
Committee. The Board of Directors may from time to time appoint members to the
Committee in substitution for, or in addition to, members previously appointed
and may fill vacancies, however caused, on the Committee. Any member of the
Committee may be removed from the Committee by the Board of Directors at any
time without cause. No person may be appointed to the Committee who is
<PAGE> 2
not a director of the Company at the time of such appointment or who
shall not be disinterested at the time of such appointment. For the purpose of
this Plan, a person shall be deemed to be "disinterested" at any given time if
at all times during the period of one year preceding the given time such person
shall not have been eligible to be granted any option under this Plan or to be
granted or allocated any stock or option under any other plan of the Company or
any of its affiliates entitling the participants therein to acquire stock,
stock purchase options, or stock appreciation options relating to the stock of
the Company or any affiliate of the Company. A person's membership on the
Committee shall automatically cease when such person ceases to be a director of
the Company or ceases to be disinterested. At any time at which no special
Committee shall have been constituted by the Board especially for the purposes
of this Plan, all disinterested members of the Compensation Committee
established pursuant to the Company's By-Laws shall have all powers and rights
delegated to the "Committee" under this Plan.
Section 2.3 Committee Procedures. The Committee shall hold its
meetings at such times and places as it may determine. The Committee may make
such rules and regulations for the conduct of its business as it shall deem
advisable. Unless the Board or the Committee shall expressly decide to the
contrary, a majority of the members of the Committee shall constitute a quorum
and any action taken by a majority of the Committee members at a meeting at
which a quorum of committee members shall be present shall be deemed an act of
the Committee.
Section 2.4 Indemnification. No member of the Committee shall be
liable, in the absence of bad faith, for any act or omission with respect to
his service on the Committee relating to this Plan. Service on the Committee
shall constitute service as a director of the Company so that the members of
the Committee shall be entitled to indemnification and reimbursement as
directors of the Company for any action or any failure to act in connection
with service on the Committee to the full extent at any time provided for or
permitted by the Company's Certificate of Incorporation or By-Laws or by any
insurance policy or other agreement intended for the benefit of the Company's
directors or by any applicable law.
PART 3: PERSONS ELIGIBLE TO RECEIVE OPTIONS
A person shall be eligible to be granted an option under this Plan
only if on the proposed Granting Date for such option or at some time between
the Granting Date of such option and the exercise of such option, such person
either holds an officership position with the Company expressly provided for in
the Company's By-Laws as then constituted or meets the following standards:
(i) such person is employed by the Company or a subsidiary, (ii) such person
has managerial, supervisory or similar responsibilities, and (iii) such person
is not covered by any collective bargaining agreement binding on such person's
employer. A person eligible to be granted
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an option under this Plan is herein called a "key employee". A director of the
Company or a subsidiary who is not also such an employee of the Company or a
subsidiary shall not be eligible to receive options under this Plan. Options
may not be granted to any person under this Plan at a time when such person is
serving as a member of the Committee.
PART 4: PURCHASE OPTIONS
Section 4.1 Power to Grant Purchase Options. The Committee shall
have the right and the power to grant at any time to any key employee an option
entitling such person to purchase Common Stock from the Company in such
quantity, at such price, on such terms and subject to such conditions
consistent with the provisions of this Plan as may be established by the
Committee on or prior to the Granting Date for such option. Each option to
purchase Common Stock which shall be granted by the Committee pursuant to the
provisions of this Part 4 is herein called a "purchase option."
Section 4.2 Purchase Price. Except as otherwise provided in Part 9,
the price at which each share may be purchased upon exercise of any stock
purchase option granted under this Plan may not be less than 80% of the per
share market value on the Granting Date for such option, provided that if a
replaceable option held by a key employee (whether or not granted under this
Plan) shall be surrendered to the Company or otherwise be terminated or expire,
then an option may be granted under this Plan not later than seven months after
such surrender, termination or expiration covering a number of shares not
greater than the shares subject to the surrendered, terminated or expired
option which shall not have been purchased by means of such option at an
initial purchase price per share equal to the purchase price per share
prescribed by the surrendered, terminated or expired option at the time of the
surrender, termination or expiration. For purposes of this Plan, an option
shall be deemed "replaceable" if: (i) it shall have been granted under this
Plan, under the ALC Communications Corporation 1982 Incentive Stock Option
Plan, the ALC Communications Corporation 1983 Incentive Stock Option Plan, the
ALC Communications Corporation 1984 Incentive Stock Option Plan, the ALC
Communications Corporation Employee Stock Option Plan, the ALC Communications
Corporation Non-Qualified Stock Option Plan, the ALC Communications
Corporation Employee Stock Purchase Plan or any other plan or program hereafter
or previously approved by the Company's stockholders; or (ii) the option shall
have been granted in the manner prescribed in this Section 4.2 to substitute
for a replaceable option; or (iii) the option shall have been originally
granted under a plan or arrangement that prohibited the grant of options for an
exercise price of less than 80% of the fair market value of the stock subject
to such option (determined as prescribed in such plan or arrangement); or (iv)
the board of directors of the corporation which shall have granted such option,
a committee of such board or the Committee existing under this Plan shall have
concluded in good faith that at the time such option was originally
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granted the exercise price of such option was not less than 80% of the fair
market value at the time of such original grant of the shares subject to such
option.
Section 4.3 Purchase Option Terms. The Committee shall have the
power to determine the key employees to whom purchase options shall be granted
under this Plan, the number of shares to be subject to each purchase option
granted under this Plan, the number of purchase options to be awarded to each
key employee and the time at which each purchase option under this Plan shall
be granted. Except as otherwise expressly provided in this Plan, the Committee
shall also have the power to determine, at the time of the grant of each
purchase option, all terms and conditions governing the rights and obligations
of the holder with respect to such option, including but not limited to: (a)
the exercise price per share or the method by which the exercise price per
share shall be determined; (b) the length of the period during which the option
may be exercised and any limitations on the number of shares purchasable with
the option at any given time during such period; (c) the times at which the
option may be exercised; (d) any conditions precedent to be satisfied before
the option may be exercised; (e) any restrictions on resale of any shares
purchased upon exercise of the option; and (f) whether the option will or will
not constitute an incentive stock option under Section 422 of the Internal
Revenue Code. Notwithstanding the foregoing, purchase options granted to
Officers shall not be exercisable for a period of at least six months from the
Granting Date.
Section 4.4 ISO Share Limitation. No person may be granted incentive
stock options under this Plan in any year entitling such person to purchase a
number of shares greater than the maximum number permitted by Section 422 of
the Internal Revenue Code as in effect on the date of grant. This Section 4.4
shall not be deemed to limit the quantity of shares which the Company may grant
the right to purchase in any year under options granted under this Plan which
are not intended to be incentive stock options.
Section 4.5 Other ISO Terms. Whenever possible, each provision in
this Plan and in every option at any time granted under this Plan which is
evidenced by an option agreement which expressly states such option is intended
to constitute an incentive stock option under Section 422 of the Internal
Revenue Code (herein called an "intended ISO") shall be interpreted in such
manner as to entitle such intended ISO to the tax treatment afforded by such
Code to options which do constitute incentive stock options under Section 422
of such Code, but if any provision of this Plan or any intended ISO at any time
granted under this Plan shall be held to be contrary to the requirements
necessary to entitle such intended ISO to the tax treatment afforded by such
Code to options which do constitute incentive stock options under Section 422
of such Code, then (i) such provision shall be deemed to have contained from
the outset such language as shall be necessary to entitle such intended ISO to
the tax treatment afforded by the Code to options which do
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<PAGE> 5
constitute incentive stock options under Section 422 of such Code, and (ii) all
other provisions of this Plan and such intended ISO shall remain in full force
and effect. If any agreement covering an intended ISO granted under this Plan
shall not explicitly include any terms required to entitle such intended ISO to
the tax treatment afforded by such Code to options which do constitute
incentive stock options under Section 422 of such Code, then all such terms
shall be deemed implicit in the intention to afford such treatment to such
option and such option shall be deemed to have been granted subject to all such
terms.
PART 5: APPRECIATION OPTIONS
Section 5.1 Power to Grant Appreciation Options. The Committee shall
have the right and the power to grant to any key employee at any time an option
having such terms consistent with the provisions of this Plan as the Committee
shall establish on the Granting Date for such option permitting the holder of
such option to elect to receive with respect to any share subject to such
option a payment from the Company payable as provided in Section 5.5 in an
amount (herein called such share's "incremental value") equal to the remainder
derived by subtracting (i) the "exercise price" established for such share in
accordance with the provisions of this Plan from (ii) the per share market
value on the date such option shall be exercised by its holder with respect to
such share. Each option which shall be granted by the Committee pursuant to
the provisions of this Part 5 is herein called an "appreciation option."
Section 5.2 Tandem Options. The Committee is hereby authorized to
grant to any key employee at any time an appreciation option consistent with
the provisions of this Plan covering any share which is at the time of such
grant also covered by a purchase option granted to the same employee either
prior to or simultaneously with the grant to such employee of the appreciation
option in such share, provided: (i) any purchase option covering any share
shall expire and not be exercisable after the exercise of any related
appreciation option with respect to the same share; (ii) any appreciation
option covering any share shall not be exercisable after the exercise of any
related purchase option with respect to the same share; and (iii) a purchase
option and an appreciation option covering the same share may not be exercised
simultaneously. The Committee is also authorized to grant at any time to any
key employee an appreciation option consistent with the provisions of this Plan
covering shares not simultaneously covered by a purchase option.
Section 5.3 Appreciation Option Terms. The Committee shall have the
right and power to determine the key employees to whom appreciation options
shall be granted under this Plan, the number of shares to be subject to each
appreciation option granted under this Plan, the number of appreciation options
to be granted to each key employee, and the time at which each appreciation
option under
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this Plan shall be granted. Except as otherwise expressly provided in this
Plan, the Committee shall also have the right and power to determine, at or
prior to the time of the grant of each appreciation option, all terms and
conditions governing the rights and obligations of the holder with respect to
such option, including but not limited to: (a) the exercise price for the
shares covered by such option or the method by which such exercise price shall
be determined; (b) the length of the period during which such option may be
exercised and any limitations on the number of shares with respect to which
such option shall be exercisable at any given time during such period; (c) any
conditions precedent which must be satisfied before the option may be
exercised; and (d) the mix of cash and Common Stock, or other consideration, to
be used to make any payment of incremental value which shall become due under
such option. Notwithstanding the foregoing, appreciation options granted to
Officers shall not be exercisable for a period of at least six months from the
Granting Date.
Section 5.4 Exercise Price.
(a) Except as otherwise provided in paragraph (b) of this Section 5.4
or in Part 9, the exercise price established under any appreciation option
granted under this Plan shall not be less than 80% of the per share market
value on the Granting Date of such appreciation option. If no exercise price
shall be established under the terms of the agreement granting any appreciation
option, then the exercise price for each share covered by such option shall be
equal to the per share market value on the Granting Date of such option.
(b) Except as otherwise provided in Part 9, the exercise price
established under any appreciation option granted to any key employee covering
any share which shall also be subject to a purchase option which shall have
been granted to the same employee earlier than the grant of such appreciation
option shall not be less than the lower of (i) the per share purchase price in
effect under such option at the time such appreciation option shall be granted
or (ii) 80% of the per share market value on the Granting Date of such
appreciation option.
Section 5.5 Payment of Incremental Value. Any payment of incremental
value which may become due from the Company by reason of any exercise of any
appreciation option may be paid (i) all in cash, (ii) all in Common Stock,
(iii) in any combination of cash and Common Stock, or (iv) in such other
consideration as the Committee may approve. In the event any Common Stock
shall be delivered to satisfy all or any part of the incremental value
obligation arising by reason of any exercise of any appreciation option, the
dollar amount of such obligation deemed to have been satisfied by such delivery
of Common Stock shall be equal to the product derived by multiplying the per
share market value as of the date of exercise times the number of shares
delivered. The Committee may determine at the time each appreciation option is
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granted the mix of cash and stock, or other consideration, to be used to make
any payment of incremental value which may become due by reason of any exercise
of any option, but in the absence of any such express determination by the
Committee to the contrary at the time of the grant of any given appreciation
option, the incremental value shall be payable entirely in cash.
Notwithstanding the foregoing, payment may be made in cash to Officers only if
the appreciation option is exercised during the "window period" required under
Rule 16b-3(e)(3) and otherwise in accordance with Rule 16b-3. No fractional
share of Common Stock shall be issued to make any payment of incremental value,
and the mix of cash and stock payable in each case shall be adjusted in such
manner as shall be prescribed by the Committee to avoid the issuance of any
fractional share.
PART 6: TERMS APPLICABLE TO ALL OPTIONS GRANTED UNDER THE PLAN
Section 6.1 Plan Provisions Control Option Terms. The terms of this
Plan shall govern all options granted under this Plan, and in no event shall
the Committee have the power to grant any option under this Plan which is
contrary to any of the provisions of this Plan. In the event any provision of
any option granted under this Plan shall conflict with any term in this Plan as
constituted on the Granting Date of such option, the term in this Plan as
constituted on the Granting Date of such option shall control. Except as
provided in Part 9, the terms of any option granted under this Plan may not be
changed after the Granting Date of such option without the express approval of
the option holder.
Section 6.2 Granting Date. An option shall be deemed to have been
granted under this Plan on the date (herein called the "Granting Date")
designated by the Committee at the time it shall approve such option as the
Granting Date of such option, provided that the Committee may not designate a
Granting Date with respect to any option which shall be earlier than the date
on which the granting of such option shall have been approved by the Committee.
Section 6.3 Option Agreement. No person shall have any rights under
any option granted under this Plan unless and until the Company and the person
to whom such option shall have been granted shall have executed and delivered
an agreement expressly granting the option to such person and containing
provisions setting forth the terms of the option.
Section 6.4 Ten Year Maximum Term. No option may be granted under
this Plan which may be exercised more than ten years after the Granting Date of
such option; provided that if an appreciation option shall be granted with
respect to any share subject to a purchase option and if pursuant to paragraph
(b) of Section 5.4 the exercise price for such share shall be set lower than
the per share market value on the date of grant of such appreciation option,
then the expiration date of such appreciation option shall be set not later
than the expiration date for the related purchase option.
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Section 6.5. Modification of Option After Grant. Each option granted
under this Plan may be modified after the date of its grant by express written
agreement between the Company and its holder provided that any such change (i)
shall not be inconsistent with the terms of this Plan and (ii) shall be
approved by the Committee. No modifications may be made to any options granted
to an Officer except in compliance with Rule 16b-3.
Section 6.6 Limitations on Transfer. No option granted under this
Plan shall be transferable otherwise than by will or the laws of descent and
distribution, or pursuant to the terms of a domestic relations order, as
defined in Section 414(p) of the Internal Revenue Code, which satisfies the
requirements of Section 414(p)(1)(A) of the Internal Revenue Code (a "Qualified
Domestic Relations Order"). Any option granted under this Plan may be
exercised during the lifetime of the person to whom the option shall initially
have been granted only by such person or by such person's guardian or legal
representative or by the alternate payee named in a Qualified Domestic
Relations Order. An optionholder may designate a beneficiary who may succeed
to the rights and obligations of the holder. For purposes of this Plan, the
"holder" of any option granted under this Plan shall during the life of the
person to whom such option shall originally have been granted be deemed to be
such person or any guardian or legal representative for such person to whom the
right to exercise such option shall pass during such person's lifetime and
after the death of such original grantee shall be deemed to be the person to
whom the original grantee's rights shall pass by reason of the original
grantee's death.
Section 6.7 Taxes. The Company shall be entitled, if the Committee
deems it necessary or desirable, to withhold (or secure payment from the option
holder in lieu of withholding) the amount of any withholding or other tax due
from the Company with respect to any amount payable and/or shares issuable
under such holder's option, or with respect to any income recognized upon a
disqualifying disposition of shares received pursuant to the exercise of an
incentive stock option, and the Company may defer such payment or issuance
unless indemnified to its satisfaction against any liability for any such tax.
Section 6.8 No Right to Employment Conferred. Nothing in this Plan
(or in the absence of any express provision to the contrary) in any option
granted pursuant to this Plan, shall confer on any person any right to continue
in the employment of the Company or any subsidiary or interfere in any way with
the right of the Company or any subsidiary to terminate such person's
employment at any time.
Section 6.9 Change of Control Event. Unless otherwise specified by
the Committee at the time of grant of each option, and subject to such terms
and conditions as the Committee may establish at the time of grant, upon the
occurrence of a Change of Control
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Event, irrespective of whether or not an option is then exercisable, the holder
shall have the right to exercise any unexpired option in full to the extent not
theretofore exercised or terminated.
PART 7: PROVISIONS GOVERNING OPTION EXERCISE
Section 7.1 Normal Option Term. Except as otherwise provided in
Section 7.3 or Section 7.5, the right to exercise any option granted under this
Plan shall terminate at whichever of the following times shall earlier occur:
(i) the date which shall occur three months after the employment termination
date of the holder of the option, or (ii) the expiration date of the option.
Section 7.2 Acceleration of Exercise Time. The Committee in its sole
discretion shall have the right (but shall not in any case be obligated) (i) to
permit purchase of shares under any purchase option prior to the time such
shares shall be purchasable under the terms of the agreement granting such
option, and (ii) to permit exercise of an appreciation option prior to the time
such option shall be exercisable under the terms of the agreement granting such
option.
Section 7.3 Extension of Exercise Time. The Committee in its sole
discretion shall have the right (but shall not in any case be obligated) to
permit any option granted under this Plan to be exercised more than three
months after the employment termination of the holder of such option, provided
that the Committee shall not have the right to permit exercise of any option
after its expiration date.
Section 7.4 Exercise Procedures. Each option granted under this Plan
shall be exercised by written notice to the Company. An option holder shall
not have any rights as a stockholder with respect to shares issuable under any
option granted under this Plan until the exercise of that option with respect
to those shares. The purchase price of shares purchased upon the exercise of a
purchase option granted under this Plan shall be paid in full in cash by the
option's holder at the time of the delivery of such shares provided that the
Committee (or any Company officer to whom the Committee shall delegate the
authority) may (but need not) permit payment to be made by delivery to the
Company of either (i) shares of Common Stock, (ii) any combination of cash and
shares of Common Stock permitted by the Committee (or any such officer), or
(iii) such other consideration permitted by the Committee. In the event any
Common Stock shall be transferred to the Company to satisfy all or any part of
the exercise price, the part of the exercise price deemed to have been
satisfied by such transfer of Common Stock shall be equal to the product
derived by multiplying the per share market value as of the date of exercise
times the number of shares transferred. The option holder may not transfer to
the Company in satisfaction of the exercise price (i) a number of shares which
when multiplied times the per share market value as
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<PAGE> 10
of the date of exercise would result in a product greater than the exercise
price or (ii) any fractional share of Common Stock. Any part of the exercise
price paid in cash upon the exercise of any option granted under this Plan
shall be added to the general funds of the Company and may be used for any
proper corporate purpose. Unless the Board of Directors shall otherwise
determine, any Common Stock transferred to the Company as payment of all or
part of the purchase price upon the exercise of any option granted under this
Plan shall be utilized as soon as possible to supply the Common Stock
deliverable by reason of the subsequent exercise of options under this Plan and
until such use shall be held as treasury shares.
Section 7.5 Death of Option Holder.
(a) Upon the death of the holder of an option granted under this Plan
who shall have been an employee of the Company or one or more subsidiaries of
the Company at the date of such holder's death, the right to exercise all
unexpired installments of such option shall be accelerated and shall accrue as
of the date of death, and the person or persons to whom such holder's rights
under the option shall pass by reason of such person's death may exercise the
option with respect to any or all of the shares subject to such option until
the earlier of (i) one year after the original holder's death or (ii) the
expiration date of the option.
(b) If the holder of an option granted under this Plan shall die
after such holder's employment termination date and if such option shall still
have been exercisable at the time of such holder's death, then the person or
persons to whom such holder's rights under such option shall pass by reason of
such holder's death, may, until one year after such holder's death or the
expiration date of the option, whichever is earlier, exercise such option to
the extent it would have been exercisable if such holder had exercised the
option immediately prior to such holder's death or to such greater extent as
may be permitted by the Committee. Any restrictions placed on the exercise of
an option which is intended to constitute an incentive stock option in order to
comply with the requirements of Section 422(b)(7) of the Internal Revenue Code
prior to amendment by the Tax Reform Act of 1986 shall be disregarded in
determining the extent to which an option could have been exercised immediately
prior to the option holder's death but shall apply to govern the required
sequence of the exercise of the deceased holder's options after such holder's
death.
Section 7.6 Option Surrender. Any purchase option granted under this
Plan may be surrendered to the Company on such terms as the Committee and
holder of such option approve, including, but not limited to, terms which
provide that upon such surrender the Company will pay to such holder cash or
Common Stock issued by the Company, or a combination of cash and Common Stock
having a value equal to the amount by which the product derived by multiplying
the number of shares (herein called the "number of unexercised shares")
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<PAGE> 11
subject to the option on the date (herein called the "Surrender Date") as of
which such option shall be surrendered times the per share market value on the
Surrender Date shall exceed the product derived by multiplying the number of
unexercised shares times the purchase price per share prescribed by the
surrendered option.
PART 8: SHARES SUBJECT TO THIS PLAN
Except as otherwise provided in Part 9, the options granted under this
Plan shall be limited so that the sum of the following shall never exceed
1,000,000 shares: (i) all shares which shall be purchased after 1986 upon the
exercise of purchase options at any time granted under ALC Communications
Corporation 1982 Incentive Stock Option Plan, the ALC Communications
Corporation 1983 Incentive Stock Option Plan, the ALC Communications
Corporation 1984 Incentive Stock Option Plan, the ALC Communications
Corporation Employee Stock Option Plan, the ALC Communications Corporation
Non-Qualified Stock Option Plan or the ALC Communications Corporation Employee
Stock Purchase Plan, (ii) all shares which shall be purchased upon the exercise
of purchase options at any time granted under this Plan, (iii) all shares for
which payment of incremental value shall be made by reason of the exercise of
appreciation options at any time granted under this Plan, and (iv) the number
of shares determined by dividing the value of the cash or other consideration
issued by the Company pursuant to Section 7.6 of this Plan by reason of the
surrender of any option by the per share market value on the Surrender Date
(provided that if a new option shall be substituted for the surrendered option,
the new option shall (regardless of the exercise price prescribed therein) be
deemed to have a value of zero for purposes of this clause (iv)). In the event
any option at any time granted under this Plan shall be surrendered to the
Company, be terminated or expire before it shall have been fully exercised,
then (except as otherwise provided in clause (iv) in the first sentence in this
paragraph) all shares formerly subject to such option as to which such option
shall not have been exercised shall be available for any option subsequently
granted in accordance with the provisions of this Plan.
PART 9: ADJUSTMENTS TO REFLECT CAPITAL CHANGES
The number and kind of shares subject to outstanding options, the
price for which shares may be purchased upon the exercise of outstanding
purchase options, the exercise price for shares covered by outstanding
appreciation options and the number and kind of shares available for options,
subsequently granted under this Plan shall be appropriately adjusted to
reflect any stock dividend, stock split, combination or exchange of shares,
merger, consolidation or other change in capitalization determined by the
Board of Directors to be similar to any of the changes expressly indicated in
this sentence in its substantive effect upon this Plan or the options granted
under this Plan. The Committee shall have the power to determine the amount of
the adjustment to be made in each
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<PAGE> 12
case, but no adjustment approved by the Committee shall be effective until and
unless it is approved by the Company's Board of Directors.
PART 10: AMENDMENT AND TERMINATION OF THIS PLAN
Section 10.1 Amendment. Except as provided in the following sentence,
the Board of Directors shall have complete power and authority to amend this
Plan at any time and no approval by the Company's stockholders or by any other
person, committee or other entity of any kind shall be required to make any
amendment approved by the Company's Board of Directors effective. The Board
shall not, however, do any of the following without the affirmative approval of
the Company's stockholders: (i) increase the maximum number of shares
available for options granted under this Plan except as provided in Part 9; or
(ii) lower the minimum purchase price permitted by this Plan for any option
granted under this Plan; or (iii) amend the requirements of this Plan as to the
class of persons eligible to receive options. No termination or amendment of
this Plan may, without the consent of the individual to whom any option shall
theretofore have been granted under this Plan, adversely affect the rights of
such individual under such option. For the purposes of this Section 10.1, an
amendment to this Plan shall be deemed to have the affirmative approval of the
Company's stockholders if such amendment shall have been submitted for vote by
the Company's stockholders at a duly called and constituted meeting of such
stockholders at which a quorum is present and a majority of the votes cast
with respect to such amendment at such meeting shall have been cast in favor
of such amendment.
Section 10.2 Termination. The Board of Directors shall have the right
and the power to terminate this Plan at any time. If this Plan is not earlier
terminated, this Plan shall terminate on December 5, 1996. No options shall be
granted under this Plan after termination of this Plan, but the termination of
this Plan shall not have any other effect and any option outstanding at the
time of the termination of this Plan may be exercised after termination of this
Plan at any time prior to the expiration date of such option to the same extent
such option would have been exercisable had this Plan not terminated.
PART 11: INTERPRETATION OF THIS PLAN
Section 11.1 Definitions. Each term defined in this Section 11.1 has
the meaning indicated in this Section 11.1 whenever such term is used in this
Plan:
Appreciation Option - The term "appreciation option" has the
meaning such term is given in Section 5.1 of this Plan.
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<PAGE> 13
Board of Directors - The term "Board of Directors" and the
term "Board" each means the Company's Board of Directors as
constituted at the time as of which term shall be applied.
Change of Control Event - The term "Change of Control Event"
means the sale or transfer of all or a portion of the equity ownership
by the majority stockholder of the Company, as a result of which the
majority stockholder no longer controls more than 50% of the
outstanding equity securities of the Company and the power to elect a
majority of the Board of Directors of the Company.
Committee - The term "Committee" has the meaning such
term is given in Section 2.1 of this Plan.
Common Stock - The term "Common Stock" means common stock
issued or issuable by the Company.
Company - The term "Company" as applied as of any given time
means ALC Communications Corporation except that if prior to the given
time any corporation or other entity shall have acquired (directly or
by means of a subsidiary) all or a substantial part of the assets of
the "Company" (as herein defined), and shall have agreed to assume the
obligations of the "Company" under this Plan, then such corporation or
other entity shall be deemed to be the "Company" at the given time.
Employment Termination Date - The term "employment termination
date" as applied to the holder of any option granted under this Plan
means the first date on which such option holder shall not be employed
by either the Company or any subsidiary for any reason (including but
not limited to voluntary termination of employment, involuntary
termination of employment, retirement, disability or death). The
Committee may specify in the original terms of any option granted
under this Plan, or if not so specified, shall determine whether an
authorized leave of absence or absence on military or government
service or absence for any other reason shall constitute a termination
of employment for the purposes of this Plan.
Exercise Price - The term "exercise price" as applied to any
purchase option granted under this Plan means the price at which stock
may be purchased upon exercise of such option established as
prescribed in this Plan. The term "exercise price" as applied to any
appreciation option granted under this Plan means the "exercise price"
established for such option under or pursuant to the provisions of
Section 5.3, Section 5.4, and Part 9 of this Plan as of the given
time.
Expiration Date - The term "expiration date" as applied to
any option granted under this Plan means the date specified in the
option agreement between the Company and the holder as
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<PAGE> 14
the expiration date of such option. If no expiration date shall be
specified in the option agreement relating to any option, then the
expiration date of such option shall be the day prior to the tenth
anniversary of the Granting Date of such option.
Granting Date - The term "Granting Date" has the meaning given
such term in Section 6.2 of this Plan.
Incremental Value - The term "incremental value" has the
meaning such term is given in Section 5.1 of this Plan.
Key Employee - The term "key employee" has the meaning such
term is given in Part 3 of this Plan.
Officer - The term "Officer" means a president, vice
president, treasurer, secretary, controller and any other person who
performs functions corresponding to the foregoing officers for the
Company, any member of the Board of Directors of the Company or any
person performing similar functions with respect to the Company, and
any other participant who is deemed to be an officer or director of
the Company for purposes of Section 16 of the Securities Exchange Act
of 1934 and the rules thereunder, as currently in effect or as amended
from time to time.
Option - The term "option" means any purchase option or
appreciation option granted under this Plan.
Per Share Market Value - The term "per share market value" on
any given date shall be the fair market value of one share of Common
Stock on the given date determined in such manner as shall be
prescribed by the Committee, provided that in the absence of any
specific instructions from the Committee to the contrary, the "per
share market value" on any given date shall be equal to the last per
share sales price reported for the Common Stock for the given date in
the Wall Street Journal (if sales for the Common Stock shall be
reported for the given date in the Wall Street Journal) or (if no
sales of the Common Stock shall be reported for the given date in the
Wall Street Journal) for the first date prior to the given date for
which sales of the Common Stock shall be reported in the Wall Street
Journal.
Purchase Option - The term "purchase option" has the meaning
such term is given in Section 4.1 of this Plan.
Rule 16b-3 - Rule 16b-3 means Rule 16b-3 promulgated by the
Securities and Exchange Commission under Section 16 of the Securities
Exchange Act of 1934, as currently in effect and as it may be amended
from time to time, and any successor rule.
Share - The term "share" means a share of Common Stock.
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<PAGE> 15
Subsidiary - Any corporation shall be deemed to be a
"subsidiary" if (i) securities issued by such corporation entitling the
owner thereof to elect a majority of the corporation's board of
directors are owned and controlled directly or indirectly by the
Company and (ii) the ownership requirements of Section 425(f) of the
Internal Revenue Code are satisfied.
Section 11.2 Board Action. For the purposes of this Plan, the Board
of Directors shall be deemed to have approved any amendment to or termination
of this Plan or to have taken any other action with the Board is authorized to
take with respect to this Plan or any option granted under this Plan if such
amendment, termination or other action is approved (i) by a majority of the
directors present at a duly called and constituted meeting of the Board of
Directors at which a quorum is present, or (ii) by written consent executed by
all persons who are members of the Board of Directors at the time of the
execution of such consent, or (iii) in any other manner which at the time the
Board's actions shall be taken shall be sufficient under applicable law to
constitute approval by the Board of routine matters.
Section 11.3 Captions. The captions (i.e. all underlined words) used
in this Plan are for convenience only, do not constitute a part of this Plan,
and shall not be deemed to limit, characterize or affect in any way any
provisions of this Plan, and all provisions of this Plan shall be construed as
if no captions had been used in this Plan.
Section 11.4 Severability. Whenever possible, each provision in this
Plan and every option at any time granted under this Plan shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Plan or any option at any time granted under this Plan shall
be held to be prohibited by or invalid under applicable law, then (i) such
provision shall be deemed amended to accomplish the objectives of the provision
as original written to the fullest extent permitted by law and (ii) all other
provisions of this Plan and every other option at any time granted under this
Plan shall remain in full force and effect.
Section 11.5 No Strict Construction. No rule of strict construction
shall be implied against the Company, the Committee, or any other person in the
interpretation of any of the terms of this Plan, any option granted under this
Plan or any rule or procedure established by the Committee.
Section 11.6 Choice of Law. Every option at any time granted under
this Plan shall be deemed to be a contract made under the laws of the State of
Michigan. For all purposes, both this Plan and every option granted under this
Plan shall be construed in accordance with and governed by the laws of the
State of Michigan.
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<PAGE> 16
Section 11.7 Committee's Interpretations Conclusive. The Committee
shall have full power and authority to interpret the terms of this Plan, the
terms of options granted under this Plan, and the rules and procedures
established by the Committee. Any determination made by the Committee as to
the meaning of or requirements imposed by or rights of any persons under this
Plan, any option granted under this Plan, or any rule or procedure established
by the Committee shall be binding upon all persons concerned.
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<PAGE> 1
EXHIBIT 10.2
ALC COMMUNICATIONS CORPORATION
1990 STOCK OPTION PLAN
AS AMENDED AND RESTATED EFFECTIVE AS OF MAY 12, 1994
ARTICLE I
PURPOSE AND ADOPTION OF THE PLAN
1.01 PURPOSE. The purpose of the ALC Communications Corporation
1990 Stock Option Plan is to provide certain key employees of ALC and its
Subsidiaries with an additional incentive to promote the financial success of
ALC and to provide an incentive which ALC may use to induce able persons to
enter into or remain in the employment of ALC or a Subsidiary.
1.02 ADOPTION AND TERM. The Plan became effective as of May 10,
1990 following approval by stockholders of ALC. The Plan as amended and
restated herein is effective as of May 12, 1994 and will remain in effect until
December 31, 2000 unless earlier terminated or abandoned by action of the
Board; provided, however, that no Incentive Stock Option may be granted after
May 9, 2000.
ARTICLE II
DEFINITIONS
2.01 ADMINISTRATOR means the group of persons having authority to
administer the Plan pursuant to Section 3.01.
2.02 ALC means ALC Communications Corporation, a Delaware
corporation.
2.03 AWARD means any one or combination of Non-Qualified Stock
Options, Incentive Stock Options, Stock Appreciation Rights, or any other award
made under the terms of the Plan.
2.04 AWARD AGREEMENT means a written agreement between ALC and
Participant or a written acknowledgment from ALC specifically setting forth the
terms and conditions of an Award granted under the Plan.
2.05 AWARD PERIOD means, with respect to an Award, the period of
time set forth in the Award Agreement during which specified conditions set
forth in the Award Agreement must be satisfied.
2.06 BENEFICIARY means (a) an individual, trust or estate who or
which, by will or by operation of the laws of descent and distribution,
succeeds to the rights and obligations of the Participant under the Plan and
Award Agreement upon the Participant's death; or (b) an individual who, by
designation of the Participant, succeeds to the rights and obligations of the
Participant under the Plan and Award Agreement upon the Participant's death.
<PAGE> 2
2.07 BOARD means the Board of Directors of ALC.
2.08 CHANGE OF CONTROL EVENT means (a) an event or series of events
by which any Person or other entity or group (as such term is used in Section
13(d) and 14(d) of the Exchange Act) of Persons or other entities acting in
concert as a partnership or other group (a "Group of Persons") (other than
Persons who are, or Groups of Persons entirely made up of, (i) management
personnel of ALC or its wholly-owned Subsidiary, Allnet Communication Services,
Inc. ("Allnet") or (ii) any affiliates of any such management personnel) shall,
as a result of a tender or exchange offer or offers, an open market purchase or
purchases, a privately negotiated purchase or purchases or otherwise, become
the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of 40% or more of the combined voting power of the then outstanding
voting stock of ALC or Allnet; (b) ALC or Allnet consolidates with, or merges
with or into, another Person (other than ALC or Allnet), or sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
its assets to any Person (other than ALC or Allnet), or any Person (other than
ALC or Allnet) consolidates with, or merges with or into, ALC or Allnet, in any
such event pursuant to a transaction in which the outstanding voting stock of
ALC or Allnet is converted into or exchanged for cash, securities or other
Property; (c) during any consecutive two-year period, individuals who at the
beginning of such period constituted either the Board or (if ALC does not own
all of the voting stock of Allnet) the Board of Directors of Allnet (together
with any new directors whose election by such Board of Directors or whose
nomination for election by the stockholders of ALC or Allnet, as the case may
be, was approved by a vote of 66-2/3% of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board or the Board of Directors of Allnet then in
office; or (d) any liquidation or dissolution of ALC or Allnet (other than a
liquidation of Allnet into ALC that is not otherwise a Change of Control
Event).
2.09 CODE means the Internal Revenue Code of 1986, as amended.
References to a section of the Code shall include that section and any
comparable section or sections of any future legislation that amends,
supplements or supersedes that section.
2.10 COMPANY COMMON STOCK means the Common Stock of ALC, par value
$.01 per share.
2.11 DATE OF GRANT means the date designated by the Administrator
as the date as of which it grants an Award, which shall not be earlier than the
date on which the Administrator approves the granting of such Award.
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<PAGE> 3
2.12 DIRECTOR means a member of the Board of Directors of ALC or
its Subsidiaries.
2.13 EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended.
2.14 EXERCISE PRICE means, with respect to a Stock Appreciation
Right, the amount established by the Administrator, in accordance with Section
7.03 hereunder, and set forth in the Award Agreement, which is to be subtracted
from the Fair Market Value on the date of exercise in order to determine the
amount of the Incremental Value to be paid to the Participant.
2.15 EXPIRATION DATE means the date specified in an Award Agreement
as the expiration date of such Award.
2.16 FAIR MARKET VALUE means, on any given date, the average of the
highest and lowest selling price for the Company Common Stock as quoted on
NASDAQ/NMS or NASDAQ (whichever is applicable) for the given date or (if no
sales of the Company Common Stock shall be reported for the given date) for the
first date prior to the given date for which sales of the Company Common Stock
shall be quoted; if the Company Common Stock is not eligible for quotation on
NASDAQ/NMS or NASDAQ at the time of any Award hereunder, the Fair Market Value
shall be the quoted selling price for the Company Common Stock available for
the most recent given date in "The Pink Sheets." Notwithstanding the
foregoing, if the Company Common Stock is, on the given date, listed on a
national securities exchange, the Fair Market Value shall be the average of the
highest and lowest selling price for the given date, or the most recent date
upon which a sale occurred.
2.17 INCENTIVE STOCK OPTION means a stock option described in
Section 422 of the Code.
2.18 INCREMENTAL VALUE has the meaning given such term in Section
7.01 of the Plan.
2.19 NON-QUALIFIED STOCK OPTION means a stock option which is not an
Incentive Stock Option.
2.20 OFFICER means a president, vice president, treasurer,
secretary, controller, and any other person who performs functions
corresponding to the foregoing officers for ALC, any member of the Board or the
board of directors of a Subsidiary of ALC or any person performing similar
functions with respect to ALC, and any other participant who is deemed to be an
officer or director of ALC or a Subsidiary of ALC for purposes of Section 16 of
the Exchange Act and the rules thereunder, as currently in effect or as amended
from time to time.
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<PAGE> 4
2.21 OPTIONS mean all Non-Qualified Stock Options and Incentive
Stock Options granted at any time under the Plan.
2.22 PARTICIPANT shall have the meaning set forth in Section 5.01.
2.23 PLAN means the ALC Communications Corporation 1990 Stock
Option Plan, as described herein and as may be amended from time to time.
2.24 PURCHASE PRICE, with respect to options, shall have the meaning
set forth in Section 6.02.
2.25 RULE 16B-3 means Rule 16b-3 promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act, as currently in
effect and as it may be amended from time to time, and any successor rule.
2.26 STOCK APPRECIATION RIGHT means an Award granted in accordance
with Article VII.
2.27 SUBSIDIARY shall have the meaning set forth in Section 424(f)
of the Code.
2.28 TERMINATION OF EMPLOYMENT means the voluntary or involuntary
termination of a Participant's employment with ALC or a Subsidiary for any
reason, including death, disability, retirement or as the result of the
divestiture of the Participant's employer or any other similar transaction in
which the Participant's employer ceases to be ALC or one of the Subsidiaries of
ALC. Whether an authorized leave of absence or absence on military or
government service, absence due to disability, or absence for any other reason
shall constitute Termination of Employment shall be determined in each case by
the Administrator in its sole discretion.
ARTICLE III
ADMINISTRATION
3.01 ADMINISTRATION. The Administrator of the Plan shall be a
committee of two or more Directors with authority to act as provided in Rule
16b-3 and shall be elected or appointed by the Board. The members of the
committee shall meet the "disinterested person" requirements of Rule
16b-3(c)(2)(i). The Administrator shall administer the Plan in accordance with
this provision and shall have the sole discretionary authority to interpret the
Plan, to establish and modify administrative rules for the Plan, to impose such
conditions and restrictions on Awards as it determines appropriate, to cancel
Awards (including those made pursuant to other plans of ALC) and to substitute
new options (including options granted under other plans of ALC) with the
consent of the recipient, and to take such steps in connection with the Plan
and Awards granted thereunder as it may deem necessary or advisable. The
Administrator may, with respect to Participants who
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<PAGE> 5
are not Officers, delegate such of its powers and authority under the Plan as
it deems appropriate to designated officers or employees of ALC.
3.02 INDEMNIFICATION. Members of the Administrator shall be
entitled to indemnification and reimbursement from ALC for any action or any
failure to act in connection with service as Administrator to the full extent
provided for or permitted by the certificate of incorporation or bylaws of ALC
or by any insurance policy or other agreement intended for the benefit of
officers, directors or employees of ALC or by any applicable law.
ARTICLE IV
COMPANY COMMON STOCK ISSUABLE PURSUANT TO THE PLAN
4.01 SHARES ISSUABLE. Shares to be issued under the Plan may be
authorized and unissued shares or issued shares which have been reacquired by
ALC. Except as provided in Section 4.03, the Awards granted under the Plan
shall be limited so that the sum of the following shall never exceed 5,000,000
shares of Company Common Stock: (i) all shares which shall be issued upon the
exercise of outstanding Options or other Awards granted under the Plan, (ii)
all shares for which payment of Incremental Value shall be made by reason of
the exercise of Stock Appreciation Rights at any time granted under the Plan,
and (iii) the number of shares otherwise issuable under an Award which are
applied by ALC to payment of the withholding or tax liability discussed in
Section 8.11. In addition, up to 822,884 shares remaining available for grant
as of June 6, 1990 (including shares presently subject to outstanding options,
in the event such options terminate without being exercised) under the terms of
the ALC Communications Corporation 1986 Option Plan shall be available for
issuance under this Plan.
4.02 SHARES SUBJECT TO TERMINATED AWARDS. In the event that any
Award at any time granted under the Plan shall be surrendered to ALC, be
terminated or expire before it shall have been fully exercised, or an award of
Stock Appreciation Rights is exercised for cash, then all shares formerly
subject to such Award as to which such Award shall not have been exercised
shall be available for any Award subsequently granted in accordance with the
Plan. Shares of Company Common Stock subject to Options, or portions thereof,
which have been surrendered in connection with the exercise of tandem Stock
Appreciation Rights shall not be available for subsequent Awards under the
Plan, and shares of Company Common Stock issued in payment of such Stock
Appreciation Rights shall be charged against the number of shares of Company
Common Stock available for the grant of Awards. Any shares of Company Common
Stock issued by ALC pursuant to its assumption or substitution of outstanding
grants from acquired companies shall not reduce the number of shares available
for Awards under this Plan unless issued under this Plan.
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<PAGE> 6
4.03 ADJUSTMENTS TO REFLECT CAPITAL CHANGES.
(a) RECAPITALIZATION. The number and kind of shares
subject to outstanding Awards, the Purchase Price or Exercise Price
for such shares, and the number and kind of shares available for
Awards subsequently granted under the Plan shall be appropriately
adjusted to reflect any stock dividend, stock split combination or
exchange of shares, merger, consolidation or other change in
capitalization with a similar substantive effect upon the Plan or the
Awards granted under the Plan. The Administrator shall have the power
to determine the amount of the adjustment to be made in each case.
(b) SALE OR REORGANIZATION. After any reorganization,
merger or consolidation in which ALC is a surviving corporation, each
Participant shall, at no additional cost, be entitled upon exercise of
an Award to receive (subject to any required action by stockholders),
in lieu of the number of shares of Company Common Stock receivable or
exercisable pursuant to such Award, a number and class of shares of
stock or other securities to which such Participant would have been
entitled pursuant to the terms of the reorganization, merger or
consolidation if, at the time of such reorganization, merger or
consolidation, such Participant had been the holder of record of a
number of shares of stock equal to the number of shares receivable or
exercisable pursuant to such Award. Comparable rights shall accrue to
each Participant in the event of successive reorganizations, mergers
or consolidations of the character described above.
(c) DISSOLUTION OR CONSOLIDATION. Unless otherwise
stated in the Award Agreement and subject to such other terms and
conditions as the Administrator may establish in the Award Agreement,
in the event of the dissolution or liquidation of ALC, or any merger
or consolidation in which ALC is not the surviving corporation,
irrespective of whether or not an Award is then exercisable, the
Participant shall have the right, immediately prior to such
dissolution, liquidation or consolidation, to exercise in full any
unexpired Award to the extent not theretofore exercised or terminated;
provided, however, that any Stock Appreciation Right so exercised must
have a Date of Grant at least six months prior to the date of
exercise. All Options and Stock Appreciation Rights shall terminate
upon the dissolution, liquidation, merger or consolidation.
(d) OPTIONS TO PURCHASE STOCK OF ACQUIRED COMPANIES.
After any reorganization, merger or consolidation in which ALC or a
Subsidiary of ALC shall be a surviving corporation, the Administrator
may grant substituted Options under the provisions of the Plan,
pursuant to Section 424 of the Code, replacing old options granted
under a plan of another party to the reorganization, merger or
consolidation, where such party's stock may no longer be issued
following such merger or consolidation. The foregoing adjustments and
manner of application of the foregoing provisions shall be determined
by the Administrator in its sole
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discretion. Any adjustments may provide for the elimination of any
fractional shares which might otherwise have become subject to any
Awards.
ARTICLE V
PARTICIPATION
ELIGIBLE EMPLOYEES. Participants in the Plan shall be the
Officers who are employees of ALC or a Subsidiary of ALC and other employees of
ALC or a Subsidiary of ALC having managerial, supervisory or similar
responsibilities or who are key administrative employees or sales managers, and
who are not covered by any collective bargaining agreement binding on such
person's employer, as the Administrator, in its sole discretion, may designate
from time to time. The Administrator's designation of a Participant in any
year shall not require the Administrator to designate such person to receive
Awards in any other year. The Administrator shall consider such factors as it
deems pertinent in selecting Participants and in determining the type and
amount of their respective Awards.
ARTICLE VI
OPTION AWARDS
6.01 POWER TO GRANT OPTIONS. The Administrator may grant, to such
Participants as the Administrator may select, Options entitling the Participant
to purchase Company Common Stock from ALC in such quantity, at such price, and
on such terms and subject to such conditions, not inconsistent with the terms
of this Plan, as may be established by the Administrator. The terms of any
Option granted under this Plan shall be set forth in an Award Agreement.
Notwithstanding the foregoing, Options granted to Officers shall not be
exercisable for a period of at least six months from the Date of Grant, except
that Options which are granted to Officers which are replacements for existing
options previously granted under this Plan or another plan of ALC may become
exercisable in accordance with the terms of the previously granted option.
6.02 PURCHASE PRICE OF OPTIONS. The Purchase Price of each share
of Company Common Stock which may be purchased upon exercise of any Option
granted under the Plan shall be determined by the Administrator, provided that
such Purchase Price shall not be less than the Fair Market Value on the Date of
Grant, and provided further that the Purchase Price for shares of Company
Common Stock purchased pursuant to Stock Options designated by the
Administrator as Incentive Stock Options shall be equal to or greater than the
Fair Market Value on the Date of Grant as required under Section 422 of the
Code.
6.03 DESIGNATION OF INCENTIVE STOCK OPTIONS. Except as otherwise
expressly provided in the Plan, the Administrator may designate, at the Date of
Grant of each Option, that the Option is an Incentive Stock Option under
Section 422 of the Code.
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<PAGE> 8
(a) INCENTIVE STOCK OPTION SHARE LIMITATION. No
Participant may be granted Incentive Stock Options under the Plan (or
any other plans of ALC) which would result in stock with an aggregate
Fair Market Value (measured on the Date of Grant) of more than
$100,000 first becoming exercisable in any one calendar year, or which
would entitle such Participant to purchase a number of shares greater
than the maximum number permitted by Section 422 of the Code as in
effect on the Date of Grant.
(b) OTHER INCENTIVE STOCK OPTION TERMS. Whenever
possible, each provision in the Plan and in every Option granted under
this Plan which is designated by the Administrator as an Incentive
Stock Option shall be interpreted in such a manner as to entitle the
Option to the tax treatment afforded by Section 422 of the Code. If
any provision of this Plan or any Option designated by the
Administrator as an Incentive Stock Option shall be held not to comply
with requirements necessary to entitle such Option to such tax
treatment, then (i) such provision shall be deemed to have contained
from the outset such language as shall be necessary to entitle the
Option to the tax treatment afforded under Section 422 of the Code,
and (ii) all other provisions of this Plan and the Award Agreement
shall remain in full force and effect. If any agreement covering an
Option designated by the Administrator to be an Incentive Stock Option
under this Plan shall not explicitly include any terms required to
entitle such Incentive Stock Option to the tax treatment afforded by
Section 422 of the Code, all such terms shall be deemed implicit in
the designation of such Option and the Option shall be deemed to have
been granted subject to all such terms.
6.04 RIGHTS AS A STOCKHOLDER. The Participant or any transferee of
an Option pursuant to Section 8.04 or Section 8.12 shall have no rights as a
stockholder with respect to any shares of Company Common Stock covered by an
Option until the Participant or transferee shall have become the holder of
record of any such shares, and no adjustment shall be made for dividends and
cash or other property or distributions or other rights with respect to any
such shares of Company Common Stock for which the record date is prior to the
date on which the Participant or a transferee of the Option shall have become
the holder of record of any such shares covered by the Option.
ARTICLE VII
STOCK APPRECIATION RIGHTS
7.01 POWER TO GRANT STOCK APPRECIATION RIGHTS. The Administrator
is authorized to grant to any Participant, on such terms established by the
Administrator on or prior to the Date of Grant and subject to and not
inconsistent with the provisions of this Plan, the right to receive the payment
from ALC, payable as provided in Section 7.04, of an amount equal to the
Incremental Value of the Stock Appreciation Rights, which shall be an amount
equal to the remainder derived from subtracting (i) the Exercise Price for the
right established in the Award Agreement from (ii) the Fair Market Value of a
share
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<PAGE> 9
of Company Common Stock on the date of exercise. The terms of any Stock
Appreciation Right granted under the Plan shall be set forth in an Award
Agreement.
7.02 TANDEM STOCK APPRECIATION RIGHTS. The Administrator may grant
to any Participant a Stock Appreciation Right consistent with the provisions of
this Plan covering any share of Company Common Stock which is, at the Date of
Grant of the Stock Appreciation Right, also covered by an Option granted to the
same Participant, either prior to or simultaneously with the grant to such
Participant of the Stock Appreciation Right, provided: (i) any Option covering
any share of Company Common Stock shall expire and not be exercisable upon the
exercise of any Stock Appreciation Right with respect to the same share; (ii)
any Stock Appreciation Right covering any share of Company Common Stock shall
not be exercisable upon the exercise of any related Option with respect to the
same share; and (iii) an Option and Stock Appreciation Right covering the same
share of Company Common Stock may not be exercised simultaneously.
7.03 EXERCISE PRICE. The Exercise Price established under any
Stock Appreciation Right granted under this Plan shall be determined by the
Administrator and shall not be less than the lower of (i) the Purchase Price of
the related Option, in the case of a tandem Stock Appreciation Right or (ii)
the Fair Market Value on the Date of Grant of the Stock Appreciation Right.
Upon exercise of the Stock Appreciation Rights, the number of shares subject to
exercise under a related Option shall automatically be reduced by the number of
shares of Company Common Stock represented by the Option or portion thereof
which is surrendered as a result of the exercise of such Stock Appreciation
Rights.
7.04 PAYMENT OF INCREMENTAL VALUE. Any payment which may become
due from ALC by reason of Participant's exercise of a Stock Appreciation Right
may be paid to the Participant as determined by the Administrator (i) all in
cash, (ii) all in Company Common Stock, or (iii) in any combination of cash and
Company Common Stock. In the event that all or a portion of the payment is
made in Company Common Stock, the number of shares of the Company Common Stock
delivered in satisfaction of such payment shall be determined by dividing the
amount of the payment by the Fair Market Value on the date of exercise. The
Administrator may determine whether payment upon exercise of a Stock
Appreciation Right will be made in cash or in stock, or a combination thereof,
upon or at any time prior to the exercise of such Stock Appreciation Right. No
fractional share of Company Common Stock shall be issued to make any payment;
if any fractional shares would be issuable, the mix of cash and Company Common
Stock payable to the Participant shall be adjusted as directed by the
Administrator to avoid the issuance of any fractional share. Payment may be
made in cash to Officers only if the Stock Appreciation Right is exercised
during the "window period" required under Rule 16b-3(e)(3) and otherwise in
accordance with Rule 16b-3.
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<PAGE> 10
ARTICLE VIII
TERMS OF OPTIONS AND STOCK APPRECIATION RIGHTS
8.01 AWARD AGREEMENT. No person shall have any rights under any
Award granted under the Plan unless and until the Administrator has adopted a
resolution granting the Award. The grant and the terms and conditions of the
Award shall be set forth in an Award Agreement between ALC and the Participant
and shall be delivered to the Participant. In the event of the loss or
destruction of the Award Agreement, or any inconsistency between the Award
Agreement and the resolution of the Administrator documenting the grant of the
Award, the resolution of the Administrator shall control.
8.02 PLAN PROVISIONS CONTROL AWARD TERMS. The terms of the Plan
shall govern all Awards granted under the Plan, and in no event shall the
Administrator have the power to grant any Award under the Plan which is
contrary to any of the provisions of the Plan. In the event any provision of
any Award granted under the Plan shall conflict with any term in the Plan as
constituted on the Date of Grant of such Award, the term in the Plan as
constituted on the Date of Grant of such Award shall control. Except as
provided in Section 4.03, (i) the terms of any Award granted under the Plan may
not be changed after the granting of such Award without the express approval of
the Participant and (ii) no modification may be made to an Award granted to an
Officer except in compliance with Rule 16b-3.
8.03 DURATION OF OPTIONS AND STOCK APPRECIATION RIGHTS. Options
and Stock Appreciation Rights shall terminate after the first to occur of the
following events:
(a) Expiration Date of the Award as provided in the Award
Agreement; or
(b) Termination of the Award as provided in Section 8.04;
or
(c) In the case of an Incentive Stock Option, ten years
from the Date of Grant; or
(d) Solely in the case of tandem Stock Appreciation
Rights, upon the Expiration Date of the related Option.
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<PAGE> 11
8.04 EXERCISE ON DEATH OR TERMINATION OF EMPLOYMENT.
(a) Unless otherwise provided in the Award Agreement, in
the event of the death of a Participant while an employee of ALC or a
Subsidiary of ALC, the right to exercise all unexpired Awards shall be
accelerated and shall accrue as of the date of death, and the
Participant's Awards may be exercised by his Beneficiary at any time
within one year after the date of the Participant's death.
(b) Unless otherwise provided in the Award Agreement, in
the event of Participant's Termination of Employment at any time for
any reason other than death (including disability or retirement), an
Award may be exercised, but only to the extent it was otherwise
exercisable, on the date of Termination of Employment, within ninety
days after the date of Termination of Employment. In the event of the
death of the Participant within the ninety-day period following
Termination of Employment, his Award may be exercised by his
Beneficiary within one year after the date of the Participant's death.
(c) With respect to an Award which is intended to
constitute an Incentive Stock Option, upon Termination of Employment,
such Award shall be exercisable as provided in Section 422 of the
Code.
8.05 ACCELERATION OF EXERCISE TIME. The Administrator, in its sole
discretion, shall have the right (but shall not in any case be obligated) to
permit purchase of shares under any Award prior to the time such Award would
otherwise become exercisable under the terms of the Award Agreement.
8.06 EXTENSION OF EXERCISE TIME. The Administrator, in its sole
discretion, shall have the right (but shall not in any case be obligated) to
permit any Award granted under this Plan to be exercised after its Expiration
Date or after the ninety day period following Termination of Employment,
subject, however, to the limitations described in Section 8.03 (c) and (d).
8.07 MODIFICATION OF AWARD AFTER GRANT. Each Award granted under
the Plan to a Participant other than an Officer may be modified after the date
of its grant by express written agreement between ALC and the Participant,
provided that such change (i) shall not be inconsistent with the terms of the
Plan and (ii) shall be approved by the Administrator. No modifications may be
made to any Awards granted to an Officer except in compliance with Rule 16b-3.
8.08 CONDITIONS FOR EXERCISE. An Award Agreement may contain such
waiting periods, exercise dates and restrictions on exercise (including, but
not limited to, periodic installments which may be cumulative) as may be
determined by the Administrator at the Date of Grant. Where payment is to be
made in whole or in part in cash, no Stock Appreciation Right may be exercised
prior to six months from the Date of Grant.
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<PAGE> 12
8.09 CHANGE OF CONTROL EVENT. Unless otherwise provided in the
Award Agreement, and subject to such other terms and conditions as the
Administrator may establish in the Award Agreement, upon the occurrence of a
Change of Control Event, irrespective of whether or not an Award is then
exercisable, the Participant shall have the right to exercise in full any
unexpired Award to the extent not theretofore exercised or terminated;
provided, however, that any Stock Appreciation Right so exercised must have a
Date of Grant at least six months prior to the date of exercise.
8.10 EXERCISE PROCEDURES. Each Option and Stock Appreciation Right
granted under the Plan shall be exercised by written notice to ALC which must
be received by the representative of ALC designated in the Award Agreement on
or before the Expiration Date of the Award. The Purchase Price of shares
purchased upon exercise of an Option granted under the Plan shall be paid in
full in cash by the Participant pursuant to the Award Agreement; provided,
however, that the Administrator may (but need not) permit payment to be made by
delivery to ALC of either (a) shares of Company Common Stock (including shares
issuable to the Participant pursuant to the exercise of the Option provided
that Officers may elect to make payment with such shares only within the
"window period" required under Rule 16b-3(e)(3) and otherwise in accordance
with Rule 16b-3), or (b) any combination of cash and shares of Company Common
Stock, or (c) such other consideration as the Administrator deems appropriate
and in compliance with applicable law (including payment in accordance with a
cashless exercise program under which, if so instructed by the Participant,
shares of Company Common Stock may be issued directly to the Participant's
broker or dealer upon receipt of the Purchase Price in cash from the broker or
dealer). In the event that any Company Common Stock shall be transferred to
ALC to satisfy all or any part of the Purchase Price, the part of the Purchase
Price deemed to have been satisfied by such transfer of Company Common Stock
shall be equal to the product derived by multiplying the Fair Market Value as
of the date of exercise times the number of shares transferred. The
Participant may not transfer to ALC in satisfaction of the Purchase Price (y) a
number of shares which when multiplied times the Fair Market Value as of the
date of exercise would result in a product greater than the Purchase Price or
(z) any fractional share of Company Common Stock. Any part of the Purchase
Price paid in cash upon the exercise of any Option shall be added to the
general funds of ALC and used for any proper corporate purpose. Unless the
Administrator shall otherwise determine, any Company Common Stock transferred
to ALC as payment of all or part of the Purchase Price upon the exercise of any
Option shall be held as treasury shares.
8.11 TAXES. ALC shall be entitled, if the Administrator deems it
necessary or desirable, to withhold (or secure payment from the Participant in
lieu of withholding) the amount of any withholding or other tax required by law
to be withheld or paid by ALC with respect to any amount payable and/or shares
issuable under such Participant's Award, or with respect to any income
recognized upon a disqualifying disposition of shares received pursuant to the
exercise of an Incentive Stock Option, and ALC may defer payment or issuance of
the cash or stock upon exercise or vesting of an Award unless
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<PAGE> 13
indemnified to its satisfaction against any liability for such tax. The amount
of such withholding or tax payment shall be determined by the Administrator
and, unless otherwise provided by the Administrator, shall be payable by the
Participant at the time of issuance or payment in accordance with the following
rules:
(a) A Participant, other than an Officer, shall have the
right to elect to meet his or her withholding requirement by: (1)
having ALC withhold from such Award the appropriate number of shares
of Company Common Stock, rounded out to the next whole number, whose
Fair Market Value is equal to such amount, or, in the case of the cash
payment, the amount of cash, as is determined by ALC to be sufficient
to satisfy applicable tax withholding requirements; or (2) direct
payment to ALC in cash of the amount of any taxes required to be
withheld with respect to such Award.
(b) Unless otherwise provided by the Administrator, an
Officer shall have the right to elect to meet his or her withholding
requirement by: (1) making an election within the "window period"
required under Rule 16b-3(e)(3) to have ALC withhold from such Award
the appropriate number of shares of Company Common Stock, rounded out
to the next whole number, whose Fair Market Value is equal to such
amount, or, in the case of the cash payment, the amount of cash, as is
determined by ALC to be sufficient to satisfy applicable tax
withholding requirements; or (2) direct payment to ALC in cash of the
amount of any taxes required to be withheld with respect to such
Award. With respect to this section, any options exercised by
Officers must be held for at least six months after the Date of Grant.
(c) In the event that an Award or property received upon
exercise of an Award has already been transferred to the Participant
on the date upon which withholding requirements apply, the Participant
shall pay directly to ALC the cash amount determined by ALC to be
sufficient to satisfy applicable federal, state or local withholding
requirements. The Participant shall provide to ALC such information
as ALC shall require to determine the amounts to be withheld and the
time such withholding requirements become applicable.
(d) If permitted under applicable federal income tax
laws, a Participant may elect to be taxed in the year in which an
Award is exercised or received, even if it would not otherwise have
become taxable to the Participant. If the Participant makes such an
election, the Participant shall promptly notify ALC in writing and
shall provide ALC with a copy of the executed election form as filed
with the Internal Revenue Service no later than thirty days from the
date of exercise or receipt. Promptly following such notification,
the Participant shall pay directly to ALC the cash amount determined
by ALC to be sufficient to satisfy applicable federal, state or local
withholding tax requirements.
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<PAGE> 14
8.12 LIMITATIONS ON TRANSFER. A Participant's rights and interest
under the Plan may not be assigned or transferred other than by will or the
laws of descent and distribution or pursuant to the terms of a domestic
relations order, as defined in Section 414(p)(1)(B) of the Code, which
satisfies the requirements of Section 414(p)(1)(A) of the Code (a "Qualified
Domestic Relations Order"). During the lifetime of a Participant, only the
Participant personally (or the Participant's personal representative or
attorney-in-fact) or the alternate payee named in a Qualified Domestic
Relations Order may exercise the Participant's rights under the Plan. The
Participant's Beneficiary may exercise a Participant's rights to the extent
they are exercisable under the Plan following the death of the Participant.
8.13 SURRENDER OF AWARDS. Any Award granted under the Plan may be
surrendered to ALC for cancellation on such terms as the Administrator and
Participant approve, including, but not limited to, terms which provide that
upon such surrender ALC will pay to the Participant cash or Company Common
Stock, or a combination of cash and Company Common Stock.
ARTICLE IX
OTHER STOCK BASED AWARDS
9.01 GRANT OF OTHER AWARDS. Other Awards of Company Common Stock
or other securities of ALC and other Awards that are valued in whole or in part
by reference to, or are otherwise based on, Company Common Stock ("Other
Awards") may be granted either alone or in addition to or in conjunction with
Options or Stock Appreciation Rights under the Plan; provided, however, that
Company Common Stock (including Company Common Stock upon conversion, exchange
or otherwise) shall be issued either as a bonus award, free or at a price no
greater than its par value, or for a price equal to at least its Fair Market
Value on the Date of Grant or issuance date as specified in the Award
Agreement. Subject to the provisions of the Plan, the Administrator shall have
the sole and complete authority to determine the persons to whom and the time
or times at which Other Awards shall be made, the number of shares of Company
Common Stock or other securities, if any, to be granted pursuant to such Other
Awards, and all other conditions of such Other Awards. Any Other Award shall
be confirmed by an Award Agreement executed by the Administrator and the
Participant, which agreement shall contain such provisions as the Administrator
determines to be necessary or appropriate to carry out the intent of this Plan
with respect to the Other Award.
9.02 TERMS OF OTHER AWARDS. In addition to the terms and
conditions specified in the Award Agreement, Other Awards made pursuant to this
Article IX shall be subject to the following:
(a) Any shares of Company Common Stock subject to such
Other Awards may not be sold, assigned, transferred or otherwise
encumbered prior to
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<PAGE> 15
the date on which the shares are issued, or, if later, the date on
which any applicable restriction, performance or deferral period
lapses; and
(b) As specified by the Administrator and the Award
Agreement, the recipient of an Other Award shall be entitled to
receive, currently or on a deferred basis, interest or dividends or
dividend equivalents with respect to the Company Common Stock or other
securities covered by the Other Award; and
(c) The Award Agreement with respect to any Other Award
shall contain provisions providing for the disposition of such Other
Award in the event of Termination of Employment prior to the exercise,
realization or payment of such Other Award, with such provisions to
take account of the specific nature and purpose of the Other Award.
ARTICLE X
GENERAL PROVISIONS
10.1 AMENDMENT AND TERMINATION OF PLAN.
(a) AMENDMENT. The Board shall have complete power and
authority to amend the Plan at any time and to add any other stock
based Award or other incentive compensation programs to the Plan as it
deems necessary or appropriate and no approval by the stockholders of
ALC or by any other person, committee or entity of any kind shall be
required to make any amendment; provided, however, that the Board
shall not, without the requisite affirmative approval of stockholders
of ALC, make any amendment which requires stockholder approval under
any applicable law, including Rule 16b-3 or the Code, unless such
compliance, if discretionary, is no longer desired. No termination or
amendment of the Plan may, without the consent of the Participant to
whom any Award shall theretofore have been granted under the Plan,
adversely affect the right of such individual under such Award. For
the purposes of this section, an amendment to the Plan shall be deemed
to have the affirmative approval of the stockholders of ALC if such
amendment shall have been submitted for a vote by the stockholders at
a duly called meeting of such stockholders at which a quorum was
present and the majority of votes cast with respect to such amendment
at such meeting shall have been cast in favor of such amendment, or if
the holders of outstanding stock having not less than a majority of
the outstanding shares consent to such amendment in writing in the
manner provided under the bylaws of ALC.
(b) TERMINATION. The Board shall have the right and the
power to terminate the Plan at any time. If the Plan is not earlier
terminated, the Plan shall terminate on December 31, 2000. No Award
shall be granted under the Plan after the termination of the Plan, but
the termination of the Plan shall not have any other effect and any
Award outstanding at the time of the termination of the Plan may
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<PAGE> 16
be exercised after termination of the Plan at any time prior to the
expiration date of such Award to the same extent such Award would have
been exercisable if the Plan had not been terminated.
10.02 NO RIGHT TO EMPLOYMENT. No employee or other person shall
have any claim or right to be granted an Award under this Plan. Neither the
Plan nor any action taken hereunder shall be construed as giving any employee
any right to be retained in the employ of ALC or any of its Subsidiaries.
10.03 COMPLIANCE WITH RULE 16B-3. It is intended that the Plan be
applied and administered in compliance with Rule 16b-3. If any provision of
the Plan would be in violation of Rule 16b-3 if applied as written, such
provision shall not have effect as written and shall be given effect so as to
comply with Rule 16b-3, as determined by the Administrator. The Board is
authorized to amend the Plan and to make any such modifications to Award
Agreements to comply with Rule 16b-3, as it may be amended from time to time,
and to make any other such amendments or modifications as it deems necessary or
appropriate to better accomplish the purposes of the Plan in light of any
amendments made to Rule 16b-3.
10.04 SECURITIES LAW RESTRICTIONS. The shares of Company Common
Stock issuable upon the exercise of any Awards granted under the Plan may not
be issued by ALC without registration or qualification of such shares under the
Securities Act of 1933, as amended, or under various state securities laws or
without an exemption from such registration requirements. Unless the shares to
be issued under the Plan have been registered and/or qualified as appropriate,
ALC shall be under no obligation to issue shares of Company Common Stock upon
exercise of an Award unless and until such time as there is an appropriate
exemption available from the registration or qualification requirements of
federal or state law as determined by the Administrator in its sole discretion.
The Administrator may require any person who is granted an award hereunder to
agree with ALC to represent and agree in writing that if such shares are
issuable under an exemption from registration requirements, the shares will be
"restricted" securities which may be resold only in compliance with applicable
securities laws, and that such person is acquiring the shares issued upon
exercise of the Award for investment, and not with the view toward
distribution.
10.05 CAPTIONS. The captions (i.e., all section headings) used in
the Plan are for convenience only, do not constitute a part of the Plan, and
shall not be deemed to limit, characterize or affect in any way any provisions
of the Plan, and all provisions of the Plan shall be construed as if no
captions have been used in the Plan.
10.06 SEVERABILITY. Whenever possible, each provision in the Plan
and every Award at any time granted under the Plan shall be interpreted in such
a manner as to be effective and valid under applicable law, but if any
provision of the Plan or any Award at any time granted under the Plan shall be
held to be prohibited or invalid under applicable
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<PAGE> 17
law, then (a) such provision shall be deemed amended to accomplish the
objectives of the provision as originally written to the fullest extent
permitted by law and (b) all other provisions of the Plan and every other Award
at any time granted under the Plan shall remain in full force and effect.
10.07 NO STRICT CONSTRUCTION. No rule of strict construction shall
be implied against ALC, the Administrator, or any other person in the
interpretation of any of the terms of the Plan, any Award granted under the
Plan or any rule or procedure established by the Administrator.
10.08 CHOICE OF LAW. All determinations made and actions taken
pursuant to the Plan shall be governed by the laws of the State of Michigan and
construed in accordance therewith.
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<PAGE> 1
EXHIBIT 10.3
ALC COMMUNICATIONS CORPORATION
1994 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
ARTICLE I.
PURPOSE AND ADOPTION OF THE PLAN
1.01 PURPOSE. The purpose of the ALC Communications Corporation
Non-Employee Director Stock Option Plan is to attract and retain the services of
experienced and knowledgeable independent directors of ALC Communications
Corporation (the "Company") and to provide an additional incentive for such
directors to continue to work for the best interests of the Company and its
stockholders.
1.02 ADOPTION AND TERM. The Plan has been approved by the Board and is
effective as of February 10, 1994 subject to approval of the Company's
stockholders on or before February 9, 1995, and will remain in effect until all
shares authorized under the terms of the Plan have been issued, unless earlier
terminated or abandoned by action of the Board.
ARTICLE II.
DEFINITIONS
2.01 BENEFICIARY means (a) an individual, trust or estate who or which, by
will or by operation of the laws of descent and distribution, succeeds to the
rights and obligations of the Non-Employee Director under the Plan and Option
Agreement upon the Non-Employee Director's death; or (b) an individual, who by
designation of the Non-Employee Director, succeeds to the rights and obligations
of the Non-Employee Director under the Plan and Option Agreement upon the
Non-Employee Director's death.
2.02 BOARD means the Board of Directors of the Company.
2.03 CODE means the Internal Revenue Code of 1986, as amended. References
to a section of the Code shall include that section and any comparable section
or sections of any future legislation that amends, supplements or supersedes
that section.
2.04 COMPANY means ALC Communications Corporation, a Delaware corporation.
2.05 COMPANY COMMON STOCK means the Common Stock of the Company, par value
$0.01.
2.06 DATE OF GRANT means the date of the Annual Meeting of stockholders of
the Company on which an Option is granted as provided in Section 5.01.
2.07 DIRECTOR means a member of the Board of Directors of the Company.
2.08 EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
2.09 EXPIRATION DATE means the date specified in an Option Agreement as
the expiration date of such Award.
2.10 FAIR MARKET VALUE means, on any given date, the average of the
highest and lowest selling price for the Company Common Stock on the American
Stock Exchange as reported in The Wall Street Journal, or, if there were no
sales on such date, the average of the highest and lowest selling price for the
most recent date upon which a sale was reported.
2.11 NON-EMPLOYEE DIRECTOR means a Director who is not an employee of the
Company or a Subsidiary.
2.12 NON-QUALIFIED STOCK OPTION means a stock option which is not an
Incentive Stock Option as described in Section 422 of the Code.
2.13 OPTION means a Non-Qualified Stock Option granted at any time under
the Plan.
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2.14 OPTION AGREEMENT means a written agreement between the Company and
the optionholder evidencing the grant of an Option and setting forth the terms
and conditions of the Option.
2.15 PLAN means the ALC Communications Corporation 1994 Non-Employee
Director Stock Option Plan, as described herein and as it may be amended from
time to time.
2.16 PURCHASE PRICE, with respect to options, shall have the meaning set
forth in Section 5.02.
2.17 RULE 16B-3 means Rule 16b-3 promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act, as currently in effect
and as it may be amended from time to time, and any successor rule.
2.18 SUBSIDIARY shall have the meaning set forth in Section 424(f) of the
Code.
ARTICLE III.
COMPANY COMMON STOCK ISSUABLE PURSUANT TO THE PLAN
3.01 SHARES ISSUABLE. Shares to be issued under the Plan may be authorized
and unissued shares or issued shares which have been reacquired by the Company.
Except as provided in Section 3.03, the Options granted under the Plan shall be
limited so that all shares which shall be issued upon the exercise of
outstanding Options granted under the Plan shall never exceed 100,000 shares of
Company Common Stock.
3.02 SHARES SUBJECT TO TERMINATED OPTIONS. In the event that any Option at
any time granted under the Plan shall be surrendered to the Company, be
terminated or expire before it shall have been fully exercised, then all shares
formerly subject to such Option as to which such Option shall not have been
exercised shall be available for any Option subsequently granted in accordance
with the Plan.
3.03 ADJUSTMENTS TO REFLECT CAPITAL CHANGES.
(a) RECAPITALIZATION. The number and kind of shares subject to
outstanding Options, the Purchase Price for such shares, and the number and
kind of shares available for Options subsequently granted under the Plan
shall be appropriately adjusted to reflect any stock dividend, stock split,
combination or exchange of shares, merger, consolidation or other change in
capitalization with a similar substantive effect upon the Plan or the
Options granted under the Plan. The Board shall have the power to determine
the amount of the adjustment to be made in each case.
(b) SALE OR REORGANIZATION. After any reorganization, merger or
consolidation in which the Company is a surviving corporation, each
Non-Employee Director shall, at no additional cost, be entitled upon
exercise of an Option to receive (subject to any required action by
stockholders), in lieu of the number of shares of Company Common Stock
receivable or exercisable pursuant to such Option, a number and class of
shares of stock or other securities to which such Non-Employee Director
would have been entitled pursuant to the terms of the reorganization,
merger or consolidation if, at the time of such reorganization, merger or
consolidation, such Non-Employee Director had been the holder of record of
a number of shares of stock equal to the number of shares receivable or
exercisable pursuant to such Option. Comparable rights shall accrue to each
Non-Employee Director in the event of successive reorganizations, mergers
or consolidations of the character described above.
ARTICLE IV.
PARTICIPATION
ELIGIBLE INDIVIDUALS. All Non-Employee Directors of the Company shall be
eligible to receive Options under the Plan.
2
<PAGE> 3
ARTICLE V.
OPTION AWARDS
5.01 GRANT OF OPTIONS. Beginning with the first Annual Meeting of
stockholders of the Company which is subsequent to the date the Plan is adopted
by the Board and continuing while the Plan remains in effect and a sufficient
number of shares are available under the Plan, each year on the date of the
Annual Meeting, there shall automatically be granted to each Non-Employee
Director who has served as a Director for at least one year, and who has been
elected to serve on the Board after the Annual Meeting, a Non-Qualified Stock
Option to purchase 5,000 shares of Company Common Stock. Each Option granted
hereunder shall be evidenced by an Option Agreement, and shall be in addition
to, and not in lieu of, the Non-Employee Director's annual retainer fee, meeting
and committee fees, and any other compensation payable to each Non-Employee
Director as a result of his or her service on the Board.
5.02 PURCHASE PRICE OF OPTIONS. The Purchase Price of each share of
Company Common Stock which may be purchased upon exercise of any Option granted
under the Plan shall be the Fair Market Value on the Date of Grant.
5.03 VESTING OF OPTIONS. No Option may be exercised prior to one year from
the Date of Grant. Each Option granted pursuant to paragraph 5.01 above shall
become exercisable with respect to 1,250 shares one year from the Date of Grant,
and with respect to an additional 1,250 shares on the second, third and fourth
anniversaries of the Date of Grant.
5.04 DURATION OF OPTIONS. Options granted under the Plan shall terminate
after the first to occur of the following events:
(a) Ten years from the Date of Grant.
(b) Three months after the Optionee ceases to be a Director, except in
the case of death, as described in (c) below.
(c) In the event of the death of a Non-Employee Director while a
Director, the right to exercise all unexpired Options shall be accelerated
and shall accrue as of the date of death, and the Non-Employee Director's
Options may be exercised by his Beneficiary at any time within one year
after the date of the Non-Employee Director's death. In the event of the
death of a Non-Employee Director within the ninety day period after he or
she ceases to be a Director, the Non-Employee Director's Beneficiary may
exercise his or her Options, to the extent exercisable on the date of
death, within one year after the date of the Non-Employee Director's death.
5.05 EXERCISE PROCEDURES. Each Option granted under the Plan may be
exercised by written notice to the Company which must be received by the
Secretary of the Company on or before the Expiration Date of the Option. The
Purchase Price of shares purchased upon exercise of an Option granted under the
Plan shall be paid in full in cash by the Non-Employee Director on the date of
exercise.
5.06 RIGHTS AS A STOCKHOLDER. The Non-Employee Director or any transferee
of an Option pursuant to Section 5.04(c) or Section 5.09 shall have no rights as
a stockholder with respect to any shares of Company Common Stock covered by an
Option until the Non-Employee Director or transferee shall have become the
holder of record of any such shares, and no adjustment shall be made for
dividends and cash or other property or distributions or other rights with
respect to any such shares of Company Common Stock for which the record date is
prior to the date on which the Non-Employee Director or a transferee of the
Option shall have become the holder of record of any such shares covered by the
Option.
5.07 PLAN PROVISIONS CONTROL OPTION TERMS. The terms of the Plan shall
govern all Options granted under the Plan. In the event any provision of any
Option granted under the Plan shall conflict with any term in the Plan as
constituted on the Date of Grant of such Option, the term in the Plan as
constituted on the Date of Grant of such Option shall control. Except as
provided in Section 3.03, (i) the terms of any Option granted under the Plan may
not be changed after the granting of such Option without the express approval of
the
3
<PAGE> 4
Non-Employee Director and (ii) no modification may be made to an Option granted
under the Plan except in compliance with Rule 16b-3.
5.08 TAXES. The Company shall be entitled, if the Company deems it
necessary or desirable, to withhold (or secure payment from the Non-Employee
Director in lieu of withholding) the amount of any withholding or other tax
required by law to be withheld or paid by the Company with respect to any shares
issuable upon exercise of an Option, and the Company may defer issuance of the
stock upon exercise unless indemnified to its satisfaction against any liability
for such tax.
5.09 LIMITATIONS ON TRANSFER. A Non-Employee Director's rights and
interest under the Plan may not be assigned or transferred other than by will or
the laws of descent and distribution, or pursuant to the terms of a domestic
relations order, as defined in Section 414(p)(1)(B) of the Code, which satisfies
the requirements of Section 414(p)(1)(A) of the Code (a "Qualified Domestic
Relations Order"). During the lifetime of a Non-Employee Director, only the
Non-Employee Director personally (or the Non-Employee Director's personal
representative or attorney-in-fact) or the alternate payee named in a Qualified
Domestic Relations Order may exercise the Non-Employee Director's rights under
the Plan. The Non-Employee Director's Beneficiary may exercise a Non-Employee
Director's rights to the extent they are exercisable under the Plan following
the death of the Non-Employee Director.
ARTICLE VI.
GENERAL PROVISIONS
6.01 AMENDMENT AND TERMINATION OF PLAN.
(a) AMENDMENT. The Board shall have complete power and authority to
amend the Plan at any time as it deems necessary or appropriate and no
approval by the stockholders of the Company or by any other person,
committee or entity of any kind shall be required to make any amendment;
provided, however, that the provisions set forth in the Plan regarding the
amount, price or timing of Option grants to Non-Employee Directors may not
be amended more than once every six months, other than to comport with
changes in the Code, the Employee Retirement Income Security Act of 1974,
as amended, or the rules thereunder. Further, the Board shall not, without
the requisite affirmative approval of stockholders of the Company, make any
amendment which requires stockholder approval under any applicable law,
including Rule 16b-3 or the Code, unless such compliance, if discretionary,
is no longer desired. No termination or amendment of the Plan may, without
the consent of the Non-Employee Director to whom any Option shall
theretofore have been granted under the Plan, adversely affect the right of
such individual under such Option. For the purposes of this section, an
amendment to the Plan shall be deemed to have the affirmative approval of
the stockholders of the Company if such amendment shall have been submitted
for a vote by the stockholders at a duly called meeting of such
stockholders at which a quorum was present and the majority of votes cast
with respect to such amendment at such meeting shall have been cast in
favor of such amendment, or if the holders of outstanding stock having not
less than a majority of the outstanding shares consent to such amendment in
writing in the manner provided under the Company's bylaws.
(b) TERMINATION. The Board shall have the right and the power to
terminate the Plan at any time. If the Plan is not earlier terminated, the
Plan shall terminate when all shares authorized under the Plan have been
issued. No Option shall be granted under the Plan after the termination of
the Plan, but the termination of the Plan shall not have any other effect
and any Option outstanding at the time of the termination of the Plan may
be exercised after termination of the Plan at any time prior to the
expiration date of such Option to the same extent such award would have
been exercisable if the Plan had not been terminated.
6.02 NO RIGHT TO CONTINUE AS DIRECTOR. Neither the Plan nor any action
taken hereunder shall be construed as giving any Non-Employee Director any right
to be retained as a Director, or to limit in any way the right of the
stockholders of the Company to remove such person as a Director.
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<PAGE> 5
6.03 COMPLIANCE WITH RULE 16B-3. It is intended that the Plan be
established and operated so as to qualify for the exemption from Section 16 of
the Exchange Act available under Rule 16b-3, and so that the Non-Employee
Director receiving Options hereunder will qualify as "disinterested" under Rule
16b-3 for purposes of administering other stock option plans of the Company. If
any provision of the Plan would cause the Non-Employee Directors not to so
qualify, or would not comply with Rule 16b-3 if applied as written, such
provision shall not have effect as written and shall be given effect so as to
comply with Rule 16b-3 and to allow the Non-Employee Directors to so qualify, as
determined by the Board. The Board is authorized to amend the Plan and to make
any such modifications to Option Agreements to comply with Rule 16b-3, as it may
be amended from time to time, and to make any other such amendments or
modifications as it deems necessary or appropriate to better accomplish the
purposes of the Plan in light of any amendments made to Rule 16b-3.
6.04 SECURITIES LAW RESTRICTIONS. The shares of Company Common Stock
issuable pursuant to the terms of any Options granted under the Plan may not be
issued by the Company without registration or qualification of such shares under
the Securities Act of 1933, as amended, or under various state securities laws
or without an exemption from such registration requirements. Unless the shares
to be issued under the Plan have been registered and/or qualified as
appropriate, the Company shall be under no obligation to issue shares of Company
Common Stock upon exercise of an Option unless and until such time as there is
an appropriate exemption available from the registration or qualification
requirements of federal or state law as determined by the Company in its sole
discretion. The Company may require any person who is granted an award hereunder
to agree with the Company to represent and agree in writing that if such shares
are issuable under an exemption from registration requirements, the shares will
be "restricted" securities which may be resold only in compliance with
applicable securities laws, and that such person is acquiring the shares issued
upon exercise of the Option for investment, and not with the view toward
distribution.
6.05 CAPTIONS. The captions (i.e., all section headings) used in the Plan
are for convenience only, do not constitute a part of the Plan, and shall not be
deemed to limit, characterize or affect in any way any provisions of the Plan,
and all provisions of the Plan shall be construed as if no captions have been
used in the Plan.
6.06 SEVERABILITY. Whenever possible, each provision in the Plan and every
Option at any time granted under the Plan shall be interpreted in such a manner
as to be effective and valid under applicable law, but if any provision of the
Plan or any Option at any time granted under the Plan shall be held to be
prohibited or invalid under applicable law, then (a) such provision shall be
deemed amended to accomplish the objectives of the provision as originally
written to the fullest extent permitted by law and (b) all other provisions of
the Plan and every other Option at any time granted under the Plan shall remain
in full force and effect.
6.07 CHOICE OF LAW. All determinations made and actions taken pursuant to
the Plan shall be governed by the laws of Michigan and construed in accordance
therewith, to the extent not preempted by the laws of the United States.
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<PAGE> 1
EXHIBIT 10.4
STOCK OPTION
Effective on the date hereof, May 12, 1994, ALC Communications Corporation, a
Delaware corporation ("ALC"), hereby grants to Grumman Hill Associates, Inc.,
15 Ketchum Street, Westport, CT 06880, a nontransferable Non-Qualified Stock
Option to purchase, at a price of $29.63 per share, 14,000 shares of ALC
Communications Corporation Common Stock. This option shall fully vest on May
12, 1995 and shall expire at the close of business on May 12, 1999.
From and after May 12, 1995, the option may be exercised by Grumman Hill
Associates, Inc. or its legal successor, by giving written notice of exercise
accompanied by payment in cash or by check for the shares being purchased.
Upon exercise, ALC shall promptly issue certificates to Grumman Hill
Associates, Inc. representing the shares acquired upon such exercise.
The ALC Communications Corporation Common Stock issuable on exercise of the
option will be registered under the Securities Act of 1933 (the "Act"), and
Grumman Hill Associates, Inc. agrees that it will make no disposition of any
of such stock in violation of the Act.
In the event of any merger, consolidation, stock dividend, split-up,
combination or exchange of shares or recapitalization, the number or kind of
shares that are subject to the option and the option price per share
immediately prior to such event shall be proportionately and appropriately
adjusted, without increase or decrease in the aggregate option price to be
paid upon exercise of the option. The determination of the Board of Directors
of ALC as to the terms of any such adjustment shall be binding and conclusive on
Grumman Hill Associates, Inc. and any other entity which is at any time
entitled to exercise the option.
ALC Communications Corporation
By: John M. Zrno
-------------------------------------
John M. Zrno, President
Accepted this 12th day of May, 1994
Grumman Hill Associates, Inc.
By: Richard D. Irwin
-------------------------------------
Richard D. Irwin, President
<PAGE> 1
EXHIBIT 10.5
AMENDMENT TO ADVISORY AGREEMENT
WITH STOCK OPTION
-----------------
Amendment made as of the 2nd day of May, 1994, to the Advisory
Agreement with Stock Option dated September 7, 1988, as amended June 6, 1990,
between ALC Communications Corporation ("ALC"), Grumman Hill Associates, Inc.
("Grumman Hill") and Grumman Hill Investments, L.P. ("Grumman L.P.").
WHEREAS, ALC had previously issued to Grumman Hill a stock option (the
"Stock Option") pursuant to an Advisory Agreement with Stock Option dated
September 7, 1988.
WHEREAS, pursuant to Amendment dated June 6, 1990, the Stock Option was
amended to provide, inter alia, that the Stock Option may be assigned to
Grumman, L.P.
WHEREAS, Grumman L.P. now desires to distribute the Stock Option to its
partners, and the partners may desire to transfer the Stock Options to
registered broker/dealers.
NOW, THEREFORE, in consideration of the mutual promises and agreements
hereinafter set forth, the parties agree to the following amendment to the
Agreement:
1. Section 3 is amended by adding the following paragraph:
"Grumman Hill Investments, L.P., with written notice
to ALC of the effective date of same, may assign this
Stock Option and parts thereof, to its partners,
provided that such partners execute a Stock Option
Agreement and such other documents requested by ALC,
all in form and substance satisfactory to ALC. The
partners of Grumman Hill Investments, L.P., with
written notice to ALC of the effective date of same,
may assign such Stock Option received from Grumman Hill
Investments, L.P. only to a registered broker dealer,
provided that such registered broker dealer shall enter
into a Stock Option Agreement and such other documents
requested by ALC, all in form and substance satisfactory
to ALC, and such Stock Option Agreement shall provide
inter alia that the Stock Option shall thereafter be
nontransferable."
2. This Amendment may be executed in two or more counterparts, each
of which shall be deemed an original and all of which together
shall be considered one and the same agreement.
<PAGE> 2
IN WITNESS WHEREOF, the parties have entered into this Amendment on the
day and year first above written.
ALC COMMUNICATIONS CORPORATION
By: JOHN M. ZMO
-----------------------------------------
Its: President and Chief Executive Officer
GRUMMAN HILL ASSOCIATES, INC.
By: RICHARD D. IRWIN
-----------------------------------------
Its: President
GRUMMAN HILL INVESTMENTS, L.P.
By: Grumman Hill Associates, Inc.
Its: General Partner
By: RICHARD D. IRWIN
-----------------------------------------
Its: General Partner
<PAGE> 1
EXHIBIT 10.6
TERMINATION OF ADVISORY AGREEMENT
WITH STOCK OPTION
For due consideration, ALC Communications Corporation, a Delaware corporation,
with principal offices at 30300 Telegraph Road, Suite 350, Bingham Farms,
Michigan 48025 ("ALC"), Grumman Hill Associates, Inc., 15 Ketchum Street,
Westport, CT 06880 ("Grumman Hill"), Grumman Hill Investments, L.P., 15 Ketchum
Street, Westport, CT 06880 ("Grumman Hill L.P."), and Richard D. Irwin, for
themselves and on behalf of their respective successors and assigns, hereby
agree to the termination of the Advisory Agreement with Stock Option entered
into as of September 7, 1988, as amended between ALC and Grumman Hill.
Notwithstanding anything to the contrary herein, the stock option granted
pursuant to the Advisory Agreement with Stock Option continues to be in full
force and effect pursuant to the terms of said Agreement, and any exercise of
such stock option shall not be void or otherwise rendered ineffective due to
this Termination of Advisory Agreement with Stock Option.
In Witness Whereof, the parties have entered into this Termination of Advisory
Agreement with Stock Option as of May 12, 1994 by their authorized
representatives in multiple copies, each of which shall be deemed an original
without production of the other copies.
ALC COMMUNICATIONS CORPORATION
By: John M. Zrno
-------------------------------------------------
John M. Zrno,
President and Chief Executive Officer
Grumman Hill Associates, Inc.
Grumman Hill Investments, L.P.
By: Richard D. Irwin
-------------------------------------------------
Richard D. Irwin,
President, Grumman Hill Associates, Inc.
General Partner, Grumman Hill Investments, L.P.
By: Richard D. Irwin
-------------------------------------------------
Richard D. Irwin
<PAGE> 1
EXHIBIT 10.7
AMENDED & RESTATED
FIBER OPTIC LEASE AGREEMENT
BETWEEN
MSM ASSOCIATES, LIMITED PARTNERSHIP
AND
ALLNET COMMUNICATION SERVICES, INC.
This Agreement (the "Agreement") is made as of the first
day of August, 1994 among MSM Associates, Limited Partnership, a Delaware
limited partnership with principal offices at 5000 Plaza on the Lake, Suite
200, Austin, Texas 78746 and assigns ("Lessor" or "MSM") and Allnet
Communication Services, Inc., a Michigan corporation with principal offices at
30300 Telegraph Road, Suite 350, Bingham Farms, Michigan 48025 ("Lessee").
WHEREAS, Mutual Signal Corp., a New York corporation, and
Lexitel Corporation, a Michigan corporation, have entered into that certain
Fiber Optic Lease Agreement dated December 5, 1985, as amended by an Amendment
thereto made as of January 31, 1986 and an Amendment No. 2 thereto made as of
February 5, 1987 and an Amendment No. 3 thereto made as of July 31, 1989 and an
Amendment No. 4 thereto made as of August 7, 1992 and an Amendment No. 5
thereto made as of November 23, 1992 to provide for the lease of specified
circuit capacity on the Fiber Optic System (the "Prior Agreement"); and
WHEREAS, Lessor is a successor by assignment to Mutual
Signal Corp. and Lessee is a successor by merger with Lexitel Corporation; and
WHEREAS, the parties have an established relationship and
have operated under the terms of the Prior Agreement over a long period of
time; and
WHEREAS, the parties desire to modify certain specific terms
in the Prior Agreement and deem it to be in their best interests and to their
mutual advantage to amend and restate the Prior Agreement with respect to
Lessor's lease of circuit capacity of the Fiber Optic System to Lessee pursuant
thereto.
NOW THEREFORE, the Prior Agreement is hereby amended and
restated as follows:
ARTICLE I DEFINITIONS
A. AFFILIATE: See Article XV B.
B. DS-3 shall refer to a digital signal with a bit rate of
44.736 Mb/s in accordance with Attachment C to the Prior Agreement incorporated
herein in its entirety. Each DS-3 shall include 672 voice grade channels
(also known as DS-0s).
C. EFFECTIVE DATE is August 1, 1994.
<PAGE> 2
D. FIBER OPTIC SYSTEM is the telecommunications system owned
and operated by Lessor, as of the date hereof, *
E. LEASE CAPACITY is defined in Exhibit B attached hereto and
made a part hereof.
F. *
G. RIGHTS-OF-WAY means the rights-of-way, licenses, leases,
easements, or other rights of use acquired by Lessor for purposes of the Fiber
Optic System.
H. SERVICE(S) means the digital telecommunications transmission
service including Support provided hereunder.
I. SUPPORT: See Article II G.
J. TERMINAL(S) means the facilities installed on the Fiber
Optic System at the addresses or approximate locations specified in Attachment
D to the Prior Agreement incorporated herein in its entirety (except with
respect to charges set forth therein which have been expressly waived by
Lessor) for the origination and termination of transmissions across the Fiber
Optic System at DS-3 (45 Mbps) or multiples thereof, and include the junctions
between transmission lines but do not include the four repeaters to be
installed by Lessor on the Fiber Optic System. Terminals include DSX-3
interfaces and as practicable are to be constructed by Lessor near the edge of
the Rights-of-Way.
L. TOTAL LEASED CAPACITY: See Article II D.
ARTICLE II SCOPE
Lessor shall lease to Lessee circuit capacity as set forth
in Exhibit B upon the terms and conditions set forth below:
A. Lessor hereby agrees to lease to Lessee and Lessee
hereby agrees to lease from Lessor the Lease Capacity as set forth in Exhibit B
through the Lease Term. *
B. Lessee shall have the right to request that Lessor
reconfigure the Total Leased Capacity on the Fiber Optic System, and Lessor
shall not unreasonably withhold its consent to any such reconfiguration so long
as such reconfiguration shall not result in Lessor, in its reasonable judgment,
being required to make any
* Confidential Treatment Applied For
2
<PAGE> 3
substantive incremental investment in the Fiber Optic System to serve other
customers. In addition, any reconfiguration of usage pursuant to this
provision shall result in the same aggregate monthly rental payment to Lessor
by Lessee for the circuit capacity as that payable prior to such
reconfiguration and for approximately the same route miles as prior to such
reconfiguration. Lessor shall provide Lessee in June and December of each
year, and as otherwise additionally requested by Lessee (but not more than once
per calendar quarter), a report of availability of circuit capacity on the
Fiber Optic System for reconfiguration. Upon acceptance by Lessor of Lessee's
request to reconfigure the Total Leased Capacity, Lessor shall use its best
efforts to complete such reconfiguration within 90 days of Lessee's request.
C. Lessee may sublease all or a portion of the Service
leased hereunder or pursuant hereto to any third person other than *
or * any of their affiliates; provided, however, that any such
sublease shall not relieve Lessee of any of its obligations hereunder.
D. The circuit capacity leased pursuant to Sections A
and B of this Article II is hereinafter referred to as "TOTAL LEASED CAPACITY."
E. Lessor shall test and use its reasonable best
efforts to maintain the Total Leased Capacity in accordance with the standards
set forth in the Exhibits attached hereto and made a part hereof.
F. Unless otherwise specified in Lessee's request for
reconfiguration, Service shall terminate in a DS-3 jackfield and all Service
shall consist of that Service between DS-3 jackfields located in Lessor's
serving terminals as outlined in the Purchase Order.
G. Lessee may, subject to availability, order other
associated customer maintenance support ("SUPPORT") offered by Lessor and
listed in Exhibit A, attached hereto and made a part hereof, as the same may be
modified by the parties by signing and exchanging copies of a supplement(s)
which shall become part of this Agreement.
H. Lessee shall be solely responsible for
interconnecting with its leased circuit capacity at Terminals, including
construction of conduit or duct work as needed from each Terminal to the edge
of the Right-of-Way for use by Lessee in running its local communication
facilities, and Lessee shall provide at its sole expense all interconnection
equipment therefor.
I. Lessor or its designee shall control and operate the
Fiber Optic System. Lessor shall be responsible for maintaining the Fiber
Optic System in a manner within its sole discretion, and
* Confidential Treatment Applied For
3
<PAGE> 4
shall comply with all applicable FCC and other governmental rules and
regulations. Lessee shall be subject to and agrees to abide by all reasonable
technical and operational requirements imposed by Lessor on Lessee's use of the
Fiber Optic System.
J. Lessor shall provide the circuit capacity leased by
Lessee hereunder from a point of origin at a Terminal on the Fiber Optic System
to a point of termination at a Terminal on the Fiber Optic System. Lessor
shall have no liability or responsibility for providing, maintaining, or
repairing interconnection facilities or other Lessee equipment. Any apparatus
and equipment provided by Lessee in connection with its leased circuit capacity
shall be maintained by Lessee at its sole expense.
K. Lessor shall not be liable for any act or omission
of any other entity furnishing facilities or equipment to the Lessee used with
respect to or in conjunction with Lessee's use of the Fiber Optic System, or
for any act or omission of any sublessee of Lessee of the Fiber Optic System.
Lessor shall not be liable for any damage or loss due to the fault or
negligence of the Lessee, its contractors, subcontractors, agents or employees,
or the failure of Lessee-provided equipment or facilities, or the breach by
Lessee of any provision of this Agreement.
L. Lessee's transmissions through the Fiber Optic
System shall comply with Federal Communications Commission and other applicable
governmental rules and regulations, and shall not interfere with the use by any
other lessee of circuit capacity on the Fiber Optic System in any manner which
will or may interfere with the use of or cause physical harm to, any fiber
optic pair or related equipment, or the Fiber Optic System as a whole.
ARTICLE III LEASE RATES AND TERMS OF PAYMENT
A. LEASE RATES
1. DIGITAL SERVICE
a. For the circuit capacity leased during the
Initial Lease Term pursuant to Section A of Article II hereof, Lessee agrees to
pay to Lessor, as rental, commencing on the Effective Date, * per
month.
b. Lessee agrees to pay Lessor the Support fees
listed in Exhibit A.
2. TARIFF
In the event a tariff is required to be filed by
Lessor with any governmental agency concerning any of the Service(s) provided
under this Agreement, the parties agree that such tariff will be filed so as to
reflect the terms and conditions of this Agreement including, without
limitation, the rates and charges set
* Confidential Treatment Applied For
4
<PAGE> 5
forth in this Article III.
B. PAYMENT TERMS
1. Beginning on the Effective Date, Lessor shall
invoice Lessee in advance on the first of each month. Payments shall be due
upon receipt and shall be deemed past due * after the date of receipt of
the invoice by Lessee (the "PAYMENT PERIOD"). Lessor shall deliver or mail
each invoice on a timely basis. The first invoice shall be for the first month
of service, * Each monthly invoice thereafter, shall be for the
following month. In case an amount is or becomes subject to dispute, Lessee
shall provide written notice to Lessor of such dispute within the Payment
Period. Except with respect to disputed items, in the event Lessee fails to
pay Lessor's invoice in full within the Payment Period, and provided that
Lessor shall have given written notice to Lessee and a period of * days in
which to cure such failure to pay, Lessee shall also pay a late fee in the
amount of the lesser of one and one-half (1-1/2%) of the unpaid and undisputed
balance per month or the maximum lawful rate thereon under applicable state law
from the date of receipt of the invoice.
2. The lease charge for any fractional portion of a
month shall be pro-rated according to the number of days for which Service was
provided.
3. In the event that: (i) Lessee fails to pay when
due any invoice issued by Lessor under the Agreement with respect to Total
Leased Capacity used by Lessee as of the date hereof; and (ii) the amount
outstanding under the Senior-Subordinated Promissory Note dated as of August 1,
1994 (the "Note") by Lessor in favor of Lessee is at such time no less than the
amount of such invoice, such amount shall be deemed to have been timely paid by
Lessee to Lessor under the Agreement and then timely paid by Lessor to Lessee
pursuant to Section 3 of the Note. In such event, both Lessee's obligation to
Lessor for the payment of such amount under the Agreement and Lessor's
obligation to Lessee to make such payment of such amount under the Note shall
be deemed to be satisfied.
ARTICLE IV TERMINATION
This Agreement may be terminated by either party in the
event that the other party defaults on its obligations hereunder and does not
cure such default as set forth below: (i) in case of a default in payment by
Lessee, within * of Lessee's receipt of Lessor's written notice to
Lessee; and (ii) in case of any deficiency in performance, Lessee shall give
written notice to Lessor of any deficiency in performance. Lessor shall have
* after receipt of notice to cure any deficiency, which Lessor may, at
its option, do by providing Replacement Services at Lessor's
* Confidential Treatment Applied For
5
<PAGE> 6
expense. "Replacement Services" shall mean service: (i) if available, from an
established fiber optic carrier which service meets the technical and
operational specifications set forth in Attachment C to the Prior Agreement; or
(ii) if an alternative fiber optic carrier is not available, from an
established digital microwave carrier with service meeting the technical and
operational specifications equivalent to those of the digital service provided
by Communications Transmission Group, Inc. to Lessee. If after the *
period, Lessor fails to meet its material obligations under this Agreement,
including but not limited to, the technical and operational specifications set
forth in Attachment C to the Prior Agreement, Lessee may terminate the smallest
incremental portion (i.e between two points of presence) of the Fiber Optic
System which must be practically replaced to restore Service to such technical
and operational specifications (the "Affected Service"). In the event of
termination under this provision, Lessee's liability for payment for Service
hereunder shall be limited to the monthly lease rate for the Affected Service
which was properly rendered prior to the effective date of termination. If for
any reason, any Services provided under this Agreement should become
unavailable and Lessor fails to restore such service (which Lessor may, at its
option, do by providing Replacement Services at Lessor's expense) within *
for Affected Service, then Lessee may terminate the Affected Service
without further liability.
ARTICLE V FORCE MAJEURE
Lessor is not liable for any interruptions of Service to the
extent attributable to causes outside its reasonable control or to Force
Majeure causes including but not limited to fires, floods, national
emergencies, insurrections, riots, civil disorders, wars, or acts of God so
long as it uses its best efforts to restore Service and does restore Service
(which Lessor may, at its option, do by providing Replacement Services at
Lessor's expense) within * after the initiation of the interruption.
Should Lessor fail to restore Service within said * Lessee may terminate
the Affected Service without further liability. In addition, Lessee is
entitled to service credits under Article VI for outages caused by Force
Majeure conditions.
ARTICLE VI ALLOWANCE FOR SERVICE OUTAGE PERIODS
A. A circuit is deemed to be in an outage condition
under this Agreement if, while Lessee is actually using or attempting to use
such circuit, the circuit loses continuity and fails to comply with the
standards set out in Attachment C to the Prior Agreement. An outage period
starts when a report is received by Lessor's Customer Service Group from Lessee
by telephone that Service has been interrupted and that such circuit is
released for repair. An outage period ends when Lessor restores the affected
Service and notifies Lessee by telephone that the Service is restored to the
level set forth in Attachment C to the Prior
* Confidential Treatment Applied For
6
<PAGE> 7
Agreement.
B. A credit for each outage period shall be allowed and
calculated as follows:
1. Lessee is credited for any outage period at the
rate of 1/1440 of the monthly rate or charge applicable to the actual Service
for the circuit which is subject to the outage period for each 1/2 hour or
major fraction thereof that an outage period continues.
2. A credit allowance is not applicable for any
period during which Lessee fails to afford access to any facilities provided by
Lessor for the purpose of investigating and correcting any interruption in
Service.
3. The monthly charges used to determine the credit
will be the then current monthly charge being assessed for the circuit
affected, calculated as a portion of the entire rental payment based on circuit
miles.
4. In no event shall any credit be allowed
hereunder (1) in excess of the then current charge being paid for the
applicable Service or (2) with respect to any Service for which Lessee (A)
fails to make or (B) is excused from making any payment because of operation of
law or any other reason.
C. Calculations of credits shall be based upon Lessor's
Customer Service Group Log as maintained in the Lessor's Network Status Center.
D. No credit allowance shall be made for outage periods:
1. caused by Lessee.
2. caused by the failure of equipment or systems
provided by Lessee or persons other than Lessor (unless Lessor has engaged such
persons to provide the equipment or systems which failed), in particular, any
provider of local access service to Lessee.
3. occurring with respect to Service released by
Lessee to Lessor to perform maintenance, to make rearrangements, or to
implement an order for a change in the Service during the time that was
negotiated with Lessee prior to the release of that Service. Thereafter, a
credit allowance as set forth in this Article VI applies.
4. occurring with respect to Service which Lessee
elects not to release for testing or repair and continues to use on an impaired
basis.
7
<PAGE> 8
E. The credit provided for hereunder is Lessor's sole
liability and Lessee's sole remedy in the event of any outage periods or
interruption of Service, except for the termination rights as set forth in
Articles IV and V.
F. In the event of an outage period that is required
for maintenance by Lessor, Lessor shall use its best efforts to give Lessee
adequate prior notice by telephone so that adequate alternative measures can be
taken by Lessee. Lessor will make every effort to schedule Service
interruptions on weekends between midnight and 3:00 a.m. Service credits shall
not apply to scheduled Service interruptions. Lessor shall use all reasonable
efforts to give Lessee two weeks notice of scheduled maintenance when possible
but in no event less than 72 hours where such maintenance would require a
Service interruption.
ARTICLE VII REPRESENTATIONS & WARRANTIES OF LESSOR AND LESSEE
A. Lessor hereby represents and warrants to Lessee that
this Agreement has been validly authorized, executed and delivered by Lessor
and represents a valid and binding obligation of Lessor.
B. Lessee hereby represents and warrants to Lessor that
this Agreement has been validly authorized, executed and delivered by Lessee
and represents a valid and binding obligation of Lessee.
C. Except as set forth in Sections A and B of this
Article VII:
(i) ALL EXPRESS AND IMPLIED WARRANTIES, INCLUDING
BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR USE ARE
EXPRESSLY EXCLUDED AND DISCLAIMED. LESSEE
ACKNOWLEDGES THAT IT HAS NOT RELIED ON ANY WRITTEN
OR ORAL REPRESENTATION BY LESSOR CONCERNING THE
SUBJECT OF THIS AGREEMENT OTHER THAN THOSE EXPRESSED
IN THIS AGREEMENT;
(ii) EXCEPT TO THE EXTENT THE INDEMNIFICATION
PROVIDED IN ARTICLE XV MAY INCLUDE COVERAGE OF
INCIDENTAL OR CONSEQUENTIAL DAMAGES, IN NO EVENT
SHALL EITHER PARTY BE LIABLE FOR ANY SPECIAL,
INCIDENTAL, PUNITIVE, RELIANCE OR CONSEQUENTIAL
DAMAGES, WHETHER FORESEEABLE OR NOT, INCLUDING BUT
NOT LIMITED TO, DAMAGE OR LOSS OF PROPERTY OR
EQUIPMENT, LOSS OF PROFITS OR REVENUE, COST OF
CAPITAL, OR CLAIMS OF CUSTOMERS FOR SERVICE
INTERRUPTIONS OR TRANSMISSION PROBLEMS, OCCASIONED
BY ANY DEFECT IN THE SERVICE PROVIDED HEREUNDER,
DELAY IN AVAILABILITY OF THE SERVICE PROVIDED
8
<PAGE> 9
HEREUNDER, FAILURE OF THE SERVICE PROVIDED HEREUNDER
OR ANY OTHER CAUSE WHATSOEVER; and
(iii) LESSOR MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, TO ANY OTHER PERSON OR ENTITY
CONCERNING THE SERVICE PROVIDED HEREUNDER AND LESSEE
SHALL DEFEND AND INDEMNIFY LESSOR FROM ANY CLAIMS
MADE UNDER ANY WARRANTY OR REPRESENTATION BY LESSEE
TO ANY THIRD PARTY.
ARTICLE VIII FCC PERMITS, AUTHORIZATION AND FILINGS
Lessor shall take all necessary and appropriate steps, as
soon as possible, to (i) procure from the Federal Communications Commission the
necessary authorizations, if any, to deliver Service to Lessee and (ii) seek
whatever approval is necessary from any other Federal, State or Local agency.
If Lessor cannot obtain all necessary Federal, State or Local authority to
provide the Service under the Agreement, Lessor shall promptly give written
notice thereof to Lessee and such notice will constitute termination without
liability of either party hereto of all obligations hereunder. All expenses
relative to securing authority to construct and maintain the Fiber Optic System
shall be borne by Lessor.
ARTICLE IX GOVERNING LAW
This Agreement shall be construed and enforced in accordance
with, and the validity and performance hereof governed by, the laws of the
state of Michigan.
ARTICLE X CONVENIENCE OF TITLES
Headings contained herein are for convenience only and do
not modify, enlarge or limit the scope of the body of the sections hereof in
any manner.
ARTICLE XI NOTICES
All notices and other communications hereunder must be in
writing and are deemed to have been duly given as of the date of delivery,
facsimile transmission or mailing, if mailed, first class postage prepaid,
certified or registered mail, return receipt requested to the following
persons, unless contrary instructions are given by the parties in writing:
If to Lessor: MSM Associates Limited Partnership
5000 Plaza on the Lake, Suite 200
Austin, TX 78746
ATTN: Vice President, Sales and Marketing
and a copy to: Riordan & McKinzie
9
<PAGE> 10
300 S. Grand Ave. 29th Floor
Los Angeles, CA 90071
ATTN: Carl McKinzie
If to Lessee: Allnet Communication Services, Inc.
30300 Telegraph Rd., Suite 350
Bingham Farms, MI 48025-4510
ATTN: Vice President, ATS
and a copy to: Allnet Communication Services, Inc.
30300 Telegraph Rd., Suite 350
Bingham Farms, MI 48025-4510
ATTN: General Counsel
ARTICLE XII WAIVER OF BREACH OR VIOLATION NOT DEEMED CONTINUING
The waiver by either party of a breach or violation of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any subsequent breach hereof.
ARTICLE XIII BANKRUPTCY
In the event of the bankruptcy of either party hereto or if
either party hereto shall make an assignment for the benefit of creditors or
take advantage of any act or law for relief of debtors, the other party to this
Agreement may terminate this Agreement without further obligation or liability
on its part.
ARTICLE XIV LIMITS OF LIABILITY
Unless specified otherwise, Lessor's sole duty under this
Agreement is the provision of Service to Lessee under the terms and conditions
set forth herein.
ARTICLE XV INDEMNITY
A. Each party, its officers, agents or employees
engaged in performance under this Agreement shall at no time be deemed to be
performing as agents or employees of the other party, and any acts, errors or
omissions of such party, officers, agents and employees shall not be deemed to
be those of the other party.
B. Each party hereto shall indemnify and hold the other
and/or all of its officers, agents, servants, subcontractors, subsidiaries,
employees and other affiliates (collectively "Affiliates"), and each of them,
harmless from and against any and all losses, claims, damages, liabilities,
costs and expenses (including reasonable attorneys fees) (collectively, the
"Claims") imposed upon either party by reason of damages to property or
injuries, including death, as a result of an intentional or a negligent act or
omission on the part of the indemnifying party or
10
<PAGE> 11
its Affiliates in connection with the performance of this Agreement.
C. In the event any action is brought against the
indemnified party, such party shall immediately notify the indemnifying party
in writing, and the indemnifying party, upon the request of the indemnified
party, shall assume the defense thereof on behalf of the indemnified party and
its Affiliates and shall pay all expenses and satisfy all judgments which may
be incurred by or rendered against the indemnified party or its Affiliates in
connection therewith, provided that the indemnified party is not liable for any
settlement of any such action effected without its written consent.
ARTICLE XVI ASSIGNMENT
Except for collateral assignments to institutional lenders,
for which no consent is required, neither party hereto may assign this
Agreement without the express written consent of the other party hereto.
Consent by either party shall not be unreasonably withheld. Provided further,
any language to the contrary notwithstanding, either party may assign the
Agreement to a parent, subsidiary or affiliate corporation without the consent
of the other party. Nothing contained herein shall be construed to release the
assigning party from any obligations or liabilities unless the other party
expressly consents to such release.
ARTICLE XVII CONFIDENTIAL RELATIONSHIP
Unless required by law, the parties hereto shall not
disclose, duplicate, or copy, or use for any purpose other than the performance
of this Agreement, and shall treat as confidential and as proprietary all
information, specifications, drawings, blueprints, nomenclature, samples and
models supplied or disclosed to each other in connection with this Agreement,
all of which shall be returned to the respective owners thereof upon completion
of this Agreement. Notwithstanding the foregoing, however, either party may
make such information available to its lenders. Neither party shall in any
manner advertise or publish or release for publication any statement mentioning
the other party or the fact that the other party has furnished or contracted to
furnish goods and services hereunder or quote the opinion of any employees of
such other party, unless written consent of such other party shall first be
obtained or unless required by law. The parties shall not have any obligation
to keep confidential any information obtained lawfully from third parties and
any information which is available in the public domain, and any information
already in their possession without an obligation of confidentiality.
ARTICLE XVIII TAXES
The amounts payable by Lessee under this Agreement do not
include any State or local sales or use taxes, or utility taxes,
11
<PAGE> 12
however designated, which may be levied on the goods and services provided by
Lessor hereunder. With respect to such taxes, if applicable, Lessee shall
furnish Lessor with an appropriate exemption certificate or pay to Lessor, upon
timely presentation of invoices therefore (i.e. within 90 days after the
provision of the goods or services relating to the invoice), such amounts
thereof as Lessor may be by law required to collect or pay. Any and all other
taxes, including but not limited to franchise, net or gross income, license,
occupation, and real or personal property taxes, shall be timely paid by
Lessor.
ARTICLE XIX ARBITRATION
Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in accordance
with the rules of the American Arbitration Association. Any such proceedings
shall take place in Detroit, Michigan unless otherwise agreed to by the
parties. A three person panel of arbitrators shall interpret this Agreement in
accordance with the substantive laws of the State of Michigan. Each party
shall select one arbitrator and the two arbitrators shall then select a third
member of the arbitration panel. The panel of arbitrators shall have the power
to order specific performance if requested. Any award, order, or judgment
pursuant to such arbitration shall be deemed final and may be enforceable in
any court of competent jurisdiction for purposes of enforcement of the
arbitrators' decision and for no other purpose. The parties agree that any
arbitration proceedings shall be conducted on a confidential basis. Lessee
may, at its option, continue to accept what it considers to be below-standard
Service and pay the charges hereunder relating thereto during such pendency of
such arbitration, without prejudice thereto.
ARTICLE XX LEGAL CONSTRUCTION
In case any one or more of the provisions contained in this
Agreement shall, for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality or unenforceability
does not affect any other provision hereof, and this Agreement will be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
ARTICLE XXI SURVIVAL
Rights and obligations of the parties relating to monies
owed and other rights and obligations of the parties that by their nature
extend beyond termination or expiration of this Agreement, such as without
limitation, the parties' rights and obligations under the confidentiality,
indemnification and limitation on liability provisions, survive termination or
expiration of this Agreement.
12
<PAGE> 13
ARTICLE XXII ENTIRE AGREEMENT
This Agreement amends and restates and supercedes the Prior Agreement
(except to the extent that the Attachments of the Prior Agreement are expressly
incorporated herein) and constitutes the entire agreement among the parties
pertaining to the Service leased hereunder. This Agreement may be modified or
supplemented only by a written instrument executed by each party hereto.
In witness to the foregoing, the parties hereto have executed this
Agreement below.
Signed as of this 1st day of August, 1994.
MSM Associates, Limited Partnership
By: Mutual Signal Corporation of Michigan,
its General Partner
JOHN J. WILLINGHAM
- - --------------------------------------------------------
By: Title:
Allnet Communication Services, Inc.
MARVIN C. MOSES
- - --------------------------------------------------------
By: Marvin C. Moses Title: Executive Vice President
Chief Financial Officer
8/4/94
13
<PAGE> 14
EXHIBIT A
EXHIBIT D
CUSTOMER MAINTENANCE SUPPORT
MSM's standard fees for customer maintenance support services
are as follows (unless set by precedence in a service contract):
Maintenance services shall be defined as all work performed by
MSM on equipment provided by or on behalf of the Customer, or supervision of the
Customer's work within MSM's terminate facilities. Maintenance Service
charges are not billed for troubles found within that portion of a circuit
provided by MSM. The following billing rates apply for these services:
A. $75 per hour (4 hour minimum-if dispatch is required)
Monday through Friday during the business hours of 8:00 a.m. - 5:00 p.m. local
time, exclusive of the following holidays:
New Years Day
President's Day
Memorial Day
Independence Day
Labor Day
Thanksgiving Day and the day after Thanksgiving
Christmas Day
B. $95 per hour (4 hour minimum) for overtime work done after
business hours (defined above) and/or on holidays (defined above) and/or all
day on Saturdays and Sundays.
C. As requests for maintenance services are typically made via
telephone, MSM must be advised, in writing as to the person(s) who are
authorized to request service. It is the Customer's responsibility to keep MSM
apprised of any changes to its list of representative(s).
D. To request technical assistance and help under the
maintenance services, a call must be made to our Network Control Center at
1-800-526-2488. This
EXHIBIT D
<PAGE> 15
MAINTENANCE POLICY & ANCILLARY PRICING
Exhibit D
Page 2
number should be used for MSM technical assistance, troubleshooting or testing
of circuits, not for service impairment or outages. The person calling in must
be on the authorized list in order to commit for charges for this technical
assistance. If that person is not on the list, the request cannot be
accommodated.
1. The Network Control Center personnel will take the call,
record the caller's name and phone number along with facts concerning the
assistance and support needed. The caller will then be given the number of the
"Assistance Ticket."
2. Upon completion of work, this "Assistance Ticket" will be
given to MSM's Accounting Department, and the customer will subsequently be
billed based upon the information on that ticket. A copy will be attached to
the invoice.
E. Except for emergencies, MSM technicians cannot be dispatched unless
requests are made in accordance with the above call-out procedure.
EXHIBIT D
<PAGE> 16
MAINTENANCE POLICY & ANCILLARY PRICING
Exhibit D
Page 3
<TABLE>
<CAPTION>
NONRECURRING CHARGES DS-1 DS-3
- - -------------------- ---- ----
<S> <C> <C>
New Order Installation * *
DS-1 RampUp Per DSO
Order Change (prior to circuit turnup)
Order Cancellation (prior to circuit turnup)
plus additional charges incurred
ASR (new or disconnect)
ASR Supplement
Order Expedite
Reconfiguration (city pair remains the same)
Ramped DS-3 Installation Per DS1
Distributed DS-3 Installation Per DS1
<CAPTION>
MONTHLY RECURRING CHARGES
- - -------------------------
<S> <C> <C>
Cross-connect Charge * *
Other IXC to MSM local access or bypass
facility (CTI long haul involved)
Local bypass - charge CTI POP to CTI POP in
same city, with no CTI long haul attached
at either CTI POP
Transit Cross-connect (CTI long haul not
included)
<CAPTION>
MISCELLANEOUS
- - -------------
<S> <C> <C>
M13 1 yr Term * *
2+ yr Term
3+ yr Term
ECHO CANCELLERS
SECOND END LOOP (Ex: for ADPCM)
<CAPTION>
DEMAND MAINTENANCE
CIF FLOOR SPACE
CIF SHELF SPACE
CIF DC POWER
<S> <C> <C>
CIF AC/DC POWER
ALL OTHER SERVICES
</TABLE>
(1) All of the above charges are subject to change with a 30-day notice.
(2) Services not described above will be considered special handling and
charges will be assessed on an individual basis.
* Confidential Treatment Applied for
<PAGE> 17
EXHIBIT B
MSM SYSTEM MILEAGE/LEASED CAPACITY RECONCILIATION
<TABLE>
<CAPTION>
Actual 1986K Invoice Invoice Reconfig Reconfig Reconfig
City Pair Miles Miles Capacity DS-3 Miles Capacity 1986 K Miles Actual Miles
- - ----------------------- ------ ------ -------- ---------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
* * * * * * * *
</TABLE>
Reconfigure miles does not equal contracted miles due to "inexact"
reconfiguration swaps.
* Confidential Treatment Applied For
<PAGE> 1
EXHIBIT 10.8
EXECUTION COPY
DIGITAL SERVICE AGREEMENT
This Digital Service Agreement (the "Agreement") is entered into as of August
5, 1994, by and between MSM Associates, Limited Partnership, a Delaware limited
partnership ("Lessor"), and Allnet Communications Services, Inc., a Michigan
corporation ("Lessee").
In consideration of the mutual promises set forth below and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions.
(a) "Accepted" shall mean, with respect to a Circuit, that Lessee has
performed whatever tests it deems necessary to confirm that such Circuit
operates in accordance with MCI's Specifications and has so informed Lessor. A
Circuit shall be deemed to be Accepted by Lessee 48 hours after notice from
Lessor to Lessee that such Circuit is Available, unless Lessee has theretofore
given notice to Lessor that such Circuit does not operate in accordance with
MCI's Specifications.
(b) "Affiliate" See Section 16(b).
(c) "Available" shall mean, with respect to any Circuit, that all
necessary equipment with respect to such Circuit has been installed, connected,
tested in accordance with MCI's acceptance testing criteria and confirmed by
Lessor to be operating in accordance with MCI's Specifications.
(d) "Activation Date" shall mean, with respect to any Circuit, the date
such Circuit is first made Available to, and Accepted by, Lessee.
(e) "Circuit" shall mean a DS-3.
(f) "Circuit Lease Term" shall mean, with respect to any Circuit, the term
in months for which Lessee desires to obtain Service on such Circuit from the
Activation Date of such Circuit, as specified in the Purchase Order for such
Circuit.
(g) "Circuit Mileage" shall mean, with respect to any Circuit, the length
of such Circuit in airline miles computed according to industry standard V&H
coordinates, as specified in the Purchase Order for such Circuit.
<PAGE> 2
(h) "City Pair" shall mean, with respect to any Circuit, the two cities in
which such Circuit terminates, as specified in the Purchase Order for such
Circuit.
(i) "DS-0 Circuit Mile Rate" shall mean, with respect to any Circuit, the
rate, if any, so designated with respect to such Circuit in the Purchase Order
pursuant to which such Circuit is ordered.
(j) "DS-3" shall mean a fiber optic circuit leased by Lessor from MCI
pursuant to the MCI Agreement meeting MCI's Specifications.
(k) "MCI" shall mean MCI Telecommunications Corporation, a Delaware
corporation.
(l) "MCI Agreement" shall mean that certain Construction and Use Agreement
dated as of July _____, 1994 between Lessor and MCI.
(m) "MCI's Specifications" shall mean the technical specifications set
forth in the MCI Agreement for the MSM Capacity (as such term is defined
therein) as set forth in Exhibit G thereto.
(n) "Monthly Lease Rate" shall mean, with respect to any Circuit, the
amount so designated in the Purchase Order pursuant to which such Circuit is
ordered. In the event no such amount is so designated, such term shall mean
the product of (i) 672, (ii) the DS-0 Circuit Mile Rate for such DS-3 and (iii)
the Circuit Mileage for such DS-3.
(o) "Purchase Order" shall mean any written purchase order in
substantially the form as those attached hereto as Exhibit B made hereunder by
Lessee and accepted by Lessor.
(p) "Requested Service Commencement Date" shall mean, with respect to any
Circuit, the date Service on such Circuit is requested by Lessee to commence as
specified in the Purchase Order for such Circuit.
(q) "Service" shall mean the digital telecommunications transmission
service leased by Lessor from MCI pursuant to the MCI Agreement and provided by
Lessor to Lessee hereunder. Service hereunder specifically does not include
leased circuit capacity and related support provided by Lessor to Lessee on
Lessor's Fiber Optic System (as described in that certain Amended & Restated
Fiber Optic Lease Agreement between Lessor and Lessee dated August 1, 1994) in
Michigan.
(r) "Support" See Section 2(g).
2. Scope and Lease Rates. Lessor shall provide Service to Lessee upon the
terms and conditions set forth below:
-2-
<PAGE> 3
(a) Service shall be provided with respect to each Circuit set forth in
each Purchase Order between Lessor's locations in each city of the City Pair
specified in such Purchase Order with respect to such Circuit.
(b) Lessor shall provide maintenance for all digital transmission
equipment owned by Lessor used in connection herewith. MCI shall provide
maintenance for all its digital transmission equipment used in connection
herewith.
(c) Lessor shall use its best efforts consistent with its obligations to
its other customers and availability of Circuits from MCI under the MCI
Agreement to provide Service on each Circuit for which it has accepted a
Purchase Order, commencing on the Requested Service Commencement Date specified
with respect to such Circuit.
(d) Except as otherwise provided herein, Lessor shall provide Service on
each Circuit ordered hereunder from the Activation Date of such Circuit for the
Circuit Lease Term of such Circuit.
(e) Lessee hereby makes, and Lessor hereby accepts, the Purchase Order
attached hereto as Exhibit A for Service on Lessor's available DS-3's from MCI
under the MCI Agreement between the City Pairs listed therein.
(f) Each additional DS-3 provided by Lessor hereunder shall have a DS-0
Circuit Mile Rate of: (i) * from the first Activation Date
of any Circuit hereunder; and (ii) a mutually agreeable rate thereafter.
(g) Lessee may, subject to availability, order other services or
associated customer maintenance support (collectively "Support") offered by
Lessor as set forth in Exhibit C.
3. Payments.
(a) Lessee agrees to pay in advance to Lessor each month during the term
of this Agreement the Monthly Lease Rate for each Circuit ordered by Lessee
hereunder which has been made Available to, and Accepted by, Lessee, and the
applicable charges, including installation charges, if any, for any associated
services listed in Exhibit C hereto delivered to Lessee.
(b) Lessor's invoices for amounts payable hereunder shall be due *
after Lessee's receipt of invoice. The first such invoice shall be for the
first two months' Service and each monthly invoice thereafter shall be for the
following month.
(c) In the event the Activation Date for a Circuit is on any day other
than the first day of the month, the Monthly Lease Rate for that month shall be
pro-rated according to the number of days for which such Circuit was activated.
* Confidential Treatment Applied For
-3-
<PAGE> 4
(d) In case an amount is or becomes subject to dispute, Lessee shall
provide written notice to Lessor of such dispute within * following
Lessee's receipt of the invoice. In the event that any undisputed portion of
such invoice remains unpaid after * following Lessee's receipt of the
invoice, such undisputed portion of such invoice shall be subject to a late
payment charge equal to the lesser of (1) one and one-half percent of the
unpaid balance per month or (2) the maximum rate allowed under applicable state
law. In the event that any undisputed portion of any invoice is unpaid thirty
days following the date of the invoice for such payment, in addition to any
other remedies available to Lessor at law or otherwise, Lessor may terminate
the Service after providing Lessee written notice and allowing Lessee a 15-
calendar-day period to remit payment.
4. Term. The term of this Agreement shall commence upon the date hereof and
shall continue until the end of the Circuit Lease Term of each of the Circuits
ordered hereunder. *
5. Termination.
(a) Lessee may terminate Service with respect to any Circuit prior to
expiration of the Circuit Lease Term for the Circuit upon * prior
written notice thereof to Lessor and payment of all termination charges set
forth below. Such termination charges shall include:
(i) In the event such termination occurs prior to the Activation Date
specified with respect to such Circuit, all nonrecoverable costs of the
implementation of, and expenditures or liabilities reasonably incurred and
directly connected with, the provision of Service, including, but not limited
to, all professional, consulting and other costs incurred by Lessor in
furtherance of implementing such Service provided that total costs do not
exceed one month's recurring cost for the Circuit; and
(ii) In the event such termination occurs at or after the Activation Date
specified with respect to such Circuit, Lessee shall pay all charges hereunder
for the period during which Service is rendered on such Circuit. If Service on
a Circuit is terminated prior to the expiration of the Circuit Lease Term for
such Circuit, Lessor shall make its best efforts to lease Service on such
Circuit at no less than the Monthly Lease Rate for such Circuit. In the event
Lessor cannot lease Service on such Circuit on the same or substantially
similar terms and conditions as set forth herein, Lessee shall be liable to
Lessor for payment (1) for the total amount due through the end of the term of
the Circuit Lease
* Confidential Treatment Applied For
-4-
<PAGE> 5
Term for such Circuit with respect to such Circuit less (2) the total amount
collected by Lessor from any other lessee with respect to such Circuit.
(b) Lessee shall give written notice to Lessor of any material breach in
performance hereunder. Lessor shall have * after such notice to cure
such breach. If after such * period, Lessor fails to cure such breach,
including but not limited to, compliance with the material technical and
operational MCI Specifications, Lessee may terminate Service on the affected
Circuits. In the event of such termination, Lessee's liability with respect to
such Circuits shall be limited to the Monthly Lease Rate for the affected
Service which was properly rendered prior to the effective date of such
termination.
(c) In the event Lessor fails to provide (after using its best efforts as
set forth in Section 2(c)) the Service with respect to any Circuit within *
* of the Requested Service Commencement Date for such Circuit, then
Lessee, at its option, may terminate that Service on the affected Circuit
without any further liability of either party whatsoever with respect to such
Circuit. In the event any Circuit ordered hereunder is not made available by
MCI, Lessor may terminate this Agreement with respect to such Circuit without
liability to Lessee.
6. Force Majeure. Lessor shall not be liable for any interruptions of
Service which are solely attributable to interruptions of Service by MCI or to
causes outside Lessor's reasonable control, including fires, floods, national
emergencies, insurrections, riots, civil disorders, wars, or acts of God so
long as it uses its best efforts to restore Service within * after the
initiation of the interruption. Should Lessor fail to restore the service
within such * Lessee may, as its sole remedy hereunder, terminate
the affected Service without further liability for the termination of such
affected Service.
7. Allowance for Service Outage Periods.
(a) A Circuit shall be deemed to be in an outage condition under this
Agreement if, while Lessee is using or attempting to use such Circuit, such
Circuit loses continuity and fails to comply with MCI's Specifications. An
outage period begins when a report is received by Lessor's Customer Service
Group from Lessee by telephone that Service has been interrupted and that such
Circuit is released for repair. An outage period ends when Lessor notifies
Lessee by telephone that Service has been restored to the level set forth in
MCI's Specifications.
(b) A credit for each outage period shall be allowed and calculated as
follows:
(i) Lessee is credited for any outage period at the rate of 1/1440 of the
monthly rate or charge applicable to the actual Service which is subject to the
outage period for each 1/2 hour or major fraction thereof that an outage period
continues.
* Confidential Treatment Applied For
-5-
<PAGE> 6
(ii) No credit shall be allowed with respect to any period during which
Lessee fails to afford access to any facilities provided by Lessor for the
purpose of investigating and correcting an interruption to Service.
(iii) The Monthly Lease Rates used to determine any credit hereunder
shall be the then current Monthly Lease Rates being assessed.
(iv) In no event shall any credit be allowed hereunder (1) in excess of
the then current Monthly Lease Rate for the applicable Circuit or (2) with
respect to any Circuit for which Lessee (A) fails to make or (B) is excused
from making any payment because of operation of law or any other reason.
(c) Calculations of credits shall be based upon Lessor's Customer Service
Group Log maintained in Lessor's Network Status Center.
(d) No credit allowance will be made for outage periods:
(i) caused by Lessee;
(ii) caused by the failure of equipment or systems provided by Lessee or
persons other than Lessor (unless Lessor has engaged such persons to provide
the equipment or systems which failed), in particular, any provider of local
access service;
(iii) occurring with respect to a Circuit released by Lessee to Lessor to
perform maintenance, to make rearrangements, or to implement an order for a
change in the Circuit during the time that was agreed with Lessee prior to the
release of such Circuit (thereafter, a credit allowance as set forth above will
be applied), or
(iv) occurring with respect to a Circuit which Lessee elects not to
release for testing or repair and continues to use on an impaired basis.
(e) The credit provided for hereunder shall be Lessor's sole liability and
Lessee's sole remedy in the event of any outage periods or interruption of
Service, except as set forth in Section 5.
(f) In the event of an outage period that is required for maintenance by
Lessor, Lessor shall use its best efforts to give Lessee notice thereof by
telephone so that adequate alternative measures can be taken by Lessee. Lessor
will use its best efforts to schedule such Service interruptions on weekends
between midnight and 3:00 a.m. Service credits will not apply to scheduled
Service interruptions. Lessor shall use all reasonable efforts to give Lessee
two weeks' notice of scheduled maintenance when possible but in no event less
than 72 hours where such maintenance will require a Service interruption.
8. Representations and Warranties of Lessor and Lessee.
-6-
<PAGE> 7
(a) Lessor hereby represents and warrants to Lessee that this Agreement
has been validly authorized, executed and delivered by Lessor and represents a
valid and binding obligation of Lessor.
(b) Lessee hereby represents and warrants to Lessor that this Agreement
has been validly authorized, executed and delivered by Lessee and represents a
valid and binding obligation of Lessee.
(c) Except as set out in Paragraphs (a) and (b) above:
(i) ALL EXPRESS AND IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO,
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PURPOSE OR USE ARE EXPRESSLY
EXCLUDED AND DISCLAIMED. LESSEE ACKNOWLEDGES THAT IT HAS NOT RELIED ON ANY
WRITTEN OR ORAL REPRESENTATIONS BY LESSOR CONCERNING THE SUBJECT OF THIS
AGREEMENT OTHER THAN THOSE EXPRESSED IN THIS AGREEMENT;
(ii) EXCEPT TO THE EXTENT THE INDEMNIFICATION PROVIDED IN SECTION 16 MAY
INCLUDE COVERAGE OF INCIDENTAL OR CONSEQUENTIAL DAMAGES, IN NO EVENT SHALL
EITHER PARTY BE LIABLE FOR ANY SPECIAL, INCIDENTAL, PUNITIVE, RELIANCE OR
CONSEQUENTIAL DAMAGES, WHETHER FORESEEABLE OR NOT, INCLUDING BUT NOT LIMITED
TO, DAMAGE OR LOSS OF PROPERTY OR EQUIPMENT, LOSS OF PROFITS OR REVENUE, COST
OF CAPITAL, OR CLAIMS OF CUSTOMERS FOR SERVICE INTERRUPTIONS OR TRANSMISSION
PROBLEMS, OCCASIONED BY ANY DEFECT IN THE SERVICE PROVIDED HEREUNDER, DELAY IN
AVAILABILITY OF THE SERVICE PROVIDED HEREUNDER, FAILURE OF THE SERVICE PROVIDED
HEREUNDER OR ANY OTHER CAUSE WHATSOEVER; and
(iii) LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, TO
ANY OTHER PERSON OR ENTITY CONCERNING THE SERVICE PROVIDED HEREUNDER AND LESSEE
SHALL DEFEND AND INDEMNIFY LESSOR FROM ANY CLAIMS MADE UNDER ANY WARRANTY OR
REPRESENTATION BY LESSEE TO ANY THIRD PARTY.
9. FCC Permits, Authorization and Filings. Lessor shall take all necessary
and appropriate steps, as soon as possible, to procure from the Federal
Communications Commission the necessary authorizations, if any, to deliver
Service hereunder to Lessee and whatever approvals are necessary from any other
federal or state agency. In the event that Lessor cannot obtain all necessary
federal, state or local authority to provide Service hereunder, Lessor shall
promptly give written notice thereof to Lessee, and such notice shall
constitute termination without liability of either party hereto of all
obligations hereunder.
-7-
<PAGE> 8
10. Governing Law. This Agreement shall be construed and enforced in
accordance with, and the validity and performance hereof, shall be governed by
the internal laws, and not the conflicts law, of the State of Michigan.
11. Convenience of Titles. Headings contained herein are for convenience
only and do not modify, enlarge or limit the scope of the body of the sections
hereof in any manner.
12. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given as of the date of delivery,
facsimile transmission or mailing, and if mailed, first class postage prepaid,
certified or registered mail, return receipt requested to the following
persons, unless contrary instructions are given by the parties in writing:
If to Lessee: Allnet Communications Services, Inc.
30300 Telegraph Road, Suite 350
Bingham Farms, Michigan 48025-4510
Attention: Vice President, ATC
and a copy to: Allnet Communication Services, Inc.
30300 Telegraph Rd., Suite 350
Bingham Farms, MI 48025-4510
Attention: General Counsel
If to Lessor: MSM Associates, Limited Partnership
5000 Plaza on the Lake, Suite 200
Austin, Texas 78746
Attention: Vice President, Sales and
Marketing
13. Waiver of Breach or Violation not Deemed Continuing. The waiver by
either party hereto of a breach or violation of any provision of this Agreement
shall not operate as or be construed to be a waiver of any subsequent breach
hereof.
14. Bankruptcy. In the event of the bankruptcy of either party hereto or if
either party hereto shall make an assignment for the benefit of creditors or
take advantage of any act or law for relief of debtors, the other party to this
Agreement shall have the right to terminate this Agreement without further
obligation or liability on its part.
15. Limits of Liability. Lessor's sole duty under this Agreement shall be
the provision of Service to Lessee under the terms and conditions set forth
herein. Lessee's
-8-
<PAGE> 9
sole remedy for Lessor's failure to perform its obligations hereunder shall be
Lessee's right to credit with respect to outage periods.
16. Indemnity.
(a) Each party hereto and its officers, agents and employees engaged in
performance under this Agreement, shall at no time be deemed to be performing
as agents or employees of the other party, and any acts, errors or omissions of
such party, officers, agents and employees shall not be deemed to be those of
the other party.
(b) Each party hereto shall indemnify and hold the other and/or all of its
officers, agents, servants, subcontractors, subsidiaries, employees and other
affiliates (collectively "Affiliates"), and each of them, harmless, from and
against any and all losses, claims, damages, liabilities, costs, attorneys'
fees and expenses ("Claims") imposed upon either party by reason of damages to
property or injuries, including death, as a result of an intentional or a
negligent act or omission on the part of the indemnifying party or its
Affiliates in connection with the performance of this Agreement.
(c) In the event any action shall be brought against the indemnified
party, such party shall immediately notify the indemnifying party in writing,
and the indemnifying party, upon the request of the indemnified party, shall
assume the defense thereof on behalf of the indemnified party and its
Affiliates and shall pay all expenses and satisfy all judgments which may be
incurred by or rendered against the indemnified party or its Affiliates in
connection therewith, provided that the indemnified party shall not be liable
for any settlement of any such action effected without its written consent.
17. Assignment. Neither party hereto may assign this Agreement without the
express written consent of the other party hereto. Consent by either party
shall not be unreasonably withheld. Provided further, any language to the
contrary notwithstanding, either party may assign the Agreement to a parent,
subsidiary or affiliate corporation without the consent of the other party.
Nothing contained herein shall be construed to release the assigning party from
any obligations or liabilities unless the other party expressly consents to
such release.
18. Confidential Relationship. Unless required by law, the parties hereto
shall not disclose, duplicate, or copy, or use for any purpose other than the
performance of this Agreement, and shall treat as confidential and as
proprietary all information, specifications, drawings, blueprints,
nomenclature, samples, and models supplied or disclosed to each other in
connection with this Agreement, all of which shall be returned to the
respective owners thereof upon completion of this Agreement. Notwithstanding
the foregoing, however, either party may make such information available to its
lenders. Neither party shall in any manner advertise or publish or release for
publication any statement mentioning the other party or the fact that the other
party has furnished or contracted to furnish goods and services hereunder or
quote the opinion of any employees of
-9-
<PAGE> 10
such other party, unless written consent of such other party shall first be
obtained or unless required by law.
19. Taxes. The amounts payable by Lessee under this Agreement do not
include any State or local sales or use taxes, or utility taxes, however
designated, which may be levied on the goods and services provided by Lessor
hereunder. With respect to such taxes, if applicable, Lessee shall furnish
Lessor with an appropriate exemption certificate or pay to Lessor, upon timely
presentation of invoices therefore (i.e. within 90 days after the provisions
of the goods or services relating to the invoice), such amounts thereof as
Lessor may be by law required to collect or pay. Any and all other taxes,
including but not limited to franchise, net or gross income, license,
occupation, and real or personal property taxes, shall be timely paid by
Lessor.
20. Binding Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the rules of the American Arbitration
Association. Any such proceedings shall take place in Austin, Texas unless
otherwise agreed to by the parties. A three person panel of arbitrators shall
interpret this Agreement in accordance with the substantive laws of the State
of Michigan. Each party shall select one arbitrator and the two arbitrators
shall then select a third member of the arbitration panel. The panel of
arbitrators shall have the power to order specific performance if requested.
Any award, order, or judgment pursuant to such arbitration shall be deemed
final and may be enforceable in any court of competent jurisdiction for
purposes of enforcement of the arbitrators' decision and for no other purpose.
The parties agree that any arbitration proceedings shall be conducted on a
confidential basis. Lessee may, at its option, continue to accept what it
considers to be below-standard Service and pay the charges hereunder relating
thereto during such pendency of such arbitration, without prejudice thereto.
21. Survival. Rights and obligations of the parties relating to monies owed
and other rights and obligations of the parties that by their nature extend
beyond termination or expiration of this Agreement, such as without limitation,
the parties' rights and obligations under the confidentiality, indemnification
and limitation on liability provisions, survive termination or expiration of
this Agreement.
22. Legal Construction. In case any one or more of the provisions contained
in this Agreement shall, for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
23. Entire Agreement. This Agreement constitutes the entire agreement among
the parties pertaining to the Circuits leased hereunder. This Agreement may be
modified or supplemented only by a written instrument executed by each party
hereto.
-10-
<PAGE> 11
In witness to the foregoing, the parties hereto have executed this Agreement
below.
Allnet Communications Services, Inc. MSM Associates, Limited Partnership
By: Mutual Signa Corporation of Michigan
Its: General Partner
By: Marvin C. Moses By: John J. Willingham
Title: Executive Vice President Title: Vice President
Chief Financial Officer
-11-
<PAGE> 12
LIST OF ATTACHMENTS
Exhibit A Initial Purchase Order
Exhibit B Form of Purchase Order
Exhibit C Schedule of Other Services
-12-
<PAGE> 13
EXHIBIT A
Initial Purchase Order
<TABLE>
<CAPTION>
CITY PAIR CIRCUIT MILEAGE
--------- ---------------
<S> <C>
* *
</TABLE>
*
The Requested Service Commencement Date of each of the above Circuits
is as soon as possible after the date MCI makes such Circuits available to
Lessor.
The Circuit Lease Term of each of the above Circuits will be *
from the Activation Date thereof.
* Confidential Treatment Applied For
-13-
<PAGE> 14
EXHIBIT B
OFFICE USE ONLY
REQ'ST SERVICE DATE:______ MSM ASSOCIATES _________________
ACCEPTED EARLIER ACTIVATION: LIMITED PARTNERSHIP |MSO#_____________|
Y___________ N_________ | |
CKT ID:____________________ |RELATED MSO:____ |
|_________________|
PURCHASE ORDER FORM FOR CUSTOMER ORDER NO:_____________
Pursuant to the DIGITAL SERVICE AGREEMENT by and between MSM ASSOCIATES LIMITED
PARTNERSHIP as LESSOR and ________________________________________________ as
LESSEE, dated___________,19_____, LESSEE orders and LESSOR shall provide the
following Digital Transmission Service:
NEW__________ RENEW________________ QTY RATE TERM MILES
CANCEL_______ DISCONNECT___________ DS-3 _____ _____ _____ _____
CHANGE_______ EXPEDITE Y___ N ____ DS-1 _____ _____ _____ _____
ON NET_______ OFF NET______________ DSO _____ _____ _____ _____
PROTOCOL_____ RECONFIGURE__________ CIF _____ _____ _____ _____
OTHER:_______________________________ OTHER _____ _____ _____ _____
CUSTOMER CONTACT:____________________ PHONE # _____________ FAX # __________
TECHNICAL CONTACT:___________________ PHONE # _____________ FAX # __________
CITY LOCATION A:_____________________ CITY LOCATION B:_______________________
_____________________________________ _______________________________________
Special _____ Switched____ Special _____ Switched______
Bypass Y ___ N ___ Owner_______ Bypass Y ___ N ___ Owner_________
LESSOR TO PROVIDE: CFA: Y ___ N ___ LESSOR TO PROVIDE: CFA: Y ___ N ___
LOA: Y ___ N ___ ASR: Y ___ N ___ LOA: Y ___ N ___ ASR: Y ___ N ___
CUSTOMER (LESSEE) TO PROVIDE: CUSTOMER (LESSEE) TO PROVIDE:
LOA: Coordinated LOA: Y__ N__ Coordinated Y ___ N ___
Y__ N__ Conversion: Y ___ N ___ Conversion:
CIF CIF Attached CIF arrangement Y___ N___ CIF Attached
arrangement Y___ N___ Y___ N ___ Y___ N ___
SPECIAL INSTRUCTIONS__________________ SPECIAL INSTRUCTIONS___________________
______________________________________ _______________________________________
______________________________________ _______________________________________
MONTHLY LEASE RATE: NON RECURRING CHARGES:
Monthly IXC Charge: $________ Installation: $____ ASR: $____
EQPT. Lease Charge: $________ Installation: $____ Reconfigure: $____
Echo Canceller: $________ Installation: $____ Expedite: $____
CIF Racks: $________ Installation: $____
CIF Power: $________ Installation: $____
Other: $________ Installation: $____
TOTAL: $________ TOTAL OF NON RECURRING CHARGES: $____
Notwithstanding anything in the Digital Service Agreement to the
contrary, (1) a security interest in this Agreement may be granted
by Lessor to any Lender and (2) Lessor may from time to time assign
all its rights and obligations hereunder with respect to any Circuits
to any Affiliate. Upon such assignment, this Agreement shall be deemed
to be multiple agreements, each upon the terms and conditions set forth
herein by and between Lessee and such affiliate with respect to such
circuit between Lessor and Lessee with respect to the circuit not so
assigned.
IN WITNESS WHEREOF, the parties have executed this PURCHASE ORDER on
the________day of_________19__
______________________________ ______________________________________
LESSOR APPROVAL/TITLE LESSEE AUTHORIZED REPRESENTATIVE/TITLE
Please fax this document to Sales and Marketing Department FAX # (512) 328-7632
____________________________________________________________________________
| FOR OFFICE USE ONLY |
| VERSION 1.2/7.19.93 |
|____________________________________________________________________________|
<PAGE> 15
EXHIBIT C
CUSTOMER MAINTENANCE SUPPORT
----------------------------
MSM's standard fees for customer maintenance support services are as
follows (unless set by precedence in a service contract):
Maintenance services shall be defined as all work performed by MSM on
equipment provided by or on behalf of the Customer, or supervision of the
Customer's work within MSM's terminate facilities. Maintenance Service charges
are not billed for troubles found within that portion of a circuit provided by
MSM. The following billing rates apply for these services:
A. $75 per hour (4 hour minimum-if dispatch is required) Monday
through Friday during the business hours of 8:00 a.m. - 5:00 p.m. local time,
exclusive of the following holidays:
New Years Day
President's Day
Memorial Day
Independence Day
Labor Day
Thanksgiving Day and the day after Thanksgiving
Christmas Day
B. $95 per hour (4 hour minimum) for overtime work done after business
hours (defined above) and/or on holidays (defined above) and/or all day on
Saturdays and Sundays.
C. As requests for maintenance services are typically made via
telephone, MSM must be advised, in writing as to the person(s) who are
authorized to request service. It is the Customer's responsibility to keep MSM
apprised of any changes to its list of representative(s).
D. To request technical assistance and help under the maintenance
services, a call must be made to our Network Control Center at 1-800-526-2488.
This number should be used for MSM technical assistance, troubleshooting or
testing of circuits, not for service impairment or outages. The person calling
in must be on the authorized list in order to commit for charges for this
technical assistance. If that person is not on the list, the request cannot be
accommodated.
1. The Network Control Center personnel will take the call,
record the caller's name and phone number along with facts concerning the
assistance and support needed. The caller will then be given the number of the
"Assistance Ticket."
2. Upon completion of work, this "Assistance Ticket" will be
given to MSM's Accounting Department, and the customer will subsequently be
billed based upon the information on that ticket. A copy will be attached to
the invoice.
E. Except for emergencies, MSM technicians cannot be dispatched
unless requests are made in accordance with the above call-out procedure.
<PAGE> 16
EXHIBIT C
MAINTENANCE POLICY & ANCILLARY PRICING
NONRECURRING CHARGES DS-1 DS-3
- - -------------------- ---- ----
New Order Installation * *
Order Change (prior to circuit turnup)
Order Cancellation (prior to circuit turnup)
plus additional charges incurred
ASR (new or disconnect)
ASR Supplement
Order Expedite
Reconfiguration (city pair remains the same)
Ramped DS-3 Installation Per DS1
Distributed DS-3 Installation Per DS1
MONTHLY RECURRING CHARGES
- - -------------------------
* *
IXC Minimum circuit charge
Cross-connect Charge
Other IXC to MSM local access or bypass
facility (CTI long haul involved)
Local bypass - charge MSM POP to MSM POP in
same city, with no MSM long haul attached
at either MSM POP
Transit Cross-connect (MSM long haul not
included)
MISCELLANEOUS
- - ------------- * *
M13 1 yr Term
2+ yr Term
3+ yr Term
ECHO CANCELLERS
SECOND END LOOP (Ex: for ADPCM)
MAINTENANCE
* *
CIF FLOOR SPACE
CIF SHELF SPACE
CIF DC POWER
CIF AC/DC POWER
ALL OTHER SERVICES
(1) All of the above charges are subject to change with a 30-day notice.
(2) Services not described above will be considered special handling and
charges will be assessed on an individual basis.
* Confidential Treatment Applied For
<PAGE> 1
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARY EXHIBIT 11.1
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------- --------------------------
June 30, June 30, June 30, June 30,
1994 1993 1994 1993
-------- --------- ---------- ---------
(in thousands except per share amounts)
Earnings Per Share
<S> <C> <C> <C> <C>
Income before extraordinary item and cumulative
effect of accounting change $14,841 $8,392 $29,486 $16,396
Accretion of discount on Class A Preferred Stock (22) (44)
Accrued dividends on Class A Preferred Stock (123) (246)
------- ------ ------- -------
Income before extraordinary item and cumulative
effect of accounting change available for
Common Stockholders $14,841 $8,247 $29,486 $16,106
Extraordinary item -- Loss on early retirement of debt (7,490) (7,490)
Cumulative effect of change in method of accounting for
income taxes 13,500
------- ------ ------- -------
Net Income Available for Common Stockholders $14,841 $757 $29,486 $22,116
======= ====== ======= =======
Weighted average Common shares outstanding during
the period 33,511 28,931 33,285 26,615
======= ====== ======= =======
Earnings per common share:
Income before extraordinary item and cumulative
effect of accounting change $0.44 $0.29 $0.89 $0.60
Extraordinary item -- Loss on early retirement of debt (0.26) (0.28)
Cumulative effect of change in method of accounting
for income taxes 0.51
------- ------ ------- -------
Net Income $0.44 $0.03 $0.89 $0.83
======= ====== ======= =======
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------- ------------------------
June 30, June 30, June 30, June 30,
1994 1993 1994 1993
--------- ---------- -------- ---------
(in thousands except per share amounts)
Primary Earnings Per Share
<S> <C> <C> <C> <C>
Income before extraordinary item and cumulative
effect of accounting change $14,841 $8,392 $29,486 $16,396
Accretion of discount on Class A Preferred Stock (22) (44)
Accrued dividends on Class A Preferred Stock (123) (246)
------- ------ ------- -------
Income before extraordinary item and cumulative
effect of accounting change available for
Common Stockholders $14,841 $8,247 $29,486 $16,106
Extraordinary item -- Loss on early retirement of debt (7,490) (7,490)
Cumulative effect of change in method of accounting
for income taxes 13,500
------- ------ ------- -------
Net Income Available for Common Stockholders $14,841 $757 $29,486 $22,116
======= ====== ======= =======
Weighted average Common shares outstanding during
the period 33,511 28,931 33,285 26,615
Common Stock Equivalents:
Average amount of Class B and Class C Preferred
(Common Stock Equivalent) 1,750
------- ------ ------- -------
Weighted Average Common and Common Equivalent Shares 33,511 28,931 33,285 28,365
======= ====== ======= =======
Earnings per common and common equivalent share:
Income before extraordinary item and cumulative
effect of accounting change $0.44 $0.29 $0.89 $0.57
Extraordinary item -- Loss on early retirement of debt (0.26) (0.26)
Cumulative effect of change in method of accounting
for income taxes 0.47
------- ------ ------- -------
Net Income $0.44 $0.03 $0.89 $0.78
======= ====== ======= =======
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------- ----------------------
June 30, June 30, June 30, June 30,
1994 1993 1994 1993
-------- ---------- -------- --------
(in thousands except per share amounts)
<S> <C> <C> <C> <C>
Primary Earnings Per Share -- Modified Treasury Stock Method
Income before extraordinary item and cumulative
effect of accounting change $14,841 $8,392 $29,486 $16,396
Accretion of discount on Class A Preferred Stock (22) (44)
Accrued dividends on Class A Preferred Stock (123) (246)
------- ------ ------- -------
Income before extraordinary item and cumulative
effect of accounting change available for
Common Stockholders $14,841 $8,247 $29,486 $16,106
Extraordinary item -- Loss on early retirement of debt (7,490) (7,490)
Cumulative effect of change in method of accounting
for income taxes 13,500
------- ------ ------- -------
Net Income Available for Common Stockholders $14,841 $757 $29,486 $22,116
======= ====== ======= =======
Weighted average Common shares outstanding during the period 33,511 28,931 33,285 26,615
Common Stock Equivalents:
Average amount of Class B and Class C Preferred
(Common Stock Equivalent) 1,750
Effect of Modified Treasury Stock Method:
Assumed exercise of all options and warrants 8,185 11,188 8,410 11,758
Assumed repurchase of up to 20% of Common Stock outstanding (3,414) (4,484) (3,406) (5,065)
------- ------ ------- -------
Weighted Average Common and Common Equivalent Shares 38,282 35,635 38,289 35,058
======= ====== ======= =======
Earnings per common and common equivalent share:
Income before extraordinary item and cumulative
effect of accounting change $0.39 $0.23 $0.77 $0.46
Extraordinary item -- Loss on early retirement of debt (0.21) (0.21)
Cumulative effect of change in method of accounting
for income taxes 0.39
------- ------ ------- -------
Net Income $0.39 $0.02 $0.77 $0.63
======= ====== ======= =======
</TABLE>
Note 1: Under the Modified Treasury Stock Method, all proceeds assumed used
for repurchase of up to 20% of Common Stock equivalents.
Note 2: Fully Diluted Earnings per share is represented by the same
calculation as Modified Treasury Stock Method.
Note 3: Reported earnings per share were calculated using the Modified
Treasury Stock Method.
