10-K
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FORM 10-K
1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended: December 31, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
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
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (810) 647-4060
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
None
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
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 February 27, 1995, the aggregate market value of the voting stock held by
non-affiliates of the registrant based on the last reported sales price of the
registrant's Common Stock on the American Stock Exchange for that date was
$959,053,927.
As of February 27, 1995, the registrant had 33,713,051 shares of Common Stock
outstanding.
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PART 1
ITEM 1. BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS
ALC Communications Corporation was incorporated in Delaware on
August 26, 1985 ("ALC" or the "Registrant"). ALC commenced business on December
19, 1985, the date of the affiliation of two long distance telephone companies,
Allnet Communication Services, Inc. ("Allnet") and Lexitel Corporation
("Lexitel"). Allnet, a wholly-owned subsidiary of ALC, now has the former
businesses and operations of both Allnet and Lexitel. ALC conducts no business
other than its position as a holding company.
Unless the context otherwise requires, the term "Company" includes ALC
and its wholly-owned subsidiaries; ConferTech International, Inc. and Allnet
and all of the wholly-owned subsidiaries of Allnet. The principal executive
offices of ALC are located at 30300 Telegraph Road, Bingham Farms,
Michigan 48025 (810/647-4060).
In August 1994, the Company completed a series of transactions
with respect to the Company's Michigan network. These transactions included
the Company's acquisition of a 15% minority ownership position in a company
owning a Michigan-based digital fiber optic network. The Michigan network was
acquired from General Electric Capital Corporation with the majority position
(85%) being purchased by IXC Communications, Inc., an Austin, Texas based
network services provider ("IXC"), and the balance (15%) by ALC.
Shortly after the end of the 1994 fiscal year, the Company
consummated two significant agreements. The first was its January 19, 1995
announcement that ALC had signed a definitive agreement to acquire ConferTech
International, Inc. for approximately $66 million in a cash transaction. The
second involved the January 20, 1995 closing of a $105 million unsecured credit
facility with First Union National Bank of North Carolina and Bank One,
Columbus, NA as Co-Managing Agents. The new facility, which includes more
favorable terms than the prior credit facility, will provide the Company with
greater flexibility to enhance its growth through strategic investment.
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company operates in one industry segment. All significant
revenues relate to sales of telecommunication services to the general public.
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(C) NARRATIVE DESCRIPTION OF BUSINESS
ALC is the holding company of Allnet and other subsidiaries
and conducts no other business. ConferTech was acquired pursuant to a tender
offer and subsequent statutory merger. Confertech provides teleconferencing
services and audio bridge equipment.
Allnet provides long distance telecommunications services
primarily to commercial and, to a lesser extent, residential subscribers in the
majority of the United States and completes subscriber calls to all directly
dialable locations worldwide. Allnet is one of the few nationwide providers of
long distance services and in 1994 carried in excess of 1.1 billion calls over
its network.
Allnet operates its own switches, develops and implements its
own products, monitors and deploys its transmission facilities and prepares and
designs its own billing and reporting systems. The Company focuses on a highly
profitable segment of the long distance industry with high operating margins,
specifically, commercial accounts, whose calling volume consists primarily of
calls made during regular business hours which command peak-hour pricing.
Commercial subscribers tend to make most of their calls on
weekdays during normal business hours, while the Company's residential
subscribers tend to make most of their calls in the evening and on weekends,
when business usage is lowest. Neither commercial nor residential subscribers'
access to the Company's service is limited as to the time of day or day of
week.
SEASONALITY
The Company experiences certain limited seasonality in the use
of its services due to periods where commercial subscribers experience higher
levels of time-off by their employees, such as during national holidays and
vacation periods. Fewer business days during a calendar month will also impact
usage. The Company will experience decreased commercial usage resulting from
these factors. Since 1992, the impact of commercial traffic seasonal variations
has been more than offset by strong year over year traffic growth as well as
reseller growth in residential traffic. Seasonality in usage from residential
subscribers tends to vary with the return of students to college and national
holidays. The Company will experience increased residential usage resulting
from these factors.
PRODUCTS AND SERVICES
The Company provides a variety of long distance telephone
products and services to commercial and residential subscribers nationwide.
The bulk of the Company's revenue is derived from outbound and inbound long
distance services which are all under the "Allnet(R)" trademark. Many of the
Company's products, however, differ from those of certain of its competitors
due to the level of value-added services the Company offers, the flexibility of
product pricing to maintain competitiveness and its broader geographic reach.
In late 1994, ALC created a subsidiary, Allnet
Communications Limited, a United Kingdom resident subsidiary ("Allnet Ltd.").
Presently inactive, Allnet Ltd. was formed in order to provide originating
domestic and international long distance telecommunications services to
commercial and consumer accounts in the United Kingdom and to provide
cost-effective termination of U.S. originating U.K. traffic. In early 1995,
ALC created another subsidiary, Allnet Local Services, Inc. a Michigan
corporation ("ALS"). Also presently inactive, ALS was formed in order to
provide local telecommunications services initially within the state of New
York.
The variety of products offered are categorized by the Company
based upon certain primary characteristics: pricing, value-added services,
reporting and 800 Services.
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Pricing. All of the Company's customers are identified by
their telephone number, dedicated trunk or validated access code, and have a
rating which is used to determine the price per minute that they pay on their
outbound or inbound long distance calls. Rates typically vary by the volume of
usage, the distance of the calls, the time of day that calls are made, the
region that originates the call, and whether or not the product is being
provided on a promotional basis. The outbound commercial product line is
broken into three major types of services.
Regional: Rates vary by area code or region and subscribers
pay a flat rate for all long distance calls within these area
codes or regions. Rates are determined by competitive
positioning and vary according to the regions which the
Company currently services. These products are priced at the
area code level, and rates offered on these products are the
primary method used to compete with small and more
regionalized carriers.
Nationwide: Rates are by mileage bands set at a distance
around the call initiating point.
Long Haul: Rates are designed for users who tend to make
substantial bicoastal and international calls. These products
offer distance-insensitive domestic pricing and two
time-of-day period rates, along with aggressive international
pricing options.
The Company's outbound residential product line is made up of
Allnet "Dial 1" Service which also has two special discount options to service
employees of commercial accounts ("EBP") and members of associations ("ABP").
Different rates are applied to inbound telephone services than
to outbound telephone services. The inbound product line is provided for
commercial accounts which use 800 telephone numbers to receive and pay for
calls from customers and potential prospects and for residential accounts
wishing similar type services.
Value-added Services. When customers subscribe to value-added
services on the Company's network, their calls are charged a fee based on the
services provided. The Company's value-added services are aimed primarily at
the business subscriber, although the Company also offers products for
residential customers. Customers access value-added services through
Allnet Access(R), which is an interactive voice response system that allows
subscribers to interact with the phone system by pressing numbers on the
telephone. Allnet Access(R) is a customized platform or menu from which
customers select the desired services to which they have subscribed. For
example, a customer who would like to deliver a prerecorded message would dial
an Allnet Access(R) 800 number or through a new streamlined dialing method
known as "00 Platform" from an Allnet presubscribed Touch Tone(R) telephone and
select "call delivery" from the voice menu. If the customer had subscribed to
other services, these services would be offered on the menu as well. Once the
customer makes a selection, the call is routed and charged accordingly.
In 1994, the Company launched Allnet Spectruma(TM), a new
calling card which marries the best attributes of Allnet Access(R) and Allnet
MultiPoint(R) 800 to allow abbreviated dialing for calling card calls. For
example, to complete a call, a customer dials his or her personal 800 number
followed by an appropriate four-digit destination PIN and the call is completed
on the Allnet network. Customer satisfaction is instilled because, after
accessing the Allnet network, the Allnet Spectrum(TM) card only requires
inputting four digits as opposed to the industry standard of fifteen digits.
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Value-added services include Allnet Call Delivery(R), a message
delivery service which enables a customer to send a prerecorded message to a
number; subscribers may also dial in to access a number of voice mail services.
With Flexible Call Routing, users can dial an 800 number and issue instructions
directing their incoming calls to any number of their choosing, including their
office, home, voice mail, pager or cellular phone. Value-added services also
include: VoiceQuote, an interactive stock quotation service; Allnet
InfoReach(R), numerous audio/text programs such as news and weather; a voice
mail service; Option USA(R), a service to provide calls to the U.S. from
selected international locations on Allnet Access(R); and three different
teleconferencing services.
During 1992 the Company launched a full spectrum of facsimile
services including Allnet Broadcast FAX(R), which allows the customer to send
or fax documents to multiple locations at the same time; fax on demand, which
allows the customer to make a fax document available to people who call an 800
number; fax mail, which allows a customer to receive facsimile messages in a
fax mailbox and pick them up at a later date; PC software, which allows the
customer to manage his facsimile lists and documents from a PC; and special
international pricing to accommodate short duration facsimile traffic.
During 1993 the Company began to focus on mobile products and services,
offering MobileLine, the resale of cellular service provided by the regional
Bell Operating Companies ("BOCs"). This service allows customers to integrate
cellular calls on their Allnet invoice and receive additional discounts on
other Allnet services. By the end of 1994, MobileLine is offered in
the Ameritech, Bell Atlantic, NYNEX, Bell South, Air Touch and U.S. West
service regions and is being expanded in other areas of the country with
non-wireline carriers. More recently, Allnet introduced the resale of a
nationwide paging service under the name TravelReach(TM).
ConferTech designs, develops and markets advanced equipment and
services for the audio teleconferencing market, principally in North America,
through both telemarketing and its own direct sales force operating from eight
North American regional sales offices. Confertech provides operator-assisted
and automatic conferencing services, called ConferCall(R), to customers
throughout North America. ConferTech also provides automatic conferencing
services throughout the United Kingdom and European countries through its
London based conferencing service. The Company's principal equipment systems
are the Tempo(R) and Allegro(R), which are bridges that integrate customized
microprocessor-based hardware and proprietary software in a single call-linking
system in order to enhance and distribute standard telephone signals so that
numerous conferees can be connected in an audio "electronic meeting."
Reporting. The Company offers its customers a variety of
billing options and media (two sizes of paper invoices [8-1/2X11 or 4X7
inches], diskette, and magnetic tape) aimed primarily at business customers.
When a new commercial account is opened, the customer is offered the
opportunity to custom design the format of its reports. For example, the
Company can include company accounting codes or internal auditing codes for
each call made with each billing statement. If a customer would like to change
a particular reference code for a telephone line, the code can be changed
automatically. The Company's primary product in this area is Allnet ESP(R) or
Executive Summary Profile. A typical Allnet ESP(R) statement breaks out calls
in a number of ways: by initiating caller number, by terminating number, by
ranking, by department, by frequently dialed number/area/country or by time of
day. Allnet customers pay a fixed monthly fee for these custom-tailored
billing services. In late 1992, Allnet ESP(R) II was launched which gives
customers graphic reports of traffic patterns on a nationwide basis by state,
within state by area of dominant influence ("ADI") and within ADI by zip code.
The Company believes this will be useful to certain customers for direct
response and customer service applications.
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The Company also offers its proprietary personal computer
reporting service, Allnet Invoice Manager(R) ("AIM"), which allows customers
to design their own reports, prepare separate itemized bills, do mark-up
reporting and generate numerous other customized reports.
In 1994, the Company's reporting services continued to expand
with new offerings, which include weekly reports of non-completed 800 number
calls, quarterly reporting for financial control, and graphic reports like
Outlook(R) showing 800 number calls on maps by geographic region.
800 Services. The Company greatly expanded its 800 product
offerings, capitalizing on opportunities resulting from FCC mandated
portability in May 1993 (which allows customers to select a different long
distance carrier without changing their 800 number). These new offerings
include area code blocking and routing; time of day routing; Home Connection
800(TM), fractional 800 service which allows residential customers to acquire
800 service utilizing a 4 digit security Personal Identification Number
("PIN"); MultiPoint(R) 800 services which allow the customer to use
accounting codes on an 800 number or route a single 800 number to numerous
locations simultaneously; Follow-Me 800 which allows a customer to change his
routing from a Touch Tone telephone; and TargetLine(R) 800 which routes
calls to the closest location and provides custom prompts based upon a customer
specific database. To supplement the Company's internal growth in this market,
the Company also will evaluate strategic external growth opportunities. For
example, in July 1993, the Company acquired the specialized 800 customer base
of Call Home America, Inc. These customers are now also able to utilize a
wide range of other telecommunications services from the Company.
In addition, in 1994, domestic 800 number services offered
were expanded to include the ability to terminate domestic U.S. 800 numbers to
any dialable telephone number in the world.
TRANSMISSION
The Company endeavors to have sufficient switching capacity,
local access circuits and long distance circuits at and between its network
switching centers to permit subscribers to obtain access to the switching
centers and its long distance circuits on a basis which exceeds industry
standards regarding clarity, busy signals or delays.
The network utilizes fiber optic and digital microwave
transmission circuits to complete long distance calls. With the exception of a
digital microwave system located in California for which Allnet holds the
Federal Communications Commission ("FCC") licenses, such facilities are leased
on a fixed price basis under both short and long term contracts. The
California microwave facilities are on leased real estate and are subject to
zoning and other land use restrictions. In recent years abundant availability
and declining prices have dictated a strategy of generally obtaining new
capacity for terms between six months and one year. The Company has several
long term contracts which have annual "mark-to-market" clauses . This
provision functions to keep the price the Company pays at or near current
market rates. An important aspect of the Company's operation is planning the
mix of the types of circuits and transmission capacity to be leased or used for
each network switching center so that calls are completed on a basis which is
cost effective for the Company without compromising prompt service and high
quality to subscribers. Over 99% of the Company's domestic traffic is carried
on owned or leased facilities ("on-net").
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In establishing a network switching center, the Company can
select equipment with varying capacities in order to meet the anticipated needs
of the service origination region(s) served by the center. The equipment used
by the Company is, for the most part, designed to permit expansion to its
capacity by the addition of standard components. If the maximum capacity of
the equipment in any center is reached, the Company replaces it with higher
capacity switching equipment. Common elements of the replaced unit are
re-deployed throughout the network. The Company is dependent upon the local
telephone company for installing local access circuits and providing related
service when establishing a network switching center. As of December 31, 1994,
the Company had 16 network switching centers which originate traffic in all
Local Access Transport Areas ("LATAs") in the United States. The Company also
maintains a separate test switch in its Southfield, Michigan switching center
that is used by Allnet engineering and operations personnel to develop and
certify software, products and services prior to introduction to the Allnet
network or customer base. International service is provided through
participation in the International Carrier Group ("ICG") with two other major
long distance companies. The ICG in turn contracts with other long distance
companies and foreign entities to provide high quality international service at
competitive rates.
MARKETING
Approximately 60% of the Company's employees are engaged in
sales, marketing or customer services. The Company markets its services and
products through personal contacts with an emphasis on customer service,
network quality, value-added services, reporting, rating and promotional
discounts. Allnet currently operates a sales network with 54 offices in the
United States. The Company employs 1,049 sales, marketing and customer service
individuals. Field sales representatives focus on making initial sales to
commercial users. They solicit business through face-to-face meetings with
small- to medium-sized businesses. Each field sales representative earns a
commission dependent on the customer's usage and value-added services. The
Company's sales strategy is to make frequent personal contact with existing and
potential customers.
The prices and promotions offered for the Company's services
are designed to be competitive with other long distance carriers. Prices will
vary as to interstate or intrastate calls as well as with the distance,
duration and time-of-day of a call. In addition, the Company may offer
promotional discounts based upon duration of commitment to purchase services,
incremental increases in service or "free" trial use of the many value-added
and reporting services. Volume discounts are also offered based upon amount of
monthly usage in the day, evening and night periods or based solely on total
volume of usage.
The Company has three groups which provide ongoing customer
service designed to maximize customer satisfaction and increase usage. First,
customer service personnel located in Southfield, Michigan are available
telephonically free of charge 24 hours a day, seven days a week. Second, a
customer service center in Columbus, Ohio processes calls from customers with
significant usage levels who have been enrolled in the Company's "Select
Service" programs. Third, communications specialists located at the sales
offices provide personal service to large commercial accounts.
The Company services more than 325,000 customers. Of these
customers, approximately 120,000 are commercial accounts, with the remainder
being residential accounts. During the past two years, the Company has become
more geographically diversified, adding new markets as necessary. The Company
is currently focusing on expanding distribution channels to increase customer
acquisition in specific target markets. Reseller revenue has continued to
grow significantly; the revenue from one reseller growing rapidly to just
under 10% of total revenue. It is the Company's understanding that this
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reseller, through a joint venture with a subsidiary of IXC, will be
installing long distance switching capacity during 1995 which as completed,
would result in over half of this traffic gradually moving to the joint venture
network. However, the joint venture has in turn entered into a three year
contract with Allnet, effective as of April 1, 1995. Allnet will terminate the
joint venture traffic which can't be terminated on the venture's own network.
Allnet also obtained provisions regarding exclusivity and minimums.
COMPETITION AND GOVERNMENT REGULATION
Competition is based upon pricing, customer service, network
quality and value-added services. The Company views the long distance industry
as a three tiered industry which is dominated on a volume basis by the nation's
three largest long distance providers: American Telephone and Telegraph Company
("AT&T"), MCI Telecommunications Corporation ("MCI") and Sprint Communications,
Inc. ("Sprint"). AT&T, MCI and Sprint, which generate an aggregate of
approximately 80% of the nation's long distance revenue of $79.3 billion,
comprise the first tier. Allnet is positioned in the second tier with three
other companies with annual revenues of $430 million to $2.2 billion each. The
third tier consists of more than 300 companies with annual revenues of less
than $430 million each, the majority below $50 million each. Allnet targets
small- and medium-sized commercial customers ($100 to $50,000 in monthly long
distance volume) with the same focus and attention to customer service that
AT&T, MCI and Sprint offer to large commercial customers. Allnet is one of the
few long distance companies with the ability to offer high quality value-added
services to small- and medium-sized commercial customers on a nationwide basis.
A number of the Company's competitors are primarily regional in nature, limited
by the size of their transmission systems or dependent on third parties for
their billing services and product offerings.
Generally, the current trend is toward lessened regulation for
both the Company and its competitors. Regulatory trends have had, and may have
in the future, both positive and negative effects upon Allnet. For example,
more markets are opening up to Allnet, as state regulators allow Allnet to
compete in markets from which it was previously barred. On the other hand, the
largest competitor, AT&T, has gained increased pricing flexibility over the
years, allowing it to price its services more aggressively.
As a nondominant Interexchange Carrier, the Company is not
required to maintain a certificate of public convenience and necessity with the
FCC other than with respect to international calls, although the FCC retains
general regulatory jurisdiction over the sale of interstate long distance
services by such carriers, including the requirement that calls be charged on a
nondiscriminatory, just and reasonable basis. Following a Court of Appeals
decision vacating an earlier FCC ruling, nondominant carriers, such as Allnet,
need to file tariffs for their interstate service offerings. The impact of the
Court of Appeals decision on Allnet was minimal and primarily administrative in
nature. Allnet is in compliance with that decision, including maintaining an
extensive set of interstate tariffs with the FCC. The FCC has since adopted
reduced requirements regarding the filing of tariffs for non-dominant carriers,
including Allnet. The Company believes that it has operated and continues to
operate in compliance with all applicable tariffing and related requirements of
the Communications Act of 1934, as amended.
In the FCC decision implementing certain provisions of the
Telephone Operator Consumer Services Improvement Act ("TOCSIA"), Allnet was
designated subject to the payment of charges by "private payphone owners."
Allnet presently is challenging that designation with the FCC and in the
courts, as it does not believe that it is engaged in the sort of activity
intended to be regulated under TOCSIA.
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In addition, by virtue of its ownership of interstate
microwave facilities located in California (as described in "Transmission"),
Allnet is subject to the FCC's common carrier radio service regulations.
In 1984, pursuant to the AT&T Divestiture Decree, AT&T
divested its 22 Bell Operating Companies ("BOCs"). In 1987, as part of the
triennial review of the AT&T Divestiture Decree, the U.S. District Court for
the District of Columbia denied the BOCs' petition to enter, among other
things, the long distance ("inter-LATA") telecommunications market. The
District Court's ruling was appealed to the United States Court of Appeals for
the District of Columbia which, in 1990, affirmed the District Court's decision
to retain the inter-LATA prohibition for the BOCs.
Congress is currently formulating legislation that might allow the BOCs
into the inter-LATA business in competition with long distance carriers such as
Allnet. Prior attempts at adopting such legislation during the 1994
Congressional session were unsuccessful. It cannot be determined at this time
whether any bills addressing relief from the AT&T Divestiture Decree will be
adopted or the timing of such adoption or, if adopted, whether the final
legislation will be similar to any previously proposed bills. To the extent
final legislation, if any, results in the BOCs being permitted to provide
inter-LATA long distance telecommunications services and to compete in the long
distance market, existing Interexchange Carriers,including the Company, would
likely face substantial additional competition from local BOC monopolies.
As part of the AT&T Divestiture Decree, the divested BOCs were required
to charge AT&T and all other carriers (including Allnet) equal per minute rates
for "local transport" service (the transmission of switched long distance
traffic between the BOCs' central offices and the Interexchange Carriers' points
of presence). BOC and other local exchange company ("LEC") tariffs for local
transport service have been based upon these "equal per unit" rules since 1984,
pursuant to the AT&T Divestiture Decree and the FCC's waiver of certain local
transport pricing rules. Although the portion of the AT&T Divestiture Decree
containing this rule ceased to be effective by its terms on September 1, 1991,
the FCC had extended its effect until it concluded the rulemaking proceeding in
which it considered whether to retain or modify the "equal per unit" local
transport pricing structure. On September 17, 1992, the FCC voted to maintain
the existing "equal per unit" pricing rules until late 1993. A two year
interim plan then took effect. Based on the interim plan rates that are in
effect, Allnet does not anticipate a material impact during 1994 and 1995.
The FCC has left open the access rate structure issue for the
post 1995 period. The FCC issued a Further Notice of Proposed Rulemaking for
consideration of a permanent rate structure to take effect beginning no earlier
than late 1995. The FCC has also recently voted to allow expanding competition
for monopoly local access through expanded local switched access
interconnection. This could ultimately provide Allnet with alternatives to
purchasing its local access from the monopoly local exchange carriers.
The FCC has issued orders stating that carriers such as Allnet
were entitled to refunds for overcharges paid to a number of local exchange
carriers during the 1985-1986 and 1987-1988 and 1989-1990 periods. These
awards have, in all but one case, been paid to Allnet. Although these awards
are in the aggregate significant, they are not a material portion of the
Company's total access costs. Some local exchange carriers have appealed the
orders and some of the awards which were paid are conditioned on the outcome of
the appeals.
The intrastate long distance telecommunications operations of
the Company are also subject to various state laws and regulations, including
certification requirements. Generally, the Company must obtain and maintain
certificates of public convenience and
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necessity as well as tariffs from regulatory authorities in most states
in which it offers intrastate long distance services, and in most of these
jurisdictions, must also file and obtain prior regulatory approval of tariffs
for its intrastate offerings. At the present time, the Company can provide
originating services to customers in all 50 states and the District of
Columbia. Those services may terminate in any state in the United States and
may also terminate to countries abroad. Only 31 states have public utility
commissions that actively assert regulatory oversight over the intrastate
services currently offered by the Company. Like the FCC, many of these
regulating jurisdictions are relaxing the regulatory restrictions currently
imposed on telecommunication carriers for intrastate service. While some of
these states restrict the offering of intra-LATA services by the Company and
other Interexchange Carriers, the general trend is toward opening up these
markets to the Company and other Interexchange Carriers. Those states that do
permit the offering of intra-LATA services by Interexchange Carriers generally
require that end users desiring to access these services dial special access
codes which place the Company and other Interexchange Carriers at a
disadvantage as compared to LEC intra-LATA toll service which generally
requires no access code.
PATENTS
In December 1992, MCI filed a lawsuit in the United States
District Court for the District of Columbia against AT&T. The complaint seeks,
among other things, a declaration that certain AT&T patents relating to basic
long distance services, toll free "800" service, and other telephone services
are invalid or unenforceable against MCI (and other similarly situated
telecommunications providers). AT&T counterclaimed against MCI for patent
infringement. Contemporaneously with the filing of its declaratory judgment
action, MCI requested the court in the AT&T Divestiture Decree case to rule
that AT&T should be barred from asserting its pre-divestiture patents to impede
competition in the interexchange telecommunications market. Both of the
foregoing actions are currently pending.
AT&T has generally indicated that it believes that long
distance telecommunications companies may be infringing on certain AT&T patents
and has offered to license such patents. AT&T has numerous patents, some of
which may pertain to the provision of services similar to those currently
provided or to be provided by the Company or to equipment similar to that used
or to be used by the Company. If it were ultimately determined that the
Company has infringed on any AT&T patents and the Company is required to
license such patents and pay damages for infringement, such costs could have an
adverse effect on the Company.
EMPLOYEES
As of December 31, 1994, the Company employed 1,705 employees
in the United States, none of whom were subject to any collective bargaining
agreements.
ITEM 2. PROPERTIES
On December 31, 1994, the Company had under lease
approximately 113,000 square feet of office space in Bingham Farms, Michigan
for executive and administrative functions and approximately 43,000 square feet
in Southfield, Michigan for customer service, collections, and data processing.
The Company also leases approximately 295,000 square feet in the aggregate for
sales and administrative offices, network switching centers and unmanned
microwave sites in 110 other locations in the continental United States.
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Most of the leased premises are for an initial term of
five-to-ten years with, in many cases, options to renew. All properties
presently being used for operations of the Company are suitable, well
maintained and equipped for the purposes for which they are used.
In 1993, ConferTech acquired a 55,000 square foot building in
Westminster, Colorado to serve as its headquarters and to provide a base for a
significant portion of its operations, including sales and marketing, service
operations, engineering and administration. ConferTech's leased facilities,
comprised of call centers, sales offices and bridge locations in the United
States, Canada and United Kingdom contain approximately 46,000 square feet,
with leases expiring in June 1995 through January 2004.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth as of March 30, 1995 the executive
officers of ALC as designated by the Company or otherwise required by law to be
so designated. Executives are elected annually and serve at the pleasure of
the Board.
NAME AGE POSITION
John M. Zrno 56 President, Chief Executive Officer
and Director
William H. Oberlin 50 Executive Vice President,
Chief Operating Officer
and Director
Marvin C. Moses 50 Executive Vice President, Chief
Financial Officer, Assistant
Secretary and Director
Gregory M. Jones 44 Senior Vice President
Connie R. Gale 48 Vice President, General Counsel
and Secretary
John M. Zrno has held his positions since August 1988. From December
1981 until joining the Company, Mr. Zrno held a number of executive positions
with Cable & Wireless North America, Inc., the most recent of which was
President and Chief Executive Officer. Between 1972 and 1981, Mr. Zrno first
served as an officer of MCI Telecommunications Corporation, a long distance
provider, then as an officer of American Satellite Corporation, a satellite
common carrier, and finally as an officer of F/S Communications Corporation, an
independent telephone interconnect company.
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William H. Oberlin has held the position of Chief Operating Officer
since July 1990, the position of Executive Vice President since October 1988
and director since July 1993. From November 1983 through September 1988, Mr.
Oberlin held a number of executive positions with Cable & Wireless North
America, Inc., the most recent of which was Senior Vice President - Sales and
Marketing. During 1983, Mr. Oberlin was founder and principal shareholder of
Electronic Express, Inc., a facsimile-based priority mail and delivery system.
From April 1982 through March 1983, Mr. Oberlin was Chief Executive Officer of
DHL Business Systems, Inc., a worldwide manufacturer and distributor of word
processing terminals. From 1974 through April 1982, Mr. Oberlin was employed by
Sprint. From September 1979 through April 1982, Mr. Oberlin was President of
Southern Pacific/Distributed Message Systems, Inc., distributors of facsimile
machines and electronic mail services.
Marvin C. Moses has held his officer positions since October 1988, and
director since September 1989. From February 1982 through September 1988, Mr.
Moses held a number of executive positions with Cable & Wireless North America,
Inc., the most recent of which was Chief Financial Officer and Senior Vice
President. From 1980 through February 1982, Mr. Moses worked with Atlantic
Research Corporation, where he was involved in obtaining project financing for
an alternative energy product. From 1975 to 1980, Mr. Moses was Vice President
- Finance and Chief Financial Officer of GTE Telenet, a data communications
company now part of Sprint.
Gregory M. Jones has held the position of Senior Vice President since
December 1990 and had formerly served as Vice President - Marketing since
January 1989. Mr. Jones was previously director of Sure Check and Retail
Services, Inc., a wholly-owned subsidiary of Comp-U-Check, Inc. From July 1979
to June 1987 Mr. Jones held various positions with MCI Telecommunications
Corporation including director of marketing for MCI Midwest in Chicago, senior
manager of telemarketing, and senior manager of customer service.
Connie R. Gale has held the position of Vice President since January
1991 and has held the positions of General Counsel and Secretary since October
1988, commencing her employment with the Company December 1986 as Associate
General Counsel and Assistant Secretary. Ms. Gale previously served as
corporate counsel for Chrysler Corporation from July 1973 to February 1980 and
for American Natural Resources, Inc. from February 1980 to March 1981. Ms. Gale
was Associate General Counsel at Federal-Mogul Corporation from April 1981 to
November 1986.
_____________________________
References to "Sprint" include its former designations: Southern Pacific
Communications Co., GTE Sprint and U.S. Sprint.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Common Stock, $.01 par value, has been traded on the AMEX
since September 4, 1991 and is listed under the symbol ALC. The table below
sets forth the ranges of high and low closing sales prices of the Common Stock
as reported on the AMEX composite tape for calendar years 1993 and 1994.
1993 1994
---- ----
HIGH LOW HIGH LOW
1st quarter $16.63 $12.50 $36.75 $28.13
2nd quarter $20.00 $15.50 $36.75 $27.50
3rd quarter $28.25 $19.75 $36.25 $29.50
4th quarter $30.75 $23.88 $38.13 $27.63
As of February 27, 1995, there were 1,932 stock holders of record of
the Common Stock. The high and low sales price per share of the Common Stock
for the period from January 1, 1995 to February 27, 1995, as reported by AMEX,
were $34.50 and $27.50, respectively.
Since its inception, ALC has not declared or paid any
dividends on its Common Stock. The Company is allowed to pay dividends by the
terms of its credit facility as follows: (a) dividends may be paid in
shares of its own capital stock and (b) cash dividends may be paid and the
Company may redeem or repurchase shares of its capital stock (i) in an
aggregate amount not to exceed thirty percent (30%) of cumulative Consolidated
Net Income and (ii) if at the time of such payment, redemption or repurchase,
no Default or Event of Default shall exist or would be created (capitalized
terms not otherwise defined herein are defined in the credit agreement).
Effective as of January 12, 1995, ALC adopted a Stockholder Rights
Plan under which a Right was distributed to stockholders of record of the
Common Stock issued and outstanding at the close of business on January 24,
1995. The Rights become exercisable only after a person or group acquires 20%
or more of the Common Stock or announces a tender offer for 20% or more of the
Common Stock. After a 20% acquisition each Right entitles the holder, at an
exercise price of $120, to purchase at a 50% discount either shares of the
Common Stock or under certain circumstances, an acquiring company's common
stock.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth for the indicated fiscal years
and periods ended, selected historical financial information for the Company.
Such information is derived from financial statements presented in Part IV,
Item 14. of this Annual Report on Form 10-K and should be read in conjunction
with such financial statements and related notes thereto.
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ALC COMMUNICATIONS CORPORATION AND SUBSIDIARY
Selected Financial Data
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
1994 1993 1992 1991 1990
(IN THOUSANDS EXCEPT PER SHARE DATA)
Income Statement Data:
Revenue $567,824 $436,432 $376,064 $346,873 $326,004
Income (loss) before extraordinary items
and Cumulative Effect of Accounting Change $64,329 $39,676 $13,826 $2,717 $(19,643)
Net income (loss) $64,329 $45,686 $20,826 $5,347 $(19,643)
Income (loss) per common share before extraordinary items
and Cumulative Effect of Accounting Change (1) $1.68 $1.07 $0.43 $(0.17) $(2.29)
Net income (loss) per common share (1) $1.68 $1.23 $0.74 $(0.02) $(2.29)
Balance Sheet Data:
Total assets $284,725 $193,541 $143,266 $140,846 $149,375
Long term obligations (2) $82,466 $87,598 $83,950 $105,355 $181,450
---------------------------
(1) 1990 has been restated to reflect the 1:5 reverse stock split.
(2) 1990 through 1992 include Class A Preferred Stock.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Nineteen hundred ninety four was a year of record performance for ALC ("the
Company"). Capitalizing on a series of multi-year financial transactions
completed in 1993, which provided for the simplification and improvement of the
debt and capital structure, the Company was able to concentrate on traffic and
revenue growth and implementation of strategies for its ongoing operations.
The Company has sustained a level of financial success which includes the fact
that net income grew from a level of $3.3 million for the first quarter of
1992 to $17.3 million for the fourth quarter of 1994. Net income (excluding
extraordinary items) for the year ended 1994 increased approximately
62% over the previous year. The results of operations for 1992, 1993 and 1994
reflect increases in both billable minutes and revenue and a significant
reduction in operating expenses as a percent of revenue.
RESULTS OF OPERATIONS
The Company reported net income of $64.3 million for the year ended December
31, 1994 on revenue of $567.8 million. This compares to net income of $45.7
million for the year ended December 31, 1993, which includes the impact of both
the $13.5 million cumulative effect of a change in method of accounting for
income taxes and the $7.5 million net loss related to early retirement of debt.
Excluding the effect of these items, income for the year ended December 31,
1993 totaled $39.7 million on revenue of $436.4 million. This compares to net
income of $20.8 million on revenue of $376.1 million for the year ended
December 31, 1992.
Operating income increased from $40.7 million for the year ended December 31,
1992 to $68.9 million in 1993 and increased to $106.3 million in 1994. This
improvement is primarily the result of increased revenue from increased
billable minutes.
Year Ended December 31,
1994 1993 1992
---- ---- ----
Revenue 100.0% 100.0% 100.0%
Cost of communication services (54.5) (53.8) (57.7)
------ ------ ------
Gross Margin 45.5% 46.2% 42.3%
Sales, general & administrative (23.7) (27.5) (28.5)
Depreciation & amortization (3.1) (2.9) (3.0)
------ ------ ------
Operating Income 18.7% 15.8% 10.8%
====== ====== ======
REVENUE
Revenue increased 30.1% to $567.8 million from 1993 to 1994 resulting from year
over year traffic growth of 42.3%. Since the third quarter of 1990, billable
minutes have continued to increase when compared to the same quarter in the
prior year. Most importantly, billable minutes reached their highest level in
1994. Across the board, volume growth was led by strong performance in the
Company's reseller and Call Home America(R) customer bases which, during 1994,
have continued to grow significantly and reached approximately 22% and 6% of
revenue, respectively.
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The Company's revenue per minute of 17.2 cents continues to be strong,
although it decreased from the 1993 level of 18.8 cents primarily due to
changes in the sales mix. 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 the
low incremental sales, general and administrative costs.
The revenue increase for 1994 included the revenue from one reseller
which grew rapidly to just under 10% of total revenue. It is ALC's
understanding that this reseller, through a joint venture, will be installing
long distance switching capacity during 1995 which, as completed, would result
in over half of this traffic gradually moving to the joint venture network.
However, the joint venture has in turn entered into a three year contract with
Allnet, effective as of April 1, 1995. Allnet will terminate the joint venture
traffic which can't be terminated on the venture's own network. Allnet also
obtained provisions regarding exclusivity and minimums.
Revenue increased 16.1% to $436.4 million from 1992 to 1993 resulting from an
18.9% increase in billable minutes offset somewhat by a decrease in the revenue
per minute. The increase in billable minutes results from traffic generated by
new customers and increased minutes per customer. Revenue per minute decreased
from 1992 to 1993 resulting from changes in the sales mix.
Beginning in May 1993, the Company benefited from new traffic growth generated
from the availability of 800 portability. Beginning in July 1993, the Company
had additional revenue from the acquisition of the customer base of Call Home
America, Inc. ("CHA") which represented approximately 2% of revenue for the
year ended December 31, 1993. In addition, resellers contributed approximately
$18 million to revenue during 1993.
The revenue generated from customers' first full month of service in 1994 was
48.4% higher than in 1993 and 30.7% higher in 1993 than in 1992. The increased
revenue from new customers along with revenue from existing customers is
significantly outpacing revenue lost from customer attrition.
The provision for uncollectible revenue, which is deducted from gross revenue
to arrive at reported revenue, was 1.7% for the year ended December 31, 1994,
1.9% for the year ended December 31, 1993, and 3.0% for the year ended December
31, 1992. Strong controls and procedures have enabled the Company to improve
the collection process and provide earlier detection of credit risks.
COST OF COMMUNICATION SERVICES
The cost of communication services increased from $216.9 million and $234.8
million to $309.5 million for the years 1992, 1993, and 1994, respectively.
The increase in the cost of communication services is due primarily to the
42.3% and 18.9% increase in billable minutes in 1994 and 1993. The cost of
communication services as a percent of revenue was 54.5% in 1994, up slightly
from 53.8% in 1993, the lowest rate in the Company's history, and reflects a
decrease from the 1992 level of 57.7%.
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 Company continues to reconfigure its network to optimize
utilization.
The Company's use of high volume, fixed price transmission facilities is
significantly more cost effective than the use of measured services. By
utilizing fixed price leased facilities to transmit long-haul traffic, the
Company has successfully decreased its network costs without the capital
expenditures associated with construction of its own fiber optic or digital
microwave network. Over 99% of the Company's traffic traverses over fixed
price, "on-net" digital facilities.
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OTHER EXPENSES
Sales, general and administrative expense was $107.3 million, $119.8 million
and $134.3 million for the years 1992, 1993 and 1994, respectively.
Sales, general and administrative expense for 1994 increased $14.5 million or
12.1% over 1993. The increase reflects increased salaries, commissions, new
sales channel program costs and other expenses related to greater sales
activity. Nineteen hundred ninety four results include a $1.2 million
reduction in cost resulting from the favorable settlement of a state
telecommunications excise tax dispute. As a percentage of revenue, sales,
general and administrative expense declined to 23.7% from 27.5% in 1993,
evidencing management's continued emphasis on process improvement and cost
benefit analysis.
Sales, general and administrative expense for 1993 increased $12.5 million or
11.7% compared to 1992. The increases reflect increased commissions, taxes
other than income, and other expenses related to sales. Sales, general and
administrative expense, however, declined as a percent of revenue which
reflects management's continuing focus on cost containment. Procedures
implemented to improve efficiencies and contain expenses included improved
budgeting techniques, continued review of actual expenses against budgeted
levels, incentive programs tied directly to achievement of budget objectives,
and detailed review of general expense programs.
Depreciation and amortization increased 37.8% and 14.3% for the years 1994 and
1993, respectively, compared to the previous years, but remained relatively
constant as a percent of revenue. In both years, the increase is the result of
depreciation on newly acquired fixed assets and amortization of intangible
assets from the purchase of CHA.
INTEREST EXPENSE
expense has dramatically decreased from $17.2 million in 1992 and
$10.5 million in 1993 to $5.4 million in 1994. Interest expense decreased due
to improved cash flow from operations and interest income (in 1994). This
decrease also resulted from reduced interest related to the replacement of the
11 7/8% Subordinated Notes, which had an effective interest rate of 13.6%, with
the 9% 1993 Notes in May 1993. A $5.0 million redemption of the 1993 Notes was
made in April 1994. Additionally, in connection with a series of refinancing
activities, various debt agreements were paid in full in 1993 and 1992.
Interest expense was also lower in 1993 and 1994 because there have
been no borrowings outstanding under the Revolving Credit Facility from
October 1993 through 1994.
INCOME TAXES
Effective January 1, 1993, the required implementation date, the Company
adopted the Financial Accounting Standards Board Statement 109 "Accounting for
Income Taxes" ("Statement 109"). Application of the new rules resulted in the
recording of a net deferred tax asset and additional income of $13.5 million as
of January 1, 1993, related primarily to the future tax benefits which are
expected to be realized upon utilization of a portion of the Company's tax net
operating loss carryforwards ("NOLs"). Statement 109 requires that the tax
benefit of NOLs be recorded as an asset to the extent that management assesses
that the realization of such NOLs is "more likely than not". Management
believes that realization of the benefit of the NOLs beyond a three-year period
is difficult to predict and therefore has recorded a valuation allowance which
has the effect of limiting the recognition of future NOL benefits for financial
reporting purposes to those expected to be realized within the three year
period. The Company did not apply Statement 109 retroactively and thus did not
restate prior year financial statements to reflect adoption of the new rules.
Prior to January 1, 1993, the Company accounted for income taxes in accordance
with Accounting Principles Board Opinion No. 11. The tax provision for the
year ended December 31, 1992 included an amount that would have been payable
except for the availability of NOLs. The tax benefits of the loss
carryforwards
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utilized were reported as an extraordinary item for the year ended 1992. With
the adoption of Statement 109, income tax expense for 1993 and 1994 included
the benefit of utilizing net operating losses. In 1992, 1993 and 1994, the
utilization of net operating losses was limited due to an Internal Revenue Code
Section 382 "ownership change".
SECTION 382 LIMITATION
The Internal Revenue Code provides that if an ownership change occurs, the
taxable income of a corporation available for offset by NOLs will be subject to
an annual limitation ("Section 382 Limitation").
The transfer of ALC Common Stock, Class B Preferred and Class C Preferred by
CTI, the Company's former parent, to certain banks in August 1992 resulted in an
ownership change with a Section 382 Limitation of approximately $10 million per
annum. As a result of this annual limitation, along with the 15 year
carryforward limitation, the maximum cumulative NOLs which can be utilized for
federal income tax purposes in 1995 and future years are limited to an
aggregate of approximately $110 million.
Future events beyond the control of the Company could reduce or eliminate the
Company's ability to utilize the tax benefit of its NOLs. The tax benefit of
NOLs would be eliminated if the Company fails to meet the continuity of
business requirements.
SEASONALITY
The Company's long distance revenue is subject to certain limited seasonal
variations. Because most of the Company's revenue is generated by commercial
customers, the Company traditionally experiences decreases in long distance
usage and revenue in vacation and holiday periods. Since 1992, the impact of
commercial traffic seasonal variations has been more than offset by strong year
over year traffic growth as well as reseller growth in residential traffic.
However, the effect of commercial seasonality is still evidenced by lower
sequential traffic growth in the fourth quarter.
LIQUIDITY AND CAPITAL RESOURCES
For the years ended December 31, 1994, 1993 and 1992, the Company generated
positive cash flow from operations of $86.0 million, $59.4 million and $30.4
million, respectively, reflecting the strong trend of profitability. The
positive cash flow reflects eighteen consecutive quarters of increased revenue
and operating profits versus prior year comparable quarters.
The positive cash flow from operations resulted in working capital of $41.5
million at December 31, 1994 compared to $1.4 million at December 31, 1993.
The increase in working capital includes a $62.0 million increase in cash and
accounts receivable due to the increase in revenue offset by a $18.2 million
increase in accrued network costs also related to higher traffic volume.
The Company's liquidity position was strengthened by refinancing
activities which included the rescheduling of substantially all debt, resulting
in significantly reduced or deferred debt service obligations. In 1992, the
Company's major debt instrument was replaced by 11 7/8% Subordinated Notes of
Allnet. As part of this restructuring, 3,400,000 ALC Common Stock warrants
were issued representing 10.2% of the then fully-diluted equity of ALC. These
notes were replaced in May 1993 with 9% Senior Subordinated Notes ("1993
Notes") which do not mature until May 2003. As a result, at December 31, 1993
ALC had a single debt instrument outstanding, $85.0 million of the 1993 Notes.
Refinancing activities also included the restructuring and simplification of the
equity of ALC. In August 1992, the equity interest of Communications
Transmission, Inc. ("CTI") represented by 14,324,000 shares of ALC Common
Stock, and the ALC Class B and Class C Convertible Preferred Stock ("Preferred
Stock") was
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transferred to a group of five banks ("Banks"). Subsequently such Preferred
Stock was converted into 3,796,000 shares of ALC Common Stock. A series of
stock offerings in 1992 and 1993 was used to facilitate the sale of
substantially all of the shares held by the Banks and a major stockholder. As
part of the stock offering in October 1992, the Company also completed an
Exchange Agreement which provided for the exchange of 2,144,044 Class A
Preferred Shares for 6,399,227 shares of ALC Common Stock at an effective 40%
discount. In December 1993, the Company redeemed the remaining shares of Class
A Preferred.
Further evidence of the Company's stronger liquidity position was its ability
to fund the purchase, in April 1994, of $5.0 million of the Company's 1993
Notes, the acquisition of customer accounts from CHA of $9.0 million and fixed
assets of $22.4 million from cash flow from operations. Additionally, in
August 1994, the Company completed a series of contracts which resulted in a
reduction of the Company's Michigan network costs by over $2 million per year.
The transactions included loaning $9.2 million in exchange for notes receivable
to be repaid over 5 years and a 15% minority ownership position in a company
owning a Michigan-based, fiber optic network.
In addition to the positive cash flow from operations, the Company's short term
liquidity position is further strengthened by the unused availability under the
Company's credit agreement. As of December 31, 1994, the Company had
availability of $40.0 million under its existing Revolving Credit Facility and
no balance outstanding. During January, 1995, the Company secured a $105
million unsecured credit facility with First Union National Bank of North
Carolina and Bank One, Columbus, NA as Co-Managing Agents. Under the new
facility, which expires December 31, 1999, the Company is able to minimize
interest expense by structuring borrowings under two alternatives, each of
which has a varying interest rate. The $40.0 million Revolving Credit Facility
was simultaneously closed.
In January 1995, ALC announced plans to acquire ConferTech International, Inc.
("ConferTech"), a leading provider of teleconferencing services and audio
bridge equipment. The Company entered a definitive agreement to acquire all
the shares of ConferTech in a transaction valued at approximately $66 million.
ALC completed a cash tender offer at $8.00 per share in late February 1995.
ALC financed this acquisition through cash from operations as well as utilizing
its line of credit. As of February 28, 1995, the balance under the line was
$12.0 million. The acquisition of ConferTech will provide additional revenue
growth for the Company and enhance product offerings to the Company's
customers. ConferTech reported revenue of $44.0 million and $35.8 million for
the years ended December 31, 1994 and 1993, respectively.
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 $22.4 million in 1994. Capital
expenditures during the year ended December 31, 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. The
level of capital expenditures for 1995 is expected to be approximately $30
million.
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 as well as provide resources for further growth of
the Company.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by
this Item 8. are set forth in Part IV, Item 14. of this Annual Report on Form
10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
As of the date of this Annual Report on Form 10-K, the Board
of Directors of ALC consists of seven positions, all elected by the holders of
Common Stock. Six of the seven positions are presently filled.
The following list identifies (i) the persons who are
Directors of the Company; and (ii) each Director's principal occupation for the
past five years.
RICHARD D. IRWIN has held the position of Chairman of the
Board of Directors since August 1988. He is the President of Grumman Hill
Associates, Inc. ("Grumman Hill"), a merchant banking firm, having held that
position since its formation in 1985. Mr. Irwin is also a member of the Board
of Directors of Caire, Inc. and Pharm Chem Laboratories, Inc., IXC and
Communications Transmission Group, Inc. ("CTGI"), which is a subsidiary
of IXC.
JOHN M. ZRNO has held the positions of President, Chief
Executive Officer and Director since August 1988. From December 1981 until
joining Allnet, Mr. Zrno held a number of executive positions with Cable &
Wireless North America, Inc., the most recent of which was President and Chief
Executive Officer
WILLIAM H. OBERLIN has held the position of Director since
July 22, 1993, and has held the position of Chief Operating Officer since July
1990 and the position of Executive Vice President since October 1988. From
November 1983 through September 1988, Mr. Oberlin held a number of executive
positions with Cable & Wireless North America, Inc., the most recent of which
was Senior Vice President - Sales and Marketing.
MARVIN C. MOSES has held the positions of Executive Vice
President, Chief Financial Officer and Assistant Secretary since October 1988.
Mr. Moses was elected as a Director in September 1989. From February 1982
through September 1988, Mr. Moses held a number of executive positions with
Cable & Wireless North America, Inc., the most recent of which was Chief
Financial Officer and Senior Vice President.
RICHARD J. UHL has held the position of Director since
September 3, 1991. Mr. Uhl is the President and a member of the Board of
Directors of Chicago Holdings, Inc. ("CHI"), having held those positions since
1985. CHI is a privately owned company engaged in the management of several
lease portfolios owned by it and its subsidiaries and in investments in
operating companies. Since November 1990 he has also been the Chief Executive
Officer and a member of the Board of Directors of Hurrah Stores, Inc.
("Hurrah"), a subsidiary of CHI. Mr. Uhl has also been President of Steiner
Financial Corporation, another subsidiary of CHI, since December 1987. Mr. Uhl
currently serves on the Boards of Directors of Dealers Alliance Credit Corp.
(as Chairman of the Board,
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since October 1993) and of First Merchants Acceptance Corporation, since March
1991, which are companies in which CHI has a significant equity investment
(Dealers Alliance Credit Corp. is privately owned). Prior to 1991, Mr. Uhl
served in a number of executive capacities as well as on the Boards of
Directors of certain finance organizations as well as a distributor of personal
computer equipment, and a manufacturer of automotive products.
MICHAEL E. FAHERTY, age 60, has held the position of Director
since June 23, 1992. Mr. Faherty primarily works (since 1977) as a business
consultant and in the contract executive business, in connection with which Mr.
Faherty has served as Chairman and Chief Executive Officer of ECCS, Inc. since
December 6, 1994. As part of his duties as a contract executive,
he has worked as Chairman of the Board and/or President for Shared Financial
Systems, Inc., BancTec, Inc., Digital Sound Corporation, Systeme
Corporation and Cable & Wireless North America, Inc. Mr. Faherty is also a
member of the Board of Directors of Biomagnetic Technologies, Inc.
BancTec, Inc., and ECCS, Inc.
Reference is made to the Item captioned "Executive Officers of
the Registrant" in Part I of this Report.
SECTION 16 COMPLIANCE
Section 16(a) of the Securities Exchange Act requires the
Company's officers and directors, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission and the American Stock Exchange. In addition, officers,
directors and greater than ten percent shareholders are required to furnish the
Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such
forms it has assisted in or otherwise received and written representations from
certain reporting persons that they were not required to file Forms 5 for
specified fiscal years, the Company believes that all of its officers,
directors, and greater than ten percent shareholders complied with all filing
requirements applicable to them with respect to transactions during fiscal 1994
except as follows: Mr. Irwin, a member of the Board of Directors who is the
indirect beneficial owner of certain derivative securities owned by Grumman
Hill, failed to timely file one required report relating to a single
transaction by Grumman Hill, and a late Form 4 was filed regarding such
beneficial ownership. One required report relating to Common Stock attributable
due to the marriage of Marilyn M. Price, Vice President and Controller, was not
filed and a late Form 5 was subsequently filed regarding this ownership event.
ITEM 11. EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION
For 1994 and to be continued for 1995, Richard D. Irwin,
Richard J. Uhl and Michael E. Faherty received or will receive remuneration of
up to $20,000 per year for their services as Board members. Of that fee,
$8,000 is dependent upon per meeting attendance at the four regularly scheduled
Board meetings. In addition, beginning in fiscal year 1994, an annual fee of
$10,000 is paid to a non-employee Director of the Board of Directors serving as
Chairperson as compensation for additional services rendered. Pursuant to
the ALC 1994 Non-Employee Directors Stock Option Plan, Messrs. Faherty,
Irwin and Uhl each were granted an option to purchase 5,000 shares
of Common Stock at $29.63 per share, the market price at date of
grant. The option vests quarterly over a four-year period (25% each year)
commencing May 12, 1995; the option expires on the first to occur of : (i) May
12, 2004; (ii) three months after the optionee ceases to be a director (except
in case of
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death); or (iii) within one year after the date of the director's death. In
case of the death of the director while a director, the right to exercise all
unexpired options is accelerated and accrues as of the date of death. On
September 3, 1991, ALC granted Richard J. Uhl an option to purchase 40,000
shares of Common Stock at $4.25 per share, the market price at date of grant.
Mr. Uhl is entitled to exercise the option in full; it expires on the earlier
of 60 days subsequent to Mr. Uhl's death, resignation or removal as a director
and September 3, 1998. On June 23, 1992, ALC granted Michael E. Faherty an
option to purchase 40,000 shares of Common Stock at $4.63 per share, the market
price at date of grant. Mr. Faherty is entitled to exercise the option in
full; it expires on the earlier of 60 days subsequent to Mr. Faherty's death,
resignation or removal as a director and June 23, 1998. It is anticipated that
the Common Stock issuable upon the exercise of the options held by Messrs. Uhl
and Faherty and granted in 1991 and 1992, respectively, will be registered
under the Securities Act.
In addition, on May 12, 1994, Grumman Hill, of which Richard
D. Irwin is President, was granted a stock option to purchase 14,000 shares of
Common Stock at $29.63 per share, the market price at date of grant. The
option vests on May 12, 1995 and expires on May 12, 1999. Previously, Grumman
Hill entered into an Advisory Agreement with Stock Option dated September 7,
1988 (the "Advisory Agreement") with the Company. The Advisory Agreement was
terminated on May 12, 1994. Pursuant to the terms of the Advisory Agreement,
Grumman Hill performed certain advisory services with respect to the
management, operation and business development activities of the Company. In
exchange for such services, Grumman Hill was initially granted a stock option
to purchase at a price of $11.25 per share 153,163 shares of Common Stock and
received an annual fee of $100,000. In conjunction with the 1990 phase of the
refinancing of the Company, the option was regranted at an exercise price of
$3.50 per share. The option was subsequently assigned to Grumman Hill
Investments, L.P. ("Grumman Hill, L.P.") (of which Mr. Irwin is the General
Partner). Grumman Hill, L.P. is entitled to exercise the option in full. The
option will expire on September 7, 1998. It is anticipated that the Common
Stock issuable upon the exercise of these options will be registered under
the Securities Act.
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24
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the total compensation paid to the Chief
Executive Officer and the four most highly compensated executive officers at
the end of calendar year 1994 for each of the past three fiscal years during
which the named executive acted as an executive officer.
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------------------------- -------------------------
OTHER
NAME AND ANNUAL OPTIONS/ ALL OTHER
PRINCIPAL COMPENSATION SARS COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) ($) (1) (4) (#) (2) ($) (3)
------ ---------------- --------------- -------------- ----------- ------------
John R. Zrno 1994 $321,524 $325,000 $4,673 $750
President, Chief 1993 319,041 273,000 2,650 300,000 600
Executive Officer, 1992 307,755 175,000 284,983 500
Director
Marvin C. Moses 1994 $246,562 $250,000 $1,761 $750
Executive Vice 1993 245,417 210,000 240,000 600
President, Chief 1992 234,998 135,000 217,398 500
Financial Officer,
Assistant Secretary,
Director
William H. Oberlin 1994 $246,562 $250,000 $5,668 $750
Executive Vice 1993 245,417 210,000 240,000 600
President, Chief 1992 234,893 135,000 217,398 500
Operating Officer,
Director
Gregory M. Jones 1994 $150,182 $ 68,790 $750
Senior Vice 1993 142,706 37,948 60,000 600
President 1992 135,090 49,708 $ 860 55,092 500
Connie R. Gale 1994 $145,250 $ 59,982 $750
Vice President, 1993 138,000 46,309 51,000 600
General Counsel 1992 130,250 48,280 47,385 500
and Secretary
(1) Total perquisites for each officer were less than either $50,000 or 10% of
total salary and bonus.
(2) Options granted in 1992 include options granted in 1990 and amended in 1992
(the exercise price was not changed).
(3) Consists of Company contributions to defined contribution plan during 1994,
1993 and 1992 in the amounts of $750, $600 and $500, respectively, for each
officer.
(4) Represents gross up for income taxes relating to a perquisite.
23
25
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY END (#) FY END ($) (1)
SHARES
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- ------------- -------------
John M. Zrno 130,000 $3,988,125 459,446 $11,719,227
340,554 3,433,749
Marvin C. Moses 15,000 438,750 485,084 12,606,900
264,916 2,555,155
William H. Oberlin 20,000 578,550 519,684 13,554,075
264,916 2,555,155
Gregory M. Jones 0 0 20,438 397,151
73,328 820,237
Connie R. Gale 0 0 79,055 1,997,049
64,330 747,756
(1) Values are calculated by determining the difference between the fair
market value of the Common Stock at December 31, 1994 and the exercise
price of the options.
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26
EMPLOYMENT CONTRACTS AND TERMINATION OR CHANGE IN CONTROL ARRANGEMENTS
In late 1988, ALC entered into employment agreements with John
M. Zrno, William H. Oberlin and Marvin C. Moses. These arrangements had
initial four year terms and were amended in 1991 to extend for an additional
two years. In January 1994, ALC and Allnet jointly entered into amended and
restated employment agreements with John M. Zrno, William H. Oberlin and
Marvin C. Moses. These agreement were amended in August 1994 and in October
1994.
These agreements provide for a base salary of $325,000,
$250,000 and $250,000, respectively, for Messrs. Zrno, Oberlin and Moses for
service provided in 1994 through 1995, beginning and ending with the month of
each officer's respective anniversary of hire. Messrs. Zrno, Oberlin and Moses
waived salary increases for the 1994/1995 anniversary year of employment.
Each of these agreements has an initial three year term and
contains a provision that, in the event the officer's employment is terminated
for any reason except death, disability, voluntary resignation or cause, such
officer will continue to receive his current salary from twelve to twenty-four
months. Should the officer be terminated without cause, the stock options
granted in the agreement would fully vest and remain exercisable for the
succeeding twelve months.
According to the employment agreements with Messrs. Zrno,
Oberlin and Moses, each officer may receive incentive compensation as
determined by the Board of Directors, based on the Board's determination of the
officer's individual achievements.
Pursuant to the August 1994 amendments, should the Company
terminate the employment of Messrs. Zrno, Oberlin or Moses without cause or
should there be a "Change of Control Event" as defined therein and such
employee decides to terminate his employment with or without cause, the Company
is obligated to such employee for various compensation (previously only
associated with the Company terminating without cause). The amendments now
permit the employee to terminate due to a Change of Control Event and receive,
in addition to the other compensation previously provided for in the agreement,
incentive compensation, payable pro rata with the base compensation being paid
monthly for the succeeding twenty-four months, computed by taking the sum of
the prior incentive compensation awards for the two fiscal years immediately
preceding the termination. The Change of Control provision is identical to
that provided in the Company's Stock Option Plans.
Officers below the level of Executive Vice President entered
into severance agreements wherein the Company agreed to provide salary
continuation and certain employee benefits for a period of twelve months
(formerly, from six-to-twelve months) should an officer be terminated from
employment prior to December 31, 1995. These agreements, originally effective
February 1990, were renewed in February 1991, August 1992, July 1993 and
January 1994.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during fiscal 1994
were Richard D. Irwin, Richard J. Uhl and Michael E. Faherty. Richard D.
Irwin, Chairman of the Board of Directors since August 1988 and a member of the
Compensation Committee, is a former officer of the Company because, prior to
March 1991, the position of Chairman of the Board was an officer position under
the Company's Bylaws. On May 12, 1994, the Board, pursuant to the Bylaws,
established a Stock Option Compensation Committee to administer the stock
option plans and grants of options under the Company's
25
27
incentive compensation plans. The members of the Stock Option Compensation
Committee during fiscal 1994 were Richard J. Uhl and Michael E. Faherty; Mr.
Irwin is not a member of the Stock Option Compensation Committee.
Grumman Hill, of which Richard D. Irwin is President, was
granted a stock option to purchase 14,000 shares of Common Stock at $29.63 per
share, the market price at date of grant. The option vests on May 12, 1995 and
expires on May 12, 1999. Previously, Grumman Hill entered into an Advisory
Agreement with Stock Option dated September 7, 1988 (the "Advisory Agreement")
with the Company. The Advisory Agreement was terminated on May 12, 1994.
Pursuant to the terms of the Advisory Agreement, Grumman Hill performed certain
advisory services with respect to the management, operation and business
development activities of the Company. In exchange for such services, Grumman
Hill was initially granted a stock option to purchase 153,163 shares of Common
Stock at a price of $11.25 per share and received an annual fee of $100,000.
In conjunction with the 1990 phase of the refinancing of the Company, the
option was regranted at an exercise price of $3.50 per share. The option was
subsequently assigned to Grumman Hill, L.P. (of which Mr. Irwin is the General
Partner). Grumman Hill, L.P. is entitled to exercise the option in full. The
option will expire on September 7, 1998. It is anticipated that the Common
Stock issuable upon the exercise of these options will be registered under the
Securities Act. Mr. Irwin is a director and stockholder of IXC which,
through its subsidiaries, provides transmission services to the Company and
has entered into a joint venture with an Allnet reseller to develop a long
distance network. The joint venture has in turn entered into a three year
contract with Allnet, effective April 1, 1995.
As of January 1995, Mr. Irwin, Mr. Faherty (as general partner
of a family-owned partnership), Mr. Uhl, Mr. Zrno and Mr. Moses own $178,000,
$600,000, $208,000, $200,000 and $150,000, respectively, in principal amount of
9% Senior Subordinated Notes (the "1993 Notes") which they acquired either in
the 1993 Note offering or in open-market transactions.
26
28
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding
beneficial ownership of the stock of ALC as of February 27, 1995 by each person
known by ALC to be the beneficial owner of more than 5.0% of any class of
stock, each executive officer and director of ALC and all executive officers
and directors of ALC as a group. The figures presented are based upon
information available to ALC.
NUMBER OF APPROXIMATE
SHARES OF PERCENTAGE OF
NAME AND ADDRESS OF COMMON STOCK VOTING POWER
BENEFICIAL OWNER (% OF CLASS)* OF ALL STOCK*
---------------- ------------- --------------
FMR Corp.(1).................................................... 3,267,800(2) 9.7%
82 Devonshire Street (9.7%)
Boston, MA 02109
Putnam Investments, Inc......................................... 2,640,418(3) 7.8%
One Post Office Square (7.8%)
Boston, MA 02109
Montgomery Asset Management...................................... 1,938,634(4) 5.8%
600 Montgomery Street (5.8%)
San Franciso, CA 94111
Firstar Corporation(5)........................................... 1,874,575(6) 5.6%
777 East Wisconsin Avenue (5.6%)
Milwaukee, WI 53202
Trustees of General Electric Pension Trust....................... 1,770,845(7) 5.0%
c/o G.E. Investments Corp. (5.0%)
3003 Summer Street
Stamford, CT 06904
Provident Investment Counsel(8).................................. 1,758,504(9) 5.2%
300 North Lake Avenue (5.2%)
Pasadena, CA 91101
Richard D. Irwin................................................. 810,646(10) 2.4%
191 Elm Street (2.4%)
New Canaan, CT 06840
Grumman Hill Investments, L.P.................................... 639,155(11) 1.9%
191 Elm Street (1.9%)
New Canaan, CT 06840
Grumman Hill Associates, Inc..................................... 103,490(12) **
191 Elm Street (**)
New Canaan, CT 06840
27
29
John M. Zrno..................................................... 460,246(13) 1.3%
30300 Telegraph Road, Suite 350 (1.3%)
Bingham Farms, MI 48025
Marvin C. Moses.................................................. 494,084(14) 1.4%
30300 Telegraph Road, Suite 350 (1.4%)
Bingham Farms, MI 48025
Richard J. Uhl................................................... 40,200(15) **
One Thousand RIDC Plaza (**)
Pittsburgh, PA 15238
Michael E. Faherty............................................... 40,000(16) **
One Sheila Drive, Building 6A (**)
Tinton Falls, NJ 07724
William H. Oberlin............................................... 519,684(17) 1.5%
30300 Telegraph Road, Suite 350 (1.5%)
Bingham Farms, MI 48025
Gregory M. Jones................................................. 21,380(18) **
30300 Telegraph Road, Suite 350 (**)
Bingham Farms, MI 48025
Connie R. Gale................................................... 82,661(19) **
30300 Telegraph Road, Suite 350 (**)
Bingham Farms, MI 48025
All current executive officers and directors as group (8)....... 2,468,901(20) 6.8%
(6.8%)
______________________________
* Percentage calculation based on 33,713,051 shares of Common
Stock, issued and outstanding on February 27, 1995, plus
shares of Common Stock which may be acquired pursuant to
warrants and options exercisable within sixty days by such
individual or group listed.
** Less than one percent.
(1) Based on information set forth in a Schedule 13G, dated
February 13, 1995, filed with the Securities and Exchange
Commission.
(2) Includes all shares held by Fidelity Management & Research
Company (acting as investment adviser) and by Fidelity
Management Trust Company (acting as investment manager),
which are wholly-owned subsidiaries of FMR Corp. These shares
are deemed to be beneficially owned by Edward Johnson 3d; Mr.
Johnson is the Chairman of the Board and a member of a
controlling group with respect to FMR Corp.
(3) Based on information set forth in a Schedule 13G, dated
January 30, 1995, filed with the Securities and Exchange
Commission.
(4) Based on information set forth in a Schedule 13G, dated
January 26, 1995, filed with the Securities and Exchange
Commission.
(5) Based on information set forth in a Schedule 13G, dated
February 13, 1995, filed with the Securities and Exchange
Commission.
(6) Includes all shares held by Firstar Investment Research &
Management Company (acting as investment adviser) which is a
wholly-owned subsidiary of Firstar Corp.
(7) Includes 1,494,845 shares of Common Stock which may be acquired
pursuant to the exercise of
28
30
outstanding warrants.
(8) Based on information set forth in a Schedule 13G, dated
February 7, 1995, filed with the Securities and Exchange
Commission.
(9) These shares are deemed to be beneficially owned by Robert M.
Kommerstad; Mr. Kommerstad is a shareholder of and controls
Provident due to his position as sole voting trustee of a
voting trust which holds all of Provident's securities.
(10) Includes 153,163 shares of Common Stock which may be acquired
pursuant to the exercise of outstanding stock options held by
Grumman Hill, L.P. and 617,483 shares of Common Stock which may
be acquired pursuant to the exercise of outstanding warrants
held individually and by Grumman Hill and Grumman Hill, L.P.
These Grumman Hill and Grumman Hill, L.P. shares are deemed to
be beneficially owned by Mr. Irwin, as President and Director
of Grumman Hill and General Partner of Grumman Hill, L.P.
(11) Includes 485,992 shares of Common Stock which may be acquired
pursuant to the exercise of outstanding warrants and 153,163
shares of Common Stock which may be acquired pursuant to the
exercise of outstanding stock options.
(12) These shares of Common Stock may be acquired pursuant to the
exercise of outstanding warrants.
(13) Includes 459,446 shares of Common Stock which Mr. Zrno has the
right to acquire pursuant to the exercise of outstanding stock
options, and 800 shares of Common Stock which Mr. Zrno's wife
and mother-in-law own jointly (Mr. Zrno disclaims beneficial
interest as to these shares).
(14) Includes 485,084 shares of Common Stock which Mr. Moses has the
right to acquire pursuant to the exercise of outstanding stock
options, 3,000 shares of Common Stock which Mr. Moses owns as
custodian for his children under UGMA and 1,000 shares of
Common Stock which Mr. Moses' daughter owns (Mr. Moses
disclaims beneficial interest as to the latter 1,000 shares).
(15) Includes 40,000 shares of Common Stock which Mr. Uhl has the
right to acquire pursuant to the exercise of outstanding stock
options.
(16) Shares of Common Stock which Mr. Faherty has the right to
acquire pursuant to the exercise of outstanding stock options.
(17) Shares of Common Stock which Mr. Oberlin has the right to
acquire pursuant to the exercise of outstanding stock options.
(18) Includes 20,438 shares of Common Stock which Mr. Jones has the
right to acquire pursuant to the exercise of outstanding stock
options.
(19) Includes 79,055 shares of Common Stock which Ms. Gale has the
right to acquire pursuant to the exercise of outstanding stock
options.
(20) Includes 1,796,870 shares of Common Stock which executive
officers and directors of Common have the right to acquire
pursuant to the exercise of outstanding stock options and
617,483 shares of Common Stock which Mr. Irwin has the right to
acquire or is deemed to have the right to acquire pursuant to
the exercise of outstanding stock warrants held individually
and by Grumman Hill and Grumman Hill, L.P.
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31
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
For further discussion regarding Messrs. Irwin, Faherty, Uhl,
Zrno and Moses see "Compensation Committee Interlocks and Insider
Participation."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) Documents filed as a part of this report
(1). Financial Statements. The following consolidated financial
statements of ALC and its subsidiary required by Part II, Item 8. are included
in Part IV of this Report:
Page
Report of Ernst & Young F-1
Consolidated Balance Sheets as of December F-2
31, 1994 and December 31, 1993
Consolidated Statements of Operations for F-4
the years ended December 31, 1994, 1993
and 1992
Consolidated Statements of Cash Flows F-5
for the years ended December 31, 1994,
1993 and 1992
Consolidated Statements of Preferred Stock F-6
and Stockholders' Equity for the years
ended December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements F-7
(2). Financial Statement Schedules Page
Schedule IX Valuation and Qualifying Accounts and Reserves F-18
(3). Exhibits required by Item 601 of Regulation S-K
30
32
EXHIBIT INDEX
[refer to definitions at end of Index]
Incorporated Page
Exhibit Filed Herein by Number
Number Description Herewith Reference to*: Herein
------ ------------ ---------- -------------- ------
2.1 Agreement and Exhibit 11(c)(1)
Plan of Merger Schedule 14D-1
ALC, DAC, January 24, 1995
ConferTech
January 18, 1995
3.1 ALC Restated Exhibit 3.1 to
Certificate of 1993 Form 10-K
Incorporation
January 7, 1994
3.2 ALC Amended/ X
Restated Bylaws
May 12, 1994
4.1 Indenture, ALC, Allnet Exhibit 4.1 to
Star Bank, N.A. Second Quarter
May 15, 1993 1993 Form 10-Q
4.2 Warrant Agrmt. Exhibit 4.2 to
ALC, Star Bank, N.A. Second Quarter
July 1, 1992 1992 Form 10-Q
4.3 Form of Warrant Exhibit 4.3 to
Certificate to be Second Quarter
granted pursuant to 1992 Form 10-Q
Warrant Agrmt.
4.4 Warrant Agrmt. ALC, Exhibit 4.3 to
Continental National Registration No.
Bank and Trust Co. 33-1882
of Chicago
December 15, 1985
4.5 Form of Note and Warrant Exhibit 4.3 to
Agrmt., as amended June 7, 1990 Form 8-K
June 4, 1990 Exhibit 10.1 to Second
Quarter 1991 Form 10-Q
Exhibits 4.4 and 4.5
to Second Quarter 1992
Form 10-Q
______________________________
* Except as otherwise indicated, all references to "Forms" are to those filed
by ALC.
31
33
Incorporated Page
Exhibit Filed Herein by Number
Number Description Herewith Reference to*: Herein
------ ----------- -------- ---------------- ------
4.6 Form of Amended/Restated Exhibit 4.6 to Second
Stock Subscription Warrant Quarter 1992 Form 10-Q
June 4, 1992
4.7 Registration Rights Exhibit 4.4 to
Agrmt. ALC, CTI, June 7, 1990 Form 8-K
GE Trust, Grumman Hill,
Grumman Hill LP,
Prudential June 4, 1990
4.8 Rights Agrmt. Exhibit 4.1 to
Mellon Bank, N.A., January 24, 1995
ALC January 12, 1995 Form 8-K
10.1** ALC Amended/ Exhibit 10.1 to
Restated 1986 Option Second Quarter
Plan 1994 Form 10-Q
May 12, 1994
10.2** ALC Amended/ Exhibit 10.2 to
Restated 1990 Stock Second Quarter
Option Plan 1994 Form 10-Q
May 12, 1994
10.3** ALC 1994 Non-Employee Exhibit 10.3 to
Director Stock Option Second Quarter
Plan 1994 Form 10-Q
May 12, 1994
10.4** Stock Option Exhibit 10.2 to
Agrmt. Third Quarter
Richard J. Uhl 1991 Form 10-Q
September 3, 1991
10.5** Stock Option Exhibit 10.8 to
Agrmt. Registration No.
Michael E. Faherty 33-47857
June 23, 1992
10.6** Form of Amendment Exhibit 10.1 to
to Stock Options First Quarter
Richard J. Uhl, 1993 Form 10-Q
Michael E. Faherty
January 27, 1993
---------------
** Management contract or compensation plan or arrangement required to be
identified by Item 14(a)(3) of this report
32
34
Incorporated Page
Exhibit Filed Herein by Number
Number Description Herewith Reference to*: Herein
------ ----------- -------- ---------------- ------
10.7** Amendment/Advisory Exhibit 10.5 to
Agrmt. with Stock Second Quarter
Option 1994 Form 10-Q
May 2, 1994
10.8** Termination/Advisory Exhibit 10.6 to
Agrmt. with Stock Option Second Quarter
May 12, 1994 1994 Form 10-Q
10.9** Stock Option Exhibit 10.4 to
Grumman Hill Second Quarter
May 12, 1994 1994 Form 10-Q
10.10** Officer Perquisites Exhibit 10.7 to
1993 Form 10-K
10.11** Short Term Incentive Exhibit 10.8 to
Program 1993 Form 10-K
10.12** Form Severance Exhibit 10.9 to
Agrmt., amended, 1993 Form 10-K
restated Jan. 7, 1994
10.13** Form of Amended/Re- Exhibit 10.10 to
stated Employment Agrmt. 1993 Form 10-K
10.14** Amendment to Exhibit 10.1 to
Amended/Restated Third Quarter 1994
Employment Agrmt. Form 10-Q
Aug. 23, 1994
10.15** Amendment to Amended/ X
Restated Employment
Agrmt. Oct. 21, 1994
10.16** Form of Director Exhibit 10.4 to
Indemnification Agrmt. Second Quarter
1992 Form 10-Q
10.17 Master Lease Agrmt. Exhibit 10.1 to
Meridian Leasing Corp., Second Quarter
Allnet Dec. 19, 1985 1989 Form 10-Q
---------------
** Management contract or compensation plan or arrangement required to
be identified by Item 14(a)(3) of this report
33
35
Incorporated Page
Exhibit Filed Herein by Number
Number Description Herewith Reference to*: Herein
------ ----------- -------- ---------------- ------
10.18 Transmission Capacity Exhibit 10.14 to
Lease: Times Mirror Registration No.
Microwave Communica- 33-1578
tions Co,. Lexitel Corp.,
October 8, 1985
10.19 Amended/Restated Exhibit 10.7 to
Fiber Optic Lease: Second Quarter
MSM, Allnet 1994 Form 10-Q
August 1, 1994 CONFIDENTIAL
TREATMENT GRANTED
10.20 Digital Service Exhibit 10.8 to
Agrmt. MSM, Allnet Second Quarter
August 5, 1994 1994 Form 10-Q
CONFIDENTIAL
TREATMENT GRANTED
10.21 Master Service Agrmt. Exhibit 10.2
Allnet, Western to Third Quarter
Tele-Communications, Inc. 1992 Form 10-Q
May 5, 1992 CONFIDENTIAL
TREATMENT GRANTED
10.22 Digital Service Agrmt. Exhibit 10.2 to
CTI, Allnet, as First Quarter 1993
amended Form 10-Q
February 10, 1989 Exhibit 28.4 to
June 7, 1990
Form 8-K
Exhibit 10.6 to
Third Quarter
10.23 Digital Service Exhibit 10.5 to
Agrmt., ALC, Second Quarter 1992
CTGI June 4, 1992 Form 10-Q
10.24 Credit Agrmt. X
Allnet, ALC,
Lenders, First
Union, Bank One
January 20, 1995
__________________
** Management contract or compensation plan or arrangement required to
be identified by Item 14(a)(3) of this report
34
36
Incorporated Page
Exhibit Filed Herein by Number
Number Description Herewith Reference to*: Herein
------ ----------- -------- ---------------- ------
10.25 Revolving Credit Exhibit 10.3 to
and Security Agrmt. Second Quarter
Bank One, 1993 Form 10-Q
Columbus, NA, Star CONFIDENTIAL
Bank, NA, Allnet, TREATMENT GRANTED
ALC June 30, 1993
10.26 Real Estate Lease: Exhibit 10.45 to
Allnet, Balcor Allnet Second Quarter
Equity Pension 1992 Form 10-Q
Investors, Ltd., Exhibit 10.6 to
as amended Second Quarter
March 26, 1987 1991 Form 10-Q
10.27 Real Estate Lease: Exhibit 10.47 to
ALC, Kirco-Oak Allnet Second Quarter
Hollow-Limited 1992 Form 10-Q
Partnership, Exhibit 10.5 to
as amended Second Quarter
Feb. 25, 1987 1991 Form 10-Q
11.1 Computation of Per X
Share Earnings
21.1 Subsidiary List X
23.1 Consent of X
Ernst & Young
27.1 Financial Data X
Schedule
35
37
DEFINITIONS: ALLNET: Allnet Communication Services, Inc.
ALC: ALC Communications Corporation
AMENDED AND RESTATED EMPLOYMENT AGREEMENTS:
Form of Amended and Restated Employment Agreement
with ALC, Allnet and John M. Zrno, William H.
Oberlin and Marvin C. Moses
Jan. 7, 1994
BANK ONE: Bank One, Columbus, NA
CONFERTECH: ConferTech International, Inc.
CTGI: Communications Transmission Group, Inc.
CTI: Communications Transmission, Inc.
DAC: Delaware Acquisition Corporation
FIRST UNION: First Union National Bank of
North Carolina
FORM OF NOTE AND WARRANT AGREEMENT:
Form of Note and Warrant Purchase Agreement among
ALC, Allnet and (i) GE Trust
($3,500,000), (ii) Prudential
($3,000,000), (iii) Grumman Hill and Grumman Hill LP
($650,000)
FORM OF AMENDED/RESTATED STOCK SUBSCRIPTION WARRANT:
Form of Stock Subscription Warrant granted to: (i)
GE Trust (2,305,105 shares); (ii) Prudential
(1,975,804 shares); (iii) Grumman Hill (98,790
shares) and (iv) Grumman Hill LP (329,300 shares)
GE TRUST: Trustees of General Electric Pension Trust
GRUMMAN HILL: Grumman Hill Associates, Inc.
GRUMMAN HILL LP: Grumman Hill Investments, L.P.
LENDERS: Bank One, First Union, Comerica Bank and Star Bank
MSM ASSOCIATES: MSM Associates, Limited Partnership
PRUDENTIAL:The Prudential Insurance Company of
America
WARRANT: Form of Stock Subscription Warrant
granted to: (i) GE Trust (2,305,105 shares);
(ii) Prudential (1,975,804 shares);
(iii) Grumman Hill (98,790 shares)
and (iv) Grumman Hill LP (329,300 shares)
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.
(b) Reports on Form 8-K
Reports on Form 8-K were filed by ALC on: (i) January 25, 1995 to
describe the Rights Agreement between Mellon Bank, N.A. and the Company; and
(ii) March 8, 1995 to describe the acquisition of ConferTech International,
Inc.
(c) Refer to Item 14(a)(3) above for Exhibits required by Item 601 of
Regulation S-K.
(d) Schedules other than those set forth in response to Item 14(a)(2)
above for which provision is made in the applicable accounting regulations of
the Securities and Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have been omitted.
36
38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has caused this report to be signed on its
behalf by the duly authorized, undersigned individual on the 23rd day of March,
1995
ALC Communications Corporation
Registrant
By: /s/ John M. Zrno
John M. Zrno, Director,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report on Form 10-K has been signed below by the following persons
in their respective capacities on behalf of the registrant as of the 23rd day
of March, 1995.
Signature Title
--------- -----
/s/ John M. Zrno President, Chief Executive
---------------------------- Officer, Director
John M. Zrno
/s/ Richard D. Irwin Chairman of the Board,
---------------------------- Director
Richard D. Irwin
/s/ Marvin C. Moses Executive Vice President and
---------------------------- Chief Financial Officer,
Marvin C. Moses Director
(Principal Financial Officer)
/s/ Marilyn M. Price Vice President, Controller
--------------------------
Marilyn M. Price
(Principal Accounting Officer)
/s/ William H. Oberlin Executive Vice President and
--------------------------- Chief Operating Officer,
William H. Oberlin Director
/s/ Richard J. Uhl Director
---------------------------
Richard J. Uhl
/s/ Michael E. Faherty Director
---------------------------
Michael E. Faherty
37
39
[ERNST & YOUNG LLP LETTERHEAD]
Report of Independent Auditors
Board of Directors and Stockholders
ALC Communications Corporation
We have audited the accompanying consolidated balance sheets of ALC
Communications Corporation and subsidiary as of December 31, 1994 and 1993, and
the related consolidated statements of operations, cash flows, and preferred
stock and stockholders' equity for each of the three years in the period ended
December 31, 1994. Our audits also included the financial statement schedule
listed in the Index at Item 14(a). These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of ALC
Communications Corporation and subsidiary at December 31, 1994 and 1993, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material respects
the information set forth therein.
ERNST & YOUNG LLP
Detroit, Michigan
January 25, 1995
F-1
40
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, December 31,
1994 1993
------------ ------------
(In Thousands)
Current Assets:
Cash and cash equivalents $41,412 $1,819
Accounts receivable, less allowance of
$4,192,000 and $3,974,000 (Note A) 81,214 58,761
Other current assets 7,121 4,543
------------ ------------
Total Current Assets $129,747 $65,123
Fixed Assets (Note D):
Communication systems $91,140 $81,752
Other equipment and leasehold improvements 36,842 29,785
Construction in progress 8,690 6,722
------------ ------------
$136,672 $118,259
Less accumulated depreciation and amortization 77,514 69,918
------------ ------------
Total Fixed Assets $59,158 $48,341
Deferred income taxes (Note F) 10,429 10,240
Cost in excess of net assets acquired less accumulated
amortization of $13,723,000 and $12,198,000 (Note A) 47,267 48,792
Intangibles (Note A) 30,444 20,557
Other assets (Note I) 7,680 488
------------ ------------
Total Assets $284,725 $193,541
============ ============
F-2
41
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, December 31,
1994 1993
------------ ------------
(In Thousands)
Current Liabilities:
Accounts payable $2,018 $1,397
Accrued liabilities 20,864 16,855
Accrued network costs 51,672 33,482
Taxes other than income 13,425 11,592
Current portion of capitilized leases and long-term debt
(Note D) 232 392
------------ ------------
Total Current Liabilities $88,211 $63,718
Long-term Liabilities:
Capitalized leases and other long-term debt (Note D) $3,048 $3,263
Senior Subordinated Notes (Note D) 79,418 84,335
------------ ------------
Total Long-Term Liabilities $82,466 $87,598
------------ ------------
Total Liabilities $170,677 $151,316
Stockholders' Equity:
Preferred Stock, $0.01 par value; authorized -- 14,784,000
shares; issued and outstanding -- none
Common Stock, par value $0.01; authorized -- 200,000,000
shares; issued and outstanding -- 33,712,000 and 32,948,000
shares (Note G) $337 $329
Capital in excess of par value 140,278 132,378
Paid-in capital -- Warrants (Notes G & I) 11,715 12,129
Accumulated deficit (38,282) (102,611)
------------ ------------
Total Stockholders' Equity $114,048 $42,225
------------ ------------
Total Liabilities and Stockholders' Equity $284,725 $193,541
============ ============
See notes to consolidated financial statements
F-3
42
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
--------------------------------------------------------------
1994 1993 1992
------------- ----------- -------------
(In Thousands Except Per Share Amounts)
Revenue $567,824 $436,432 $376,064
Operating Expenses:
Cost of communication services (Note I) $309,516 $234,849 $216,889
Sales, general and administrative 134,296 119,841 107,294
Depreciation and amortization 17,696 12,840 11,197
------------ ----------- -----------
Total Operating Expenses $461,508 $367,530 $335,380
------------ ----------- -----------
Operating Income $106,316 $68,902 $40,684
Interest expense 5,412 10,476 17,158
------------ ----------- -----------
Income Before Income Taxes, Extraordinary Items and
Cumulative Effect of Accounting Change $100,904 $58,426 $23,526
Income taxes (Note F) 36,575 18,750 9,700
------------ ----------- -----------
Income Before Extraordinary Items and
Cumulative Effect of Accounting Change $64,329 $39,676 $13,826
Extraordinary Items:
Loss related to early retirement of debt (net of
income tax benefit of $4,000,000) (Note D) (7,490)
Utilization of operating loss carryforward 7,000
Cumulative effect of change in method of accounting
for income taxes (Note F) 13,500
------------ ----------- -----------
Net Income $64,329 $45,686 $20,826
============ =========== ===========
Earnings per common and common equivalent share (Note G):
Income before extraordinary items and cumulative
effect of accounting change $1.68 $1.07 $0.43
Extraordinary Items:
Loss related to early retirement of debt (0.21)
Utilization of operating loss carryforward 0.31
Cumulative effect of change in method of accounting
for income taxes 0.37
------------ ----------- -----------
Net Income $1.68 $1.23 $0.74
============ =========== ===========
Weighted average common and common
equivalent shares outstanding 38,353 36,348 22,141
============ =========== ===========
See notes to consolidated financial statements
F-4
43
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
---------------------------------------------------
1994 1993 1992
-------- ----------- ---------
(In Thousands)
Operating Activities
Net income $64,329 $45,686 $20,826
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 11,426 9,810 10,094
Amortization of intangible assets and bond discount 6,315 3,858 4,415
Provision for deferred income taxes (Note F) (674) (11,838)
Loss (gain) on retirement of debt, net of tax 7,490 (59)
Increase in accounts receivable and
other current assets (24,749) (13,680) (3,371)
Increase (decrease) in current liabilities 29,309 18,033 (1,523)
------------ ----------- -----------
Net Cash Provided by Operating Activities $85,956 $59,359 $30,382
Financing Activities
Proceeds from (payments on) Revolving Credit
Facility (Note D) ($14,802) $5,400
Proceeds from senior subordinated notes (Note D) 84,335
Payments on long-term debt $(969) (19,602) (22,818)
Proceeds from issuance of stock (Note G) 3,432 12,776 607
Payment to Preferred A Stockholders (1,286)
Redemption of Class A Preferred Stock (7,119)
Payment of dividends on Class A Preferred Stock (3,357)
Payment of stock issuance costs (620)
Retirement of debentures (Note D) (947)
Retirement of senior subordinated and subordinated notes (Note D) (4,962) (72,380)
------------ ----------- -----------
Net Cash Used in Financing Activities ($2,499) ($20,149) ($19,664)
Investing Activities
Expenditures for fixed assets ($22,374) ($16,207) ($10,233)
Increase in other non-current assets (12,499) (1,686) (596)
Purchase of customer base (Note C) (8,991) (19,610)
------------ ----------- -----------
Net Cash Used in Investing Activities ($43,864) ($37,503) ($10,829)
------------ ----------- -----------
Increase (Decrease) in Cash $39,593 $1,707 ($111)
Cash at beginning of year 1,819 112 223
------------ ----------- -----------
Cash and cash equivelants at end of year $41,412 $1,819 $112
============ =========== ===========
Interest paid $11,117 $9,686 $15,572
============ =========== ===========
Income taxes paid $30,302 $7,464 $1,862
============ =========== ===========
See notes to consolidated financial statements
F-5
44
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Years Ended December 31, 1994, 1993 and 1992
(In Thousands)
Shareholders' Equity
---------------------------------------------------
Class A Preferred Stock Class B Preferred Stock Class C Preferred Stock
------------------------ ----------------------- -----------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ---------- ---------- ---------- ----------
Balance, December 31, 1991 2,500 $63,452 1,000 $10 1,000 $10
Accretion of discount on Class A
Preferred Stock 860
Accrued undeclared dividends on Class A
Preferred Stock (Note E) 3,254
Accretion of contract payment to certain
Class A Preferred Stockholders 268
Contract payment to certain Class A
Preferred Stockholders (1,286)
Exercise of Stock Options (Note G)
Issuance of warrants
Repricing of warrants
Conversion of Class A Preferred Stock
to Common Stock (Note E) (2,144) (56,889)
Issuance of Common Stock (Note G)
Stock Issuance costs
Net income for the year ended
December 31, 1992
-------- -------- -------- -------- -------- --------
Balance, December 31, 1992 356 $9,659 1,000 $10 1,000 $10
Accretion of discount on Class A
Preferred Stock 364
Accrued dividends on Class A Preferred
Stock (Note E) 453
Dividends paid (3,357)
Conversion of Class B Preferred to
Common Stock (Note G) (1,000) (10)
Conversion of Class C Preferred to
Common Stock (Note G) (1,000) (10)
Exercise of Stock Options (Note F)
Tax benefit from exercise of stock options (Note F)
Exercise of Warrants
Redemption of Class A Preferred
Stock (Note E) (356) (7,119)
Net income for the year ended
December 31, 1993
-------- -------- -------- -------- -------- --------
Balance, December 31, 1993 0 $0 0 $0 0 $0
Exercise of Stock Options (Note F)
Tax benefit from exercise of stock options (Note F)
Exercise of Warrants
Net income for the year ended
December 31, 1994
-------- -------- -------- -------- -------- --------
Balance, December 31, 1994 0 $0 0 $0 0 $0
======== ======== ======== ======== ======== ========
Years Ended December 31, 1994, 1993 and 1992
(In Thousands)
Stockholders' Equity
-------------------------------------------------------------------------------
Paid-in
Common Stock Capital in Capital Warrants
----------------------- excess of ---------------- Accumulated
Shares Amount par value Shares Amount Deficit Total
-------- -------- --------- ------ -------- ----------- ---------
Balance, December 31, 1991 17,221 $172 $57,718 5,469 $8,913 ($169,123) ($102,300)
Accretion of discount on Class A
Preferred Stock (860) (860)
Accrued undeclared dividends on Class A
Preferred Stock (Note E) (3,254) (3,254)
Accretion of contract payment to certain
Class A Preferred Stockholders (268) (268)
Contract payment to certain Class A
Preferred Stockholders
Exercise of Stock Options (Note G) 174 2 605 607
Issuance of warrants 3,400 3,400 3,400
Repricing of warrants 4,709 4,709
Conversion of Class A Preferred Stock
to Common Stock (Note E) 56,825 56,825
Issuance of Common Stock (Note G) 6,399 64 64
Stock Issuance costs (620) (620)
Net income for the year ended
December 31, 1992 20,826 20,826
--------- -------- -------- ------- ------- -------- --------
Balance, December 31, 1992
23,794 $238 $110,146 8,869 $17,022 ($148,297) ($20,871)
Accretion of discount on Class A
Preferred Stock (364) (364)
Accrued dividends on Class A Preferred
Stock (Note E) (453) (453)
Dividends paid
Conversion of Class B Preferred to
Common Stock (Note G) 1,898 19 (9)
Conversion of Class C Preferred to
Common Stock (Note G) 1,898 19 (9)
Exercise of Stock Options (Note F) 755 7 2,796 2,803
Tax benefit from exercise of stock options
(Note F) 5,452 5,452
Exercise of Warrants 4,603 46 14,819 (4,603) (4,893) 9,972
Redemption of Class A Preferred
Stock (Note E)
Net income for the year ended
December 31, 1993 45,686 45,686
--------- -------- -------- ------- ------- -------- --------
32,948 $329 $132,378 4,266 $12,129 ($102,611) $42,225
Balance, December 31, 1993
Exercise of Stock Options (Note F) 350 4 1,358 1,362
Tax benefit from exercise of stock options
(Note F) 4,062 4,062
Exercise of Warrants 414 4 2,480 (414) (414) 2,070
Net income for the year ended
December 31, 1994 64,329 64,329
--------- -------- -------- ------- ------- -------- --------
Balance, December 31, 1994 33,712 $337 $140,278 3,852 $11,715 ($38,282) $114,048
========= ======== ======== ======= ======= ======== ========
See notes to consolidated financial statements
F-6
45
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Allnet Communication Services, Inc. ("Allnet"), the operating subsidiary of ALC
Communications Corporation ("ALC" or the "Company"), provides long distance
telecommunications services primarily to commercial and, to a lesser extent,
residential subscribers in a majority of the United States and completes
subscriber calls to all directly dialable locations worldwide. Allnet
transmits long distance telephone calls through its network facilities over
transmission lines which are leased from other long haul transmission
providers. All of the transmission facilities utilized by Allnet are digital.
Basis of Consolidation
The consolidated financial statements include the accounts of ALC and its
wholly-owned subsidiary, Allnet. Intercompany transactions have been
eliminated.
Cash Equivalents
The Company defines cash equivalents as highly liquid, short-term investments
with an original maturity of three months or less.
Fixed Assets
Fixed assets are stated at cost. Depreciation is provided on the straight-line
method over the estimated useful lives or lease terms of the assets.
Maintenance and repairs are charged to operations as incurred.
Intangible Assets
The cost in excess of net assets acquired of $61.0 million, resulting from the
acquisition of Lexitel, is being amortized on a straight-line basis over 40
years.
The purchase price of the customer base and the accounts acquired under a
marketing agreement with Call Home America, Inc. ("CHA") (Note C) is being
amortized over a period from 42 months to seven years. Amortization expense
related to the acquisition and marketing agreement totaled $4.4 million in 1994
and $1.2 million in 1993.
Amortization expense, including amortization of cost in excess of net assets
acquired and cost associated with the issuance of debentures and the Revolving
Credit Facility, as well as amortization associated with CHA, totaled $6.3
million, $3.1 million and $1.8 million for the years ended December 31, 1994,
1993 and 1992, respectively.
Accumulated amortization of intangible assets was $14.4 million and $12.6
million at December 31, 1994 and 1993, respectively.
F-7
46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Revenue Recognition
Customers are billed as of monthly cycle dates. Revenue is recognized as
service is provided and unbilled usage is accrued.
Major Customers
The Company's 1994 revenue includes the impact of a major reseller customer
whose revenue has increased substantially in the last year and comprises
approximately 9.9% of revenue for the year and 11.4% of accounts receivable at
December 31, 1994.
Accrued Facility Costs
In the normal course of business, the Company estimates its accrual for
facility costs. Subsequently, the accrual is adjusted based on invoices
received from local exchange carriers.
Employee Benefit Plan
Allnet has a contributory 401(k) plan that covers substantially all employees.
The Company's contributions to the plan are made at the discretion of the Board
of Directors and totalled $655,000 and $500,000 in 1994 and 1993, respectively.
Income Taxes
The Company adopted Statement of Financial Standards No. 109 "Accounting for
Income Taxes" as of January 1, 1993, the required implementation date (Note F).
Prior to January 1, 1993, income taxes were accounted for in accordance with
Accounting Principles Board Opinion No. 11 ("APB 11").
Reclassifications
Certain prior year amounts have been reclassified to conform to the current
year presentation.
NOTE B ---SUBSEQUENT EVENT
In January 1995, ALC announced plans to acquire ConferTech International, Inc.
("ConferTech"), a leading provider of teleconferencing services and audio
bridge equipment. The Company entered a definitive agreement to acquire all
the shares of ConferTech in a transaction valued at approximately $66 million.
ALC completed a cash tender offer at $8.00 per share in March 1995. ALC
financed this acquisition through cash from operations as well as utilizing its
line of credit. ConferTech reported revenue of $44.0 million and $35.8
F-8
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
million and net income of $1.6 million and $2.3 million for fiscal years ended
December 31, 1994 and 1993, respectively.
NOTE C --- PURCHASE OF CUSTOMER BASE
During July 1993, the Company acquired the specialized 800 customer base of CHA
for $15.5 million plus a payment of $4.2 million made in August 1994 which was
based on certain 800 customer base revenue generated by the customers in April,
May and June 1994.
The Company also acquired additional customers from CHA under a marketing
agreement from August 1993 through 1994. Under this agreement, an additional
$9.0 million and $4.1 million was paid for customers acquired during 1994 and
1993, respectively, and has been allocated to the purchase price for the
related customers acquired during the respective years.
The following unaudited proforma summary presents the Company's revenue and
income as if the transaction occurred at the beginning of the year. The
proforma financial data is not necessarily indicative of the results that
actually would have occurred had the transactions taken place on the date
presented.
Year Ended
December 31, 1993
-----------------------
(in thousands except per
share amounts)
Revenue $447,077
Income Before Extraordinary Item and
Cumulative Effect of Accounting Change $41,457
Net Income $47,467
Earnings Per Common and Common
Equivalent Share:
Income before extraordinary item and
cumulative effect of accounting change $1.12
Net Income $1.28
F-9
48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE D - LONG TERM DEBT AND OTHER FINANCING
Long-term debt, including amounts due within one year, consists of:
December 31,
1994 1993
-------- --------
(in Thousands)
9% Senior Subordinated Notes
due 2003 - face value of $80,000,000
and $85,000,000 less discount of
and $582,000 and $665,000 $ 79,418 $ 84,335
Capitalized lease obligations (Note H) 254 541
Other long-term debt 3,026 3,114
---------- ----------
$ 82,698 $ 87,990
Due within one year 232 392
---------- ----------
$ 82,466 $ 87,598
========== ==========
There were no outstanding balances on the Revolving Credit Facility during
1994. During 1993 the weighted average interest rates were 12.3% on Notes
Payable and 5.5% on the Revolving Credit Facility. Weighted average interest
rates during 1992 were 10.19% on Notes Payable and 12.36% on the Revolving
Credit Facility.
Revolving Credit Facilities
During 1994 and 1993, the Company had a $40.0 million Revolving Credit Facility
which was to expire on June 30, 1995. The effective rate under the Facility
during 1993 approximated 5.8%. There were no borrowings under the line during
1994. A .375% per annum charge is made on the unused portion of the line.
Availability under the Facility was based on the level of eligible accounts
receivable. As of December 31, 1994, the Company had $40 million of
availability under the line. Borrowings under the Facility were collateralized
by accounts receivable.
In January 1995, the Company entered into a $105 million unsecured credit
facility with First Union National Bank of North Carolina and Bank One,
Columbus, NA as Co-Managing Agents. The $40.0 million Revolving Credit
Facility was simultaneously terminated. Under the new credit facility, which
expires December 31, 1999, the Company is able to minimize interest expense by
structuring borrowings under two alternatives. Each alternative has a varying
interest rate associated with it. As of February 28, 1995, the average interest
rate charged was 7.3% per annum. A 0.25% per annum commitment fee is
charged on the unused portion of the line.
9% Senior Subordinated Notes
In May 1993, Allnet completed an offering of $85.0 million 9.0% Senior
Subordinated Notes ("1993 Notes"). The net proceeds of $84.3 million were used
to repay the outstanding 11 7/8% Senior Subordinated Notes of
F-10
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Allnet ("1992 Notes") aggregating $72.4 million and to reduce the amount
outstanding under the short term Revolving Credit Facility. The early
retirement of the 1992 Notes resulted in an extraordinary loss of $7.5 million,
net of the related tax effect of $4.0 million. Interest on the 1993 Notes is
payable semi-annually commencing November 15, 1993. The 1993 Notes will mature
on May 15, 2003, but are redeemable at the option of the Company, in whole or
in part, on or after May 15, 1998. In the event of an ownership change, the
holders have the right to require the Company to purchase all or part of the
1993 Notes. The 1993 Notes contain restrictive covenants which could limit
additional indebtedness and restrict the payment of dividends.
In April 1994, the Company acquired, on the open market, $5.0 million of its
1993 Notes at the Company's approximate book value.
Other Long-Term Debt
Other long-term debt represents deferred liabilities relating to certain
operating leases.
Future Maturities
The future maturities of long-term debt at December 31, 1994 are as follows (in
thousands):
Year Ended December 31:
1995 $ 232
1996 1,496
1997 812
1998 467
1999 193
2000 and thereafter 80,080
--------
$83,280
Less discount on 1993 Notes 582
--------
$82,698
========
NOTE E - REDEEMABLE PREFERRED STOCK
As of January 1, 1992, the Company had 2,500,000 shares of Class A Preferred
outstanding with a redemption value of $48.9 million plus accrued dividends. In
October 1992, pursuant to the Exchange Agreement with the major holders of the
Class A Preferred, the Company exchanged 2,144,044 shares of Class A Preferred
for 6,399,227 shares of ALC Common Stock at an effective 40% discount.
In September 1992, ALC paid approximately $1.3 million to certain major holders
of Class A Preferred in connection with a concession agreement entered into in
June 1990.
In July 1993, a dividend of $0.32 per share was declared which was subsequently
paid September 30, 1993. In December 1993, the Company redeemed the remaining
355,956 shares of Class A Preferred for $10.4 million including $3.2 million of
accrued dividends.
F-11
50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE F - TAXES ON INCOME
Effective as of January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("Statement 109").
Under Statement 109, the liability method is used in accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between the financial reporting and tax basis of assets
and liabilities and are measured using the enacted tax rates and laws that will
be in effect when those differences are expected to reverse.
As permitted by Statement 109, the Company has elected not to restate the
financial statements of any prior years. The cumulative effect of the change
resulted in recording net deferred tax assets and increasing net income in 1993
by $13.5 million.
Income tax expense and the extraordinary item as shown in the Consolidated
Statement of Operations are composed of the following (in thousands):
Statement 109 APB 11
------------- -------
1994 1993 1992
-------- -------- --------
Federal
Income tax expense $31,180 $16,150 $8,075
Extraordinary item $6,445
State
Income tax expense $ 5,395 $ 2,600 $1,625
Extraordinary item $ 555
Due to the change of ownership which occurred in August 1992 and the resulting
limitation on the utilization of net operating loss carryforwards ("NOLs"), the
Company is subject to the regular tax, resulting in federal taxes currently
payable of $24.7 million, $6.7 million and $1.6 million for 1994, 1993 and
1992, respectively.
The provisions for state and local income taxes reflect the effect of filing
separate company state and local income tax returns, as appropriate, for
members of the consolidated group. This amount is reduced, where applicable,
by the availability to utilize state and local portions of operating loss
carryforwards. State and local income taxes currently payable were $4.3
million, $1.2 million, and $1.1 million in 1994, 1993 and 1992, respectively.
The tax benefit realized from the exercise of stock options of $4.1 million in
1994, and $5.5 million in 1993 was added to capital in excess of par value and
is not reflected in operations.
F-12
51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A reconciliation between the statutory federal and the effective income tax
rates follows:
Percentage of Pre-tax Income
1994 1993 1992
------------ ------------ ------------
Income tax at statutory rate 35.0% 35.0% 34.0%
Goodwill amortization 0.5 0.9 2.2
State taxes (net of federal benefit) 3.4 2.8 4.6
Utilization of operating loss
carryforwards under Stmt. 109 (3.4) (5.9)
Other 0.8 (0.7) 0.4
---- ---- ----
Income tax expense 36.3% 32.1% 41.2%
Extraordinary item, utilization,
of operating loss carryforwards
under APB 11 (29.8)
---- ---- ----
Income tax expense, net of
extraordinary item 36.3% 32.1% 11.4%
==== ==== ====
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and income tax purposes. Significant components of the Company's deferred
taxes are as follows (in thousands):
December 31, 1994 December 31, 1993
----------------- -----------------
Deferred tax liability:
CHA intangible assets $ (4,400) $ (1,500)
Depreciation (1,000)
--------- --------
Total deferred tax liabilities $ (5,400) $ (1,500)
Deferred tax assets:
Future tax benefit of NOL carryforward $ 42,000 $ 44,700
Bad debt expense 1,600 1,500
Compensation 1,200 900
Depreciation 500
Other 1,612 638
--------- --------
$ 46,412 $ 48,238
Valuation allowance for
deferred tax assets (28,500) (34,900)
--------- --------
Total deferred tax assets $ 17,912 $ 13,338
--------- --------
Net deferred tax assets $ 12,512 $ 11,838
========= ========
The Company has tax net operating loss, alternative tax net operating loss and
investment tax credit ("ITC") carryforwards which can be utilized annually to
offset future taxable income. Because of the "ownership changes" which occurred
in 1989, 1992, and 1993 under provisions of Internal Revenue Code Section 382,
the utilization of carryforwards is presently limited to approximately $10
million per year through 2005. This annual limitation,
F-13
52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
coupled with the 15 year carryforward limitation, results in a maximum
cumulative NOL and ITC carryforward which may be utilized of approximately $108
million and $118 million as of December 31, 1994 and December 31, 1993,
respectively. Because it is difficult to predict the realization of the NOL
benefit beyond a period of three years, the Company has established valuation
allowances of $28.5 million and $34.9 million as of December 31, 1994 and
December 31, 1993, respectively.
NOTE G - EARNINGS PER SHARE AND STOCKHOLDERS' EQUITY
Earnings per share
Earnings per share are computed using weighted average shares outstanding and
common stock equivalents. To arrive at income available for common
stockholders for 1993 and 1992, the Company's net income is adjusted by amounts
relating to the accretion of discount and dividends accrued on Class A
Preferred, and in 1992, the accretion of a contract payment to certain major
holders of the Class A Preferred. Anti-dilutive securities for 1992 were
warrants and options. Earnings per share for the third and fourth quarters of
1992 and for all of 1993 and 1994 include the impact of the exercise of
outstanding stock options and warrants utilizing the Treasury Stock Method.
Equity Offerings
In March 1993, an equity offering was completed in which an aggregate of
10,350,000 shares of ALC Common Stock were sold at $14.25 per share. ALC did
not receive the proceeds from the sale of these shares by existing major
holders, although it did receive $1.9 million upon exercise of 963,784
warrants.
In September 1993, an equity offering was completed in which an aggregate of
7,763,391 shares of ALC Common Stock were sold at $25.50 per share. This
offering included the exercise of 3,240,025 warrants. ALC did not receive any
proceeds from the sale of these shares by existing major holders, but did
receive $6.9 million from the exercise of warrants.
Common Stock Warrants
As of December 31, 1994, warrants for the purchase of 428,090 shares of Common
Stock at $2.00 per share, 2,763,878 shares at $5.00 per share and 660,000
shares at $63.75 per share were outstanding. The warrants expire in June 2005,
June 1997 and December 1995, respectively. The $2.00 and $5.00 warrants were
issued in connection with the Company's refinancings and the difference between
the exercise price and the fair value of the warrants at the time of issuance
was recorded as a discount on the related notes and an increase to
Paid-in-capital - warrants.
Employee Stock Options
The Company has two Employee Stock Option Plans as well as a Non-Employee
Director Plan. The maximum number of shares for which options may be granted
under both employee plans is 6,000,000 (adjusted for certain events such as a
recapitalization). The plans provide for the granting of stock options and
stock appreciation rights to key employees. The maximum number of shares which
may be granted under the Non-Employee Plan is 100,000 shares.
F-14
53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Shares under option are summarized below:
Option Price
Number of -----------------------------------------
Shares Per Share Total
------------------ ----------- ----------------
(in thousands)
January 1, 1992 2,801,716 $ 3.50 - $ 4.40 $ 9,886
Options Terminated (72,219) $ 3.50 - $ 5.88 (297)
Options Granted 1,080,876 $ 4.38 - $ 7.69 5,796
Options Exercised (173,345) $ 3.50 (607)
--------- -------
Shares under option
December 31, 1992 3,637,028 $ 3.50 - $ 7.69 $14,778
Options Terminated (18,067) $ 3.50 - $ 5.88 (94)
Options Granted 1,630,500 $26.06 - $26.25 40,973
Options Exercised (755,265) $ 3.50 - $ 7.69 (2,803)
--------- --------
Shares under option
December 31, 1993 4,494,196 $ 3.50 - $26.25 $52,854
Options Terminated (56,822) $ 3.50 - $33.25 (970)
Options Granted 49,750 $29.63 - $33.25 1,543
Options Exercised (349,715) $ 3.50 - $25.06 (1,362)
--------- --------
Shares under option
December 31, 1994 4,137,409 $ 3.50 - $26.25 $52,065
========= ================== ========
Options exercisable,
December 31, 1992 2,012,566 $ 3.50 - $ 4.68 $ 7,131
========= ================== ========
Options exercisable,
December 31, 1993 1,893,888 $ 3.50 - $ 5.88 $ 7,078
========= ================== ========
Options exercisable,
December 31, 1994 2,207,216 $ 3.50 - $29.63 $12,663
========= ================== ========
NOTE H - LEASES
Future minimum rental payments under non-cancelable operating leases with
initial or remaining terms of one or more years are $32.9 million, $23.7
million, $17.1 million, $11.0 million, $4.9 million and $3.6 million for 1995,
1996, 1997, 1998, 1999 and 2000 and thereafter, respectively.
The Company's lease arrangements frequently include renewal options or fair
market value purchase options, and for leases relating to office space, rent
increases based on the Consumer Price Index or similar indices.
F-15
54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Non-cancelable operating leases relate primarily to intercity transmission
facilities, building and office space, and office equipment. Rental expense
was $49.9 million, $49.9 million, and $52.3 million for the years ended
December 31, 1994, 1993 and 1992, respectively.
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 totaling $9.2 million in exchange for
notes receivable to be repaid over 5 years and a 15% minority ownership
position in a company owning a Michigan-based digital fiber optic network.
NOTE I - TRANSACTIONS WITH RELATED PARTIES
The Company leased transmission capacity, multiplexing and various other
technical equipment under leases from an affiliate of CTI, a major shareholder
through August 1992. Amounts paid under the leases totaled $17.7 million for
the year ended December 31, 1992.
In June 1992, the Company paid $2.0 million to CTI for the purchase of certain
assets including an $800,000 note from a major holder of Class A Preferred
which was paid in full upon closing of the 1992 equity offering. Consideration
for the transaction also included a $1.2 million prepayment of transmission
capacity to be utilized over a 37 month period.
As of December 31, 1994, Grumman Hill Associates, Inc. and Grumman Hill
Investments L.P., of which Richard D. Irwin (the Chairman of the Board of
Directors of the Company) is the General Partner, held an aggregate of 622,486
warrants to purchase shares of Common Stock. Additionally, Grumman Hill
Investments, L.P. and Grumman Hill Associaties, Inc. hold options to purchase
153,163 and 14,000 shares of Common Stock, respectively. Richard Irwin holds
options to purchase 5,000 shares of Common Stock.
F-16
55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE J - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Three Months Ended
----------------------------------------------------------------------
March 31, June 30, September 30, December 31,
1994 1994 1994 1994
------------- ------------- ------------- -------------
(in thousands except per share amounts)
Revenue $129,789 $135,908 $149,054 $153,073
Gross Margin $ 59,779 $ 61,520 $ 68,399 $ 68,610
Net Income $ 14,645 $ 14,841 $ 17,593 $ 17,250
Net income per common
and common equivalent
share $ 0.38 $ 0.39 $ 0.46 $ 0.45
Three Months Ended
----------------------------------------------------------------------
March 31, June 30, September 30, December 31,
1993 1993 1993 1993
------------- ------------- ------------- -------------
(in thousands except per share amounts)
Revenue $101,844 $104,233 $113,098 $117,257
Gross Margin $ 46,377 $ 47,409 $ 52,537 $ 55,260
Income before extraordinary
item and cumulative effect
of accounting change $ 8,004 $ 8,392 $ 10,854 $ 12,426
Net Income $ 21,504 $ 902 $ 10,854 $ 12,426
Income per common and
common equivalent
share before extraordinary
item and cumulative effect
of accounting change $ 0.23 $ 0.23 $ 0.29 $ 0.32
Net income per common
and common equivalent
share $ 0.61 $ 0.02 $ 0.29 $ 0.32
F-17
56
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARY SCHEDULE IX
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
ADDITIONS ADDITIONS
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COST AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------------------------------- ------------ -------------- ----------------- ---------------- --------------
Year ended December 31, 1994
Allowance for doubtful accounts $3,974,000 $14,341,000 (1) $14,123,000 (3) $4,192,000
Deferred tax asset valuation allowance $34,900,000 $6,400,000 $28,500,000
Year ended December 31, 1993
Allowance for doubtful accounts $3,334,000 $12,638,000 (1) $11,998,000 (3) $3,974,000
Deferred tax asset valuation allowance $0 $37,000,000 (2) $2,100,000 $34,900,000
Year ended December 31, 1992
Allowance for doubtful accounts $3,676,000 $14,551,000 (1) $14,893,000 (3) $3,334,000
-------------
(1) Amounts accounted for as a reduction of revenue.
(2) In connection with the Company's adoption of Statement of Financial
Standards No. 109, "Accounting for Income Taxes", a valuation allowance
for deferred tax assets of $37,000,000 was recorded January 1, 1993. (See
Note F to the Consolidated Financial Statements).
(3) Uncollectible accounts written off, net of recoveries.
F-18
57
EXHIBIT INDEX
Exhibit
No. Description Page
------- ----------- ----
3.2 ALC Amended/Restated Bylaws
May 12, 1994
10.15 Amendment to Amended and
Restated Employment Agreements
10.24 Credit Agreement
11.1 Computation of Per Share Earnings
21.1 Subsidiary List
23.1 Consent of Ernst & Young
27.1 Financial Data Schedule
EX-3.2
2
EXHIBIT 3.2
1
EXHIBIT 3.2
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, Bingham Farms, Michigan 48025 or such other place within
or without 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,
2
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 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.
2
3
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 other corporation is held, directly or
indirectly, by the Corporation,
3
4
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 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 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
4
5
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.
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
5
6
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 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 after
the date on which such a request is received, adopt a resolution fixing the
record date. If no record date has been fixed by the Board of Directors 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.
(d) Within five (5) business days after receipt of the earliest dated consent
delivered to the Corporation in the manner provided
6
7
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 to 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 inspectors 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 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
7
8
corporate action without a meeting by less than unanimous written 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 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;
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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 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
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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 Required 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.
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
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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 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
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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 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
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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 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. 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. 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 "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,
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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 or 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 any 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 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,
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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 of 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 any 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 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
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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.
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 for
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
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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 (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 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.
17
EX-10.15
3
EXHIBIT 10.15
1
EXHIBIT 10.15
AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT
ALC COMMUNICATIONS CORPORATION, ALLNET COMMUNICATION
SERVICES, INC. AND EMPLOYEE
DATED JANUARY 7, 1994
Amendment dated as of October 21, 1994 to Amended and Restated Employment
Agreement between ALC Communications Corporation, Allnet Communication
Services, Inc. and Employee, dated as of January 7, 1994.
Section 7. Termination is hereby amended as follows:
Any reference to "benefits" being paid to the Employee as a result of any
termination under this Section 7 shall mean those benefits which have accrued
to the date of termination and which are payable upon termination as well as
unreimbursed expenses accrued to the date of termination.
Any reference to the Company having no liability or obligation to the Employee
other than the liabilities or obligations specified therein shall be
interpreted so as not to preclude the Company's obligations to Employee under
any of the Company's stock option plans and stock awards.
Subsection 7.3 is hereby amended with respect to "employee benefits" as
follows: "...as well as during such time period all employee benefits to which
Employee was entitled prior to such termination, other than any officer
perquisites and 401(k) plan participation, and upon substantially the same
terms and conditions incuding, but not limited to, Life, Health and Long-Term
Disability insurance coverage; provided, however, that if Employee obtains
full-time employment prior to the expiration of the twelve-month period, the
provision of these benefits shall terminate although the salary shall continue
for the remainder of the period." (underlining showing the addition)
Subsection 7.4 is hereby amended with respect to "employee benefits" as
follows: "...as well as during such time period all employee benefits to which
Employee was entitled prior to such termination, other than any officer
perquisites and 401(k) participation, and upon substantially the same terms and
conditions incuding, but not limited to, Life, Health and Long-term Disability
Insurance coverage; provided, however, that if Employee obtains full-time
employment prior to the expiration of the applicable period, the provision of
these benefits shall terminate, although the salary shall continue for the
remainder of the period..." (underlining showing the addition)
All other terms of the Amended and Restated Employment Agreement as previously
amended remain in effect and are not modified by this Agreement.
2
Page two
Amendment
October 21, 1994
In Witness Whereof, the undersigned have executed this Amendment as of the date
first above written.
[Corporate Seal] ALC Communications Corporation
By:_______________________________
[Corporate Seal] Allnet Communication Services, Inc.
By:_______________________________
By:_______________________________
, "Employee"
EX-10.24
4
EXHIBIT 10.24
1
EXHIBIT 10.24
CREDIT AGREEMENT
dated as of January 20, 1995
by and among
ALLNET COMMUNICATION SERVICES, INC.,
as Borrower,
ALC COMMUNICATIONS CORPORATION,
as Guarantor,
the Lenders referred to herein,
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Managing Agent, Credit Agent and Syndication Agent,
and
BANK ONE, COLUMBUS, NA,
as Managing Agent and Administrative Agent
2
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 1.3. Other Definitions and Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE II
REVOLVING CREDIT FACILITY . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.1. Revolving Credit Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.2. Procedure for Advances of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.3. Repayment of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.4. Revolving Credit Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.5. Permanent Reduction of the Aggregate Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.6. Increase In Aggregate Commitment; Additional Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.7. Termination of Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.8. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE III
LETTER OF CREDIT FACILITY . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.1. L/C Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.2. Procedure for Issuance of Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.3. Commissions and Other Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.4. L/C Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.5. Reimbursement Obligation of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.6. Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.7. Effect of Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE IV
GENERAL LOAN PROVISIONS . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.1. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.2. Notice and Manner of Conversion or Continuation of Loans . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.3. Commitment and Agency Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.4. Manner of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.5. Crediting of Payments and Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.6. Nature of Obligations of Lenders Regarding Extensions of Credit; Assumption by Administrative Agent . . 27
SECTION 4.7. Changed Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.8. Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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SECTION 4.9. Capital Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE V
CLOSING; CONDITIONS OF CLOSING AND BORROWING . . . . . . . 33
SECTION 5.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.2. Conditions to Closing and Initial Extensions of Credit . . . . . . . . . 33
SECTION 5.3. Conditions to All Loans and Letters of Credit. . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CREDIT PARTIES . . . . . . 36
SECTION 6.1. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 6.2. Survival of Representations and Warranties, Etc . . . . . . . . . . . . . . . . . . . 44
ARTICLE VII
FINANCIAL INFORMATION AND NOTICES . . . . . . . . . . 45
SECTION 7.1. Financial Statements and Projections . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.2. Officer's Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 7.3. Accountants' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 7.4. Other Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 7.5. Notice of Litigation and Other Matters . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 7.6. Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE VIII
AFFIRMATIVE COVENANTS . . . . . . . . . . . . . 49
SECTION 8.1. Preservation of Corporate Existence and Related Matters . . . . . . . . . . . . . . . 49
SECTION 8.2. Maintenance of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.3. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.4. Accounting Methods and Financial Records . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.5. Payment and Performance of Obligations. . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 8.6. Compliance With Laws and Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 8.7. Environmental Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 8.8. Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 8.9. Compliance With Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 8.10. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 8.11. Visits and Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 8.12. Material Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 8.13. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE IX
FINANCIAL COVENANTS . . . . . . . . . . . . . 52
SECTION 9.1. Maximum Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.2. Minimum Debt Service Coverage Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . 52
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SECTION 9.3. Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.4. Minimum Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE X
NEGATIVE COVENANTS . . . . . . . . . . . . . . 53
SECTION 10.1 Limitations on Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 10.2. Limitations on Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 10.3. Limitations on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 10.4. Limitations on Loans, Advances, Investments and Acquisitions . . . . . . . . . . . . 54
SECTION 10.5. Limitations on Mergers and Liquidation . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 10.6. Limitations on Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 10.7. Limitations on Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 10.8. Limitations on Exchange and Issuance of Capital Stock . . . . . . . . . . . . . . . . 57
SECTION 10.9. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 10.10. Certain Accounting Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 10.11. Amendments; Payments and Prepayments of Subordinated Debt . . . . . . . . . . . . . 58
SECTION 10.12. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 10.13. Restrictive Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE XI
UNCONDITIONAL GUARANTY . . . . . . . . . . . . . 59
SECTION 11.1. Guaranty of Obligations of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 11.2. Nature of Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 11.3. Demand by the Credit Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 11.4. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 11.5. Modification of Loan Documents etc . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 11.6. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 11.7. No Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE XII
DEFAULT AND REMEDIES . . . . . . . . . . . . . 62
SECTION 12.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 12.2. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 12.3. Rights and Remedies Cumulative; Non-Waiver; etc . . . . . . . . . . . . . . . . . . . 66
SECTION 12.4. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE XIII
THE AGENTS . . . . . . . . . . . . . . . 67
SECTION 13.1. Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 13.2. Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 13.3. Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 13.4. Reliance by Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 13.5. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
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SECTION 13.6. Non-Reliance on Such Agents and Other Lenders . . . . . . . . . . . . . . . . . . . . 69
SECTION 13.7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 13.8. Each of the Agents in Its Individual Capacity . . . . . . . . . . . . . . . . . . . . 70
SECTION 13.9. Resignation of Agents; Successor Agents. . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 13.10. Credit and Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE XIV
MISCELLANEOUS . . . . . . . . . . . . . . . 71
SECTION 14.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 14.2. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 14.3. Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 14.4. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 14.5. Consent to Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 14.6. Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 14.7. Reversal of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 14.8. Injunctive Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 14.9. Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 14.10. Successors and Assigns; Participations . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 14.11. Amendments, Waivers and Consents; Renewal . . . . . . . . . . . . . . . . . . . . . 79
SECTION 14.12. Performance of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 14.13. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 14.14. All Powers Coupled with Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 14.15. Survival of Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 14.16. Titles and Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 14.17. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 14.18. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 14.19. Term of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 14.20. Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
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EXHIBITS
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Notice of Conversion/Continuation
Exhibit D - Form of Officer's Certificate
Exhibit E - Form of Assignment and Acceptance
Exhibit F - Form of Subsidiary Guaranty
Exhibit G - Form of Corporate Opinion
Exhibit H - Form of Communications Law Opinion
SCHEDULES
Schedule 6.1(a) - Jurisdictions of Organization and
Qualification to Do Business as Foreign Corporation
Schedule 6.1(b) - Subsidiaries and Capitalization
Schedule 6.1(d) - Compliance of Loan Documents with Applicable
Laws and Governmental Approvals
Schedule 6.1(h) - ERISA Plans
Schedule 6.1(l) - Material Contracts
Schedule 6.1(m) - Labor and Collective Bargaining Agreements
Schedule 6.1(t) - Debt and Contingent Obligations
Schedule 6.1(u) - Litigation
Schedule 6.1(v) - Regulatory Matters
Schedule 10.3 - Existing Liens
Schedule 10.4 - Existing Loans, Advances and Investments
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CREDIT AGREEMENT, dated as of the 20th day of January, 1995 by and among
ALLNET COMMUNICATION SERVICES, INC., a corporation organized under the laws of
Michigan (the "Borrower"), ALC COMMUNICATIONS CORPORATION, a corporation
organized under the laws of Delaware ("ALC"), as Guarantor, the Lenders who are
or may become a party to this Agreement, FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, a national banking association, as Managing Agent, Credit Agent and
Syndication Agent, and BANK ONE, COLUMBUS, NA, a national banking association,
as Managing Agent and Administrative Agent.
STATEMENT OF PURPOSE
The Borrower has requested and the Lenders have agreed to extend certain
credit facilities to the Borrower on the terms and conditions of this
Agreement. ALC is the owner of one hundred percent (100%) of the capital stock
of the Borrower, and will benefit directly and indirectly from the extension of
such credit facilities to the Borrower. As a precondition to making any
extensions of credit hereunder, the Lenders have required, and ALC has agreed,
to execute this Agreement as Guarantor.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such
parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. The following terms when used in this Agreement
shall have the meanings assigned to them below:
"Administrative Agent" means Bank One in its capacity as administrative
agent hereunder, and any successor thereto appointed pursuant to Section 13.9.
"Administrative Agent's Office" means the office of the Administrative
Agent specified in or determined in accordance with the provisions of Section
14.1.
"Affiliate" means, with respect to ALC and its Subsidiaries, any other
Person (other than a Subsidiary) which directly or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, ALC or any of its Subsidiaries. The term "control" means (a) the power
to vote twenty percent (20%) or more of the securities or other equity
interests of a Person having ordinary voting power, or (b) the possession,
directly or indirectly, of any other power to direct or cause the direction of
the management and policies of a Person,
8
whether through ownership of voting securities, by contract or otherwise.
"Agents" means the collective reference to the Credit Agent, the Managing
Agents and the Administrative Agent.
"Aggregate Commitment" means the aggregate amount of the Lenders'
Commitments hereunder, as such amount may be reduced at any time or from time
to time pursuant to Section 2.5. On the Closing Date, the Aggregate Commitment
shall be One Hundred and Five Million Dollars ($105,000,000).
"Agreement" means this Credit Agreement, as amended or modified from time
to time.
"ALC" means ALC Communications Corporation, a Delaware corporation, and its
successors.
"Allnet" means Allnet Communication Services, Inc., a Michigan corporation,
and its successors.
"Applicable Law" means all applicable provisions of constitutions,
statutes, rules, regulations and orders of all Governmental Authorities and all
orders and decrees of all courts and arbitrators.
"Applicable Margin" shall have the meaning assigned thereto in Section
4.1(c).
"Application" means an application, in the form specified by the Issuing
Lender from time to time, requesting the Issuing Lender to issue a Letter of
Credit.
"Assignment and Acceptance" shall have the meaning assigned thereto in
Section 14.10.
"Available Commitment" means, as to any Lender at any time, an amount equal
to the excess, if any, of (a) such Lender's Commitment over (b) such Lender's
Extensions of Credit.
"Bank One" means Bank One, Columbus, NA, a national banking association,
and its successors.
"Base Rate" means, at any time, the higher of (a) the Prime Rate or (b) the
Federal Funds Rate as determined by the Administrative Agent plus 1/2 of 1%;
each change in the Base Rate shall take effect simultaneously with the
corresponding change or changes in the Prime Rate or the Federal Funds Rate.
"Base Rate Loan" means any Loan bearing interest at a rate determined with
reference to the Base Rate as provided in Section 4.1(a) hereof.
"Borrower" means Allnet in its capacity as borrower hereunder.
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"Business Day" means (a) for all purposes other than as set forth in clause
(b) below, any day other than a Saturday, Sunday or legal holiday on which
banks in Charlotte, North Carolina, Columbus, Ohio and New York, New York are
open for the conduct of their commercial banking business, and (b) with respect
to all notices and determinations in connection with, and payments of principal
and interest on, any LIBOR Rate Loan, any day that is a Business Day described
in clause (a) and that is also a day for trading by and between banks in U.S.
Dollar deposits in the London interbank market.
"Capital Asset" means, with respect to ALC and its Subsidiaries, any asset
that would, in accordance with GAAP, be required to be classified and accounted
for as a capital asset on a Consolidated balance sheet of ALC and its
Subsidiaries.
"Capital Expenditures" means, with respect to ALC and its Subsidiaries for
any period, the aggregate cost of all Capital Assets acquired by any such
Person during such period, determined in accordance with GAAP.
"Capital Lease" means, with respect to ALC and its Subsidiaries, any lease
of any property that would, in accordance with GAAP, be required to be
classified and accounted for as a capital lease on a Consolidated balance sheet
of ALC and its Subsidiaries.
"Change in Control" shall have the meaning assigned thereto in Section
12.1(i).
"Closing Date" means the date of this Agreement or such later Business Day
upon which each condition described in Article V shall be satisfied or waived
in all respects in a manner acceptable to the Agents, in their sole discretion.
"Code" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, each as amended or supplemented from time to time.
"Collateral" means any assets pledged by ALC or any of its Subsidiaries to
the Credit Agent for the ratable benefit of the Agents and the Lenders in order
to secure the Obligations.
"Commitment" means, as to any Lender, the obligation of such Lender to make
Loans to and issue or participate in Letters of Credit issued for the account
of the Borrower hereunder in an aggregate principal or face amount at any time
outstanding not to exceed the amount set forth opposite such Lender's name on
the signature pages hereof, as the same may be reduced or modified at any time
or from time to time pursuant to Sections 2.5 and 14.10.
"Commitment Percentage" means, as to any Lender at any time, the ratio of
(a) the amount of the Commitment of such Lender to (b) the Aggregate Commitment
of all of the Lenders.
3
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"Consolidated" means, when used with reference to financial statements or
financial statement items of ALC and its Subsidiaries, such statements or items
on a consolidated basis in accordance with applicable principles of
consolidation under GAAP.
"Contingent Obligation" means, with respect to ALC and its Subsidiaries,
without duplication, any obligation, contingent or otherwise, of any such
Person pursuant to which such Person has directly or indirectly guaranteed any
Debt or other obligation of any other Person and, without limiting the
generality of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of any such Person (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt or other obligation (whether
arising by virtue of partnership arrangements, by agreement to keep well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement condition or otherwise) or (b) entered into for the purpose
of assuring in any other manner the obligee of such Debt or other obligation of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part); provided, that the term Contingent Obligation shall not
include (i) endorsements for collection or deposit in the ordinary course of
business or (ii) accrued income tax liabilities reflected on the financial
statements of ALC or any of its Subsidiaries not yet due and payable.
"Credit Agent" means First Union in its capacity as Credit Agent hereunder,
and any successor thereto appointed pursuant to Section 13.9.
"Credit Facility" means the collective reference to the Revolving Credit
Facility and the L/C Facility.
"Credit Parties" means the collective reference to ALC and the Borrower.
"Debt" means, with respect to ALC and its Subsidiaries at any date and
without duplication, the sum of the following calculated in accordance with
GAAP: (a) all liabilities, obligations and indebtedness for borrowed money
including but not limited to obligations evidenced by bonds, debentures, notes
or other similar instruments of any such Person, (b) all obligations to pay the
deferred purchase price of property or services of any such Person, except (i)
trade payables arising in the ordinary course of business not more than one
hundred and eighty (180) days past due and in an aggregate amount less than
$1,000,000, and (ii) documented disputes with other long distance carriers
arising from the provision of telecommunications services which disputes are in
the process of resolution and for which adequate reserves have been established
in accordance with GAAP, (c) all obligations of any such Person as lessee under
Capital Leases, (d) all Debt of any other Person secured by a Lien on any asset
of any such Person, (e) all Contingent Obligations of any such Person, (f) all
obligations, contingent or otherwise, of any such Person relative to the face
amount of letters of credit, whether or not drawn, including
4
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without limitation any Reimbursement Obligation, and banker's acceptances
issued for the account of any such Person and (g) all obligations incurred by
any such Person pursuant to Hedging Agreements.
"Debt Service" means, with respect to ALC and its Subsidiaries for any
period, the sum of the following calculated without duplication on a
Consolidated basis in accordance with GAAP: (a) all payments of principal or
similar amounts required to be paid with respect to Total Debt during such
period and (b) Interest Expense required to be paid during such period.
"Default" means any of the events specified in Section 12.1 which with the
passage of time, the giving of notice or any other condition, would constitute
an Event of Default.
"Dollars" or "$" means, unless otherwise qualified, dollars in lawful
currency of the United States.
"Eligible Assignee" means, with respect to any assignment of the rights,
interest and obligations of a Lender hereunder, a Person that is at the time of
such assignment (a) a commercial bank organized under the laws of the United
States or any state thereof, having combined capital and surplus in excess of
$500,000,000, (b) a finance company, insurance company or other financial
institution which in the ordinary course of business extends credit of the type
extended hereunder and that has total assets in excess of $1,000,000,000, (c)
already a Lender hereunder (whether as an original party to this Agreement or
as the assignee of another Lender), and (d) the successor (whether by transfer
of assets, merger or otherwise) to all or substantially all of the commercial
lending business of the assigning Lender, and, in the case of (a), (b) or any
other Person, has been approved in writing as an Eligible Assignee by the
Borrower and the Managing Agents.
"Employee Benefit Plan" means any employee benefit plan within the meaning
of Section 3(3) of ERISA which (a) is maintained for employees of the Borrower
or any ERISA Affiliate or (b) has at any time within the preceding six years
been maintained for the employees of the Borrower or any current or former
ERISA Affiliate.
"Environmental Laws" means any and all federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations and orders of courts or Governmental Authorities, relating to
the protection of human health or the environment, including, but not limited
to, requirements pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of Hazardous Materials. Environmental
Laws include, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. Section 9601 et. seq.), the
Hazardous Material Transportation Act (49 U.S.C. Section 331 et. seq.), the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et. seq.), the
Federal Water Pollution Control Act (33 U.S.C. Section 1251
5
12
et. seq.), the Clean Air Act (42 U.S.C. Section 7401 et. seq.), the Toxic
Substances Control Act (15 U.S.C. Section 2601 et. seq.), the Safe Drinking
Water Act (42 U.S.C. Section 300, et. seq.), the Environmental Protection
Agency's regulations relating to underground storage tanks (40 C.F.R. Parts 280
and 281), and the Occupational Safety and Health Act (29 U.S.C. Section 651
et. seq.) and the rules and regulations promulgated under each of these
statutes, each as amended or modified from time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974, and the
rules and regulations thereunder, each as amended or modified from time to
time.
"ERISA Affiliate" means any Person who together with the Borrower is
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b) of ERISA.
"Event of Default" means any of the events specified in Section 12.1,
provided that any requirement for passage of time, giving of notice, or any
other condition, has been satisfied.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Extensions of Credit" means, as to any Lender at any time, an amount equal
to the sum of (a) the aggregate principal amount of all Loans made by such
Lender then outstanding and (b) such Lender's Commitment Percentage of the L/C
Obligations then outstanding.
"FCC" means the Federal Communications Commission or any successor
Governmental Authority.
"FCC License" means any long distance telecommunications or other license,
permit, consent, certificate of compliance, franchise, approval, waiver or
authorization granted or issued by the FCC, including, without limitation, any
of the foregoing authorizing or permitting the acquisition, construction or
operation of Network Facilities or any other long distance telecommunications
system.
"Federal Funds Rate" means, for any day, a fluctuating interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published at 11:00 a.m. (Columbus time) for such day (or, if
such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
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"First Union" means First Union National Bank of North Carolina, a national
banking association, and its successors.
"Fiscal Year" means the fiscal year of ALC and its Subsidiaries ending on
December 31.
"Fixed Charges" means, with respect to ALC and its Subsidiaries, for any
period, the following without duplication, each calculated for such period in
accordance with GAAP: (a) all principal payments or similar amounts required to
be paid with respect to Total Debt during such period plus (b) Interest Expense
required to be paid during such period plus (c) total cash dividends paid by
ALC during such period plus (d) all payments in respect of any retirement,
redemption or other acquisition of the capital stock of ALC and its
Subsidiaries consummated during such period.
"Foreign Material Subsidiary" shall have the meaning assigned thereto in
Section 8.12.
"GAAP" means generally accepted accounting principles, as recognized by the
American Institute of Certified Public Accountants and the Financial Accounting
Standards Board, consistently applied and maintained on a consistent basis for
ALC and its Subsidiaries throughout the period indicated and consistent with
the prior financial practice of ALC and its Subsidiaries.
"Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities, including without limitation all FCC Licenses and PUC
Authorizations.
"Governmental Authority" means any nation, province, state or political
subdivision thereof, and any government or any Person exercising executive,
legislative, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing, including
without limitation the FCC and any PUC.
"Guaranteed Obligations" shall have the meaning assigned thereto in Section
11.1.
"Guarantor" means ALC in its capacity as guarantor under Article XI hereof.
"Guaranty" means the unconditional guaranty agreement of ALC set forth in
Article XI hereof.
"Hazardous Materials" means any substances or materials (a) which are or
become defined as hazardous wastes, hazardous substances, pollutants,
contaminants or toxic substances under any Environmental Law, (b) which are
toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise harmful to human health or the environment and are or
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become regulated by any Governmental Authority, (c) the presence of which
require investigation or remediation under any Environmental Law or common law,
(d) the discharge or emission or release of which requires a permit or license
under any Environmental Law or other Governmental Approval, (e) which are
deemed to constitute a nuisance, a trespass or pose a health or safety hazard
to persons or neighboring properties, (f) which are materials consisting of
underground or aboveground storage tanks, whether empty, filled or partially
filled with any substance, or (g) which contain, without limitation, asbestos,
polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum
hydrocarbons, petroleum derived substances or waste, crude oil, nuclear fuel,
natural gas or synthetic gas.
"Hedging Agreement" means any agreement with respect to an interest rate
swap, collar, cap, floor or a forward rate agreement or other agreement
regarding the hedging of interest rate risk exposure executed in connection
with hedging the interest rate exposure of the Borrower under this Agreement,
and any confirming letter executed pursuant to such hedging agreement, all as
amended or modified.
"Indenture" means the Indenture dated as of May 15, 1993 among Allnet, as
issuer, ALC, as guarantor and Star Bank, National Association, as trustee, as
in effect on the date hereof.
"Interest Expense" means, with respect to ALC and its Subsidiaries for any
period, total interest expense of ALC and its Subsidiaries (including without
limitation, interest expense attributable to Capital Leases) and, to the extent
not included therein, fees and other charges payable with respect to all Debt,
(including fees and charges payable with respect to Hedging Agreements, Letters
of Credit and similar investments), all determined on a Consolidated basis for
such period in accordance with GAAP.
"Interest Period" shall have the meaning assigned thereto in Section 4.1(b).
"Issuing Lender" means Bank One, in its capacity as issuer of any Letter of
Credit, or any successor thereto.
"L/C Commitment" means Five Million Dollars ($5,000,000).
"L/C Facility" means the letter of credit facility established pursuant to
Article III hereof.
"L/C Obligations" means at any time, an amount equal to the sum of (a) the
aggregate undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to Section 3.5.
"L/C Participants" means the collective reference to all the Lenders other
than the Issuing Lender.
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"Lender" means each Person executing this Agreement as a Lender set forth
on the signature pages hereto and each Person that hereafter becomes a party to
this Agreement as a Lender pursuant to Section 14.10.
"Lending Office" means, with respect to any Lender, the office of such
Lender maintaining such Lender's Commitment Percentage of the Loans.
"Letters of Credit" shall have the meaning assigned thereto in Section 3.1.
"Leverage Ratio" shall have the meaning assigned thereto in Section 9.1.
"LIBOR" means the rate of interest determined on the basis of the rate for
deposits in Dollars in minimum amounts of at least $5,000,000 for a period
equal to the applicable Interest Period appearing on Telerate Page 3750 as of
11:00 a.m. (London time) two Business Days prior to the first day of the
applicable Interest Period. In the event that such rate does not appear on
Telerate Page 3750, "LIBOR" shall be determined by the Administrative Agent to
be the arithmetic average (rounded upward, if necessary, to the nearest
one-sixteenth of one percent (1/16%)) of the rate per annum at which deposits
in Dollars would be offered by first class banks in the London interbank market
to the Administrative Agent (or the Administrative Agent's London branch) at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of the applicable Interest Period for a period equal to such Interest Period
and in an amount substantially equal to the amount of the applicable Loan.
"LIBOR Rate" means (a) LIBOR divided by (b) one (1) less the Reserve
Percentage.
"LIBOR Rate Loan" means any Loan bearing interest at a rate determined with
reference to the LIBOR Rate as provided in Section 4.1(a) hereof.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person shall be deemed to own subject to
a Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to such asset.
"Loan" means any revolving loan made to the Borrower pursuant to Section
2.1, and all such Loans collectively as the context requires.
"Loan Documents" means, collectively, this Agreement, the Notes, the
Subsidiary Guaranties, the Applications, any Hedging Agreement executed by any
Lender and each other document, instrument and agreement executed and delivered
by the Credit
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Parties, their Subsidiaries or their counsel in connection with this Agreement
or otherwise referred to herein or contemplated hereby, all as may be amended
or modified from time to time.
"Managing Agents" means First Union and Bank One in their capacity as
managing agents hereunder, and any successor thereto in each case appointed
pursuant to Section 13.9; each, a "Managing Agent."
"Material Adverse Effect" means, with respect to ALC or any of its
Subsidiaries, a material adverse effect on the properties, business, prospects,
operations or condition (financial or otherwise) of such Persons taken as a
whole or the ability of any such Person to perform its obligations under the
Loan Documents or Material Contracts, in each case to which it is a party.
"Material Contract" means (a) any contract or other agreement, written or
oral, of ALC or any of its Subsidiaries involving monetary liability of or to
any such Person in an amount in excess of $5,000,000 per annum, or (b) any
other contract or agreement, written or oral, of ALC or any of its Subsidiaries
the failure to comply with which could reasonably be expected to have a
Material Adverse Effect.
"Material Subsidiary" means a Subsidiary of ALC formed or acquired after
the Closing Date, which Subsidiary has total annual revenue or total assets
equal to or in excess of $5,000,000 as of such date of formation or
acquisition, as applicable, or at any time thereafter.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making, or
is accruing an obligation to make, contributions within the preceding six
years.
"Net Income" means, with respect to ALC and its Subsidiaries for any
period, the Consolidated net income (or loss) of ALC and its Subsidiaries for
such period determined in accordance with GAAP; provided, that there shall be
excluded from net income (or loss) (a) the income (or loss) of any Person
acquired prior to the date such Person becomes a Subsidiary of ALC or is merged
into or consolidated with ALC or any of its Subsidiaries or that Person's
assets are acquired by ALC or any of its Subsidiaries (except in connection
with any acquisition treated as a pooling of interests in accordance with
GAAP), (b) if the ability of ALC to receive, recover or repatriate cash or
receive the economic benefits (other than any increase in value of ALC's stock
or ownership interest in a Subsidiary thereof) from any of its Subsidiaries is
materially limited or restricted for a material period of time at any date of
determination by operation of the terms of the charter of such Subsidiary or
any agreement, instrument, or Applicable Law, the portion of the income of each
such Subsidiary so restricted and (c) the effect of any currency translation
adjustments.
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"Net Worth" means, at any date of determination thereof, the sum of the
capital stock (excluding treasury stock and capital stock subscribed and
unissued) and surplus (including earned surplus, capital surplus and the
balance of the current profit and loss account not transferrable to surplus)
accounts of ALC and its Subsidiaries appearing on a Consolidated balance sheet
of ALC and its Subsidiaries prepared in accordance with GAAP.
"Network Agreement" means any document or agreement entered into by ALC or
any of its Subsidiaries regarding the use, operation, maintenance or otherwise
concerning any of the Network Facilities.
"Network Facilities" means the network of digital or analog facilities
owned or leased by ALC or any of its Subsidiaries.
"Notes" means the separate Revolving Credit Notes made by the Borrower
payable to the order of each Lender, substantially in the form of Exhibit A
hereto, evidencing the Revolving Credit Facility, and any amendments and
modifications thereto, any substitutes therefor, and any replacements,
restatements, renewals or extension thereof, in whole or in part; "Note" means
any of such Notes.
"Notice of Borrowing" shall have the meaning assigned thereto in Section
2.2(a).
"Notice of Conversion/Continuation" shall have the meaning assigned thereto
in Section 4.2.
"Obligations" means, in each case, whether now in existence or hereafter
arising: (a) the principal of and interest on (including interest accruing
after the filing of any bankruptcy or similar petition) the Loans, (b) the L/C
Obligations, (c) all payment and other obligations owing by the Borrower to any
Lender or Agent under any Hedging Agreement and (d) all other fees and
commissions (including attorney's fees), charges, indebtedness, loans,
liabilities, financial accommodations, obligations, covenants and duties owing
by the Borrower to the Lenders or to any Agent, of every kind, nature and
description, direct or indirect, absolute or contingent, due or to become due,
contractual or tortious, liquidated or unliquidated, and whether or not
evidenced by any note, and whether or not for the payment of money under or in
respect of this Agreement, any Note, any Letter of Credit or any of the other
Loan Documents.
"Officer's Compliance Certificate" shall have the meaning assigned thereto
in Section 7.2.
"Operating Cash Flow" means, with respect to ALC and its Subsidiaries for
any period, the following, each calculated on a Consolidated basis for such
period without duplication in accordance with GAAP: (a) Net Income, plus (b)
to the extent deducted in determining Net Income (i) income and franchise
taxes, (ii) Interest Expense and (iii) amortization and depreciation and less
(c) the sum of (i) interest income and (ii) extraordinary non-
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cash items of income and items of income resulting from a change in accounting
method (or plus any extraordinary non-cash items of loss and items of loss
resulting from a change in accounting method).
"Other Taxes" shall have the meaning assigned thereto in Section 4.10(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency.
"Pension Plan" means any Employee Benefit Plan, other than a Multiemployer
Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of
the Code and which (a) is maintained for employees of the Borrower or any ERISA
Affiliates or (b) has at any time within the preceding six years been
maintained for the employees of the Borrower or any of their current or former
ERISA Affiliates.
"Person" means an individual, corporation, partnership, association, trust,
business trust, joint venture, joint stock company, pool, syndicate, sole
proprietorship, unincorporated organization, Governmental Authority or any
other form of entity or group thereof specifically listed herein.
"Prime Rate" means, at any time, the rate of interest per annum publicly
announced from time to time by the Administrative Agent as its prime rate.
Each change in the Prime Rate shall be effective as of the opening of business
on the day such change in the Prime Rate occurs. The parties hereto
acknowledge that the rate announced publicly by the Administrative Agent as its
Prime Rate is an index or base rate and shall not necessarily be its lowest or
best rate charged to its customers or other banks.
"Projections" shall have the meaning set forth in Section 7.1(c).
"PUC" means any state regulatory agency or body that exercises jurisdiction
over the rates or services or the ownership, construction or operation of any
Network Facility or long distance telecommunications systems or over Persons
who own, construct or operate a Network Facility or long distance
telecommunications systems, in each case by reason of the nature or type of the
business subject to regulation and not pursuant to laws and regulations of
general applicability to Persons conducting business in said state.
"PUC Authorizations" means all applications, filings, reports, documents,
recordings and registrations with, and all validations, exemptions, franchises,
waivers, approvals, orders or authorizations, consents, licenses, certificates
and permits from any PUC.
"Register" shall have the meaning assigned thereto in Section 14.10(d).
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"Reimbursement Obligation" means the obligation of the Borrower to
reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn under
Letters of Credit.
"Required Lenders" means, at any date, any combination of Lenders whose
Commitment Percentages aggregate at least sixty-six and two-thirds percent
(66-2/3%).
"Reserve Percentage" means the maximum daily arithmetic reserve requirement
imposed by the Board of Governors of the Federal Reserve System (or any
successor) under Regulation D on Eurocurrency liabilities (as defined in
Regulation D) for the applicable Interest Period as of the first day of such
Interest Period, but subject to any changes in such reserve requirement
becoming effective during the Interest Period. For purposes of calculating the
Reserve Percentage, the reserve requirement shall be as set forth in Regulation
D without benefit of credit for prorations, exemptions or offsets under
Regulation D, and further without regard to whether or not any Lender elects to
actually fund any Loan or portion thereof with Eurocurrency liabilities. Each
calculation by the Administrative Agent of the LIBOR Rate shall be conclusive
and binding for all purposes, absent manifest error.
"Responsible Officer" means any president, vice president-treasurer, vice
president-comptroller, vice president-general counsel, chief financial officer
or chief operating officer of any Credit Party.
"Revolving Credit Facility" means the revolving credit facility established
pursuant to Article II hereof.
"Security Documents" means the collective reference to each Subsidiary
Guaranty and each other agreement or writing pursuant to which ALC or any
Subsidiary thereof pledges or grants a security interest in the Collateral or
other collateral securing the Obligations or such Person guaranties the payment
and/or performance of the Obligations.
"Solvent" means, as to ALC and its Subsidiaries taken on a Consolidated
basis on a particular date, that such Persons (a) have capital sufficient to
carry on their business and transactions and all business and transactions in
which they are about to engage and are able to pay their debts as they mature,
(b) own property having a value, both at fair valuation and at present fair
saleable value, greater than the amount required to pay their probable
liabilities (including contingencies), and (c) do not believe that they will
incur debts or liabilities beyond their ability to pay such debts or
liabilities as they mature.
"Subordinated Debt" means the collective reference to the Subordinated
Notes and the other Debt designated as Subordinated Debt on Schedule 6.1(t)
hereof and any other Debt of ALC or any Subsidiary subordinated in right and
time of payment to the Obligations on terms satisfactory to the Required
Lenders.
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"Subordinated Notes" means the 9% Senior Subordinated Notes due May 15,
2003 issued by Allnet pursuant to the Indenture.
"Subsidiary" means as to any Person, any corporation, partnership or other
entity of which more than fifty percent (50%) of the outstanding capital stock
or other ownership interests having ordinary voting power to elect a majority
of the board of directors or other managers of such corporation, partnership or
other entity is at the time, directly or indirectly, owned by or the management
is otherwise controlled by such Person (irrespective of whether, at the time,
capital stock of any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency). Unless
otherwise qualified, references to "Subsidiary" or "Subsidiaries" herein shall
refer to those of the applicable Credit Party.
"Subsidiary Guarantor" means any Material Subsidiary of ALC required to
execute a Subsidiary Guaranty pursuant to Section 8.12.
"Subsidiary Guaranty" means each guaranty agreement executed by a
Subsidiary Guarantor pursuant to Section 8.12 or Section 10.4 in favor of the
Credit Agent for the ratable benefit of the Agents and Lenders substantially in
the form of Exhibit F hereto, with such modifications thereto to reflect any
requirements of Applicable Law or the particular circumstances of the
applicable Subsidiary Guarantor as may be reasonably requested by the Credit
Agent, as amended or modified from time to time.
"Syndication Agent" means First Union in its capacity as syndication agent
hereunder, and any successor thereto.
"Taxes" shall have the meaning assigned thereto in Section 4.10(a).
"Termination Date" means the earliest of the dates referred to in Section
2.7.
"Termination Event" means: (a) a "Reportable Event" described in Section
4043 of ERISA (other than a Reportable Event as to which the provision of 30
days notice has been waived by the PBGC under applicable regulations); or (b)
the withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan
during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA; or (c) the termination of a Pension Plan, the
filing of a notice of intent to terminate a Pension Plan or the treatment of a
Pension Plan amendment as a distress termination under Section 4041(c) of
ERISA; or (d) the institution of proceedings to terminate, or the appointment
of a trustee with respect to, any Pension Plan by the PBGC; or (e) any other
event or condition which would constitute grounds under Section 4042(a) of
ERISA for the termination of, or the appointment of a trustee to administer,
any Pension Plan; or (f) the partial or complete withdrawal of ALC or any ERISA
Affiliate from a Multiemployer Plan; or (g) the imposition of a Lien pursuant
to Section 412 of the Code or Section 302 of ERISA; or (h) any event or
condition which results in the
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reorganization or insolvency of a Multiemployer Plan under Sections 4241 or
4245 of ERISA; or (i) any event or condition which results in the termination
of a Multiemployer Plan under Section 4041A of ERISA or the institution by PBGC
of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA.
"Total Debt" means, with respect to ALC and its Subsidiaries at any date of
determination and without duplication, all Debt of ALC and its Subsidiaries on
a Consolidated basis.
"Uniform Customs" the Uniform Customs and Practice for Documentary Credits
(1994 Revision), International Chamber of Commerce Publication No. 500.
"UCC" means the Uniform Commercial Code as in effect in the State of North
Carolina.
"United States" means the United States of America.
"Wholly-Owned" means, with respect to a Subsidiary, a Subsidiary all of the
shares of capital stock (except directors' qualifying shares) or other
ownership interests of which are, directly or indirectly, owned or controlled
by ALC and/or one or more of its Wholly-Owned Subsidiaries.
SECTION 1.2. General. All terms of an accounting nature not specifically
defined herein shall have the meaning assigned thereto by GAAP. Unless
otherwise specified, a reference in this Agreement to a particular section,
subsection, Schedule or Exhibit is a reference to that section, subsection,
Schedule or Exhibit of this Agreement. Wherever from the context it appears
appropriate, each term stated in either the singular or plural shall include
the singular and plural, and pronouns stated in the masculine, feminine or
neuter gender shall include the masculine, the feminine and the neuter. Any
reference herein to "Columbus time" shall refer to the applicable time of day
in Columbus, Ohio.
SECTION 1.3. Other Definitions and Provisions.
(a) Use of Capitalized Terms. Unless otherwise defined therein, all
capitalized terms defined in this Agreement shall have the defined meanings
when used in this Agreement, the Notes and the other Loan Documents or any
certificate, report or other document made or delivered pursuant to this
Agreement.
(b) Miscellaneous. The words "hereof", "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this Agreement as
a whole and not to any particular provision of this Agreement.
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ARTICLE II
REVOLVING CREDIT FACILITY
SECTION 2.1. Revolving Credit Loans. Subject to the terms and conditions
of this Agreement, each Lender severally agrees to make Loans to the Borrower
from time to time from the Closing Date through the Termination Date as
requested by the Borrower in accordance with the terms of Section 2.2;
provided, that (a) the aggregate principal amount of all outstanding Loans
(after giving effect to any amount requested) shall not exceed the Aggregate
Commitment less the L/C Obligations and (b) the principal amount of outstanding
Loans from any Lender to the Borrower shall not at any time exceed such
Lender's Commitment. Each Loan by a Lender shall be in a principal amount
equal to such Lender's Commitment Percentage of the aggregate principal amount
of Loans requested on such occasion. Subject to the terms and conditions
hereof, the Borrower may borrow, repay and reborrow Loans hereunder until the
Termination Date.
SECTION 2.2. Procedure for Advances of Loans.
(a) Requests for Borrowing. The Borrower shall give the Administrative
Agent irrevocable prior written notice in the form attached hereto as Exhibit B
(a "Notice of Borrowing") not later than 11:00 a.m. (Columbus time) (i) on the
same Business Day as each Base Rate Loan and (ii) at least three Business Days
before each LIBOR Rate Loan, of its intention to borrow, specifying (A) the
date of such borrowing, which shall be a Business Day, (B) the amount of such
borrowing, which shall be with respect to LIBOR Rate Loans in an aggregate
principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess
thereof and with respect to Base Rate Loans in an aggregate principal amount of
$1,000,000 or a whole multiple of $500,000 in excess thereof, (C) whether the
Loans are to be LIBOR Rate Loans or Base Rate Loans, and (D) in the case of a
LIBOR Rate Loan, the duration of the Interest Period applicable thereto.
Notices received after 11:00 a.m. (Columbus time) shall be deemed received on
the next Business Day. The Administrative Agent shall promptly notify the
Lenders of each Notice of Borrowing.
(b) Disbursement of Loans. Not later than 2:00 p.m. (Columbus time) on the
proposed borrowing date, each Lender will make available to the Administrative
Agent, for the account of the Borrower, at the office of the Administrative
Agent in funds immediately available to the Administrative Agent, such Lender's
Commitment Percentage of the Loans to be made on such borrowing date. The
Borrower hereby irrevocably authorizes the Administrative Agent to disburse the
proceeds of each borrowing requested pursuant to this Section 2.2 in
immediately available funds by crediting such proceeds to a deposit account of
the Borrower maintained with the Administrative Agent or by wire transfer from
such deposit account to another account as may be requested by the Borrower by
prior written notice to the Administrative Agent. Subject to Section 4.6
hereof, the
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Administrative Agent shall not be obligated to disburse a Lender's Commitment
Percentage of any Loan requested pursuant to this Section 2.2 until such Lender
shall have made available to the Administrative Agent its Commitment Percentage
of such Loan.
SECTION 2.3. Repayment of Loans.
(a) Repayment on Termination Date. The Borrower shall repay the outstanding
principal amount of all Loans in full, together with all accrued but unpaid
interest thereon, on the Termination Date.
(b) Mandatory Repayment of Excess Loans. If at any time the outstanding
principal amount of all Loans exceeds the Aggregate Commitment less the L/C
Obligations, the Borrower shall repay immediately upon notice from the
Administrative Agent, by payment to the Administrative Agent for the account of
the Lenders, the Loans in an amount equal to such excess. Each such repayment
shall be accompanied by accrued interest on the amount repaid and any amount
required to be paid pursuant to Section 4.8 hereof.
(c) Optional Repayments. The Borrower may at any time and from time to time
repay the Loans, in whole or in part, upon at least three (3) Business Days'
irrevocable notice to the Administrative Agent with respect to LIBOR Rate Loans
and one (1) Business Day irrevocable notice with respect to Base Rate Loans,
specifying the date and amount of repayment and whether the repayment is of
LIBOR Rate Loans or Base Rate Loans or a combination thereof, and, if of a
combination thereof, the amount allocable to each. Upon receipt of such
notice, the Administrative Agent shall promptly notify each Lender. If any
such notice is given, the amount specified in such notice shall be due and
payable on the date set forth in such notice. Partial repayments shall be in
an aggregate amount of $5,000,000 or a whole multiple of $1,000,000 in excess
thereof with respect to LIBOR Rate Loans and $1,000,000 or a whole multiple of
$500,000 in excess thereof with respect to Base Rate Loans.
(d) Limitation on Repayment of LIBOR Rate Loans. The Borrower may not repay
any LIBOR Rate Loan on any day other than on the last day of the Interest
Period applicable thereto unless such repayment is accompanied by any amount
required to be paid pursuant to Section 4.8 hereof.
SECTION 2.4. Revolving Credit Notes. Each Lender's Loans and the
obligation of the Borrower to repay such Loans shall be evidenced by a
Revolving Credit Note executed by the Borrower payable to the order of such
Lender representing the Borrower's obligation to pay such Lender's Commitment
or, if less, the aggregate unpaid principal amount of all Loans made and to be
made by such Lender to the Borrower hereunder, plus interest and all other
fees, charges and other amounts due thereon. Each Revolving Credit Note shall
be dated the date hereof and shall bear interest on the unpaid principal amount
thereof at the applicable interest rate per annum specified in Section 4.1.
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SECTION 2.5. Permanent Reduction of the Aggregate Commitment.
(a) The Borrower shall have the right at any time and from time to time,
upon at least five (5) Business Days prior written notice to the Administrative
Agent, to permanently reduce, in whole at any time or in part from time to
time, without premium or penalty, the Aggregate Commitment in an aggregate
principal amount not less than $5,000,000 or any whole multiple of $1,000,000
in excess thereof. The amount of each partial permanent reduction shall be
applied pro rata to reduce the remaining mandatory reduction amounts required
under Section 2.5(b).
(b) Subject to Section 2.7, the Aggregate Commitment shall be permanently
reduced by the following amounts on the corresponding dates as follows:
Amount of Aggregate
Date Reduction Commitment
---- --------- ----------
March 31, 1997 $ 6,562,500 $98,437,500
June 30, 1997 6,562,500 91,875,000
Sept. 30, 1997 6,562,500 85,312,500
Dec. 31, 1997 6,562,500 78,750,000
March 31, 1998 9,187,500 69,562,500
June 30, 1998 9,187,500 60,375,000
Sept. 30, 1998 9,187,500 51,187,500
Dec. 31, 1998 9,187,500 42,000,000
March 31, 1999 10,500,000 31,500,000
June 30, 1999 10,500,000 21,000,000
Sept. 30, 1999 10,500,000 10,500,000
Dec. 31, 1999 10,500,000 -0-
(c) Each permanent reduction permitted or required pursuant to this
Section 2.5 shall be accompanied by a payment of principal sufficient to reduce
the aggregate outstanding Extensions of Credit of the Lenders after such
reduction to the Aggregate Commitment as so reduced and by payment of accrued
interest on the amount of such repaid principal. Any permanent reduction of
the Aggregate Commitment to zero shall be accompanied by payment of all
outstanding Obligations (and furnishing of cash collateral equal to the amount
of all outstanding L/C Obligations) and termination of the Commitments and
Credit Facility. Such cash collateral shall be applied in accordance with
Section 12.2(b). If the reduction of the Aggregate Commitment requires the
repayment of any LIBOR Rate Loan, such reduction may be made only on the last
day of the then current Interest Period applicable thereto unless such
repayment is accompanied by any amount required to be paid pursuant to Section
4.8 hereof.
SECTION 2.6. Increase In Aggregate Commitment; Additional Lenders. The
Aggregate Commitment may be increased and financial institutions added as
Lenders hereunder within forty-five (45) days after receipt by the Managing
Agents of a written request therefor from the Credit Parties; provided that (a)
no Default or Event of Default exists at the time of such request or the
effective date of
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the amendment giving effect to such request, (b) each Lender approves (in its
sole discretion) and executes such amendment and (c) any increase in the
Aggregate Commitment shall first be offered to Lenders party hereto at the time
of such written request before any such offer is made to any other financial
institution.
SECTION 2.7. Termination of Credit Facility. The Credit Facility shall
terminate on the earliest of (a) December 31, 1999, (b) the date of termination
by the Borrower pursuant to Section 2.5(a), and (c) the date of termination by
the Credit Agent on behalf of the Lenders pursuant to Section 12.2(a);
provided, that the date set forth above in this Section 2.7 may be extended to
December 31, 2000 at any time after the second anniversary of the Closing Date
upon written request therefor made by the Credit Parties to the Managing Agents
and receipt by the Credit Agent of written consent to such extension by each
Lender party hereto. Upon the effectiveness of any such extension pursuant to
this Section, one calendar year shall be added to each remaining date set forth
in the amortization table contained in such Section.
SECTION 2.8. Use of Proceeds. The Borrower shall use the proceeds of the
Loans (a) to finance the acquisition of Capital Assets, (b) to finance
acquisitions permitted by Section 10.4(c), and (c) for working capital and
general corporate requirements of the Borrower and its Subsidiaries, including
the payment of certain fees and expenses incurred in connection with the
transactions contemplated hereby.
ARTICLE III
LETTER OF CREDIT FACILITY
SECTION 3.1 L/C Commitment. Subject to the terms and conditions hereof,
the Issuing Lender, in reliance on the agreements of the other Lenders set
forth in Section 3.4(a), agrees to issue standby letters of credit ("Letters of
Credit") for the account of the Borrower on any Business Day from the Closing
Date through but not including the Termination Date in such form as may be
reasonably approved from time to time by the Issuing Lender; provided, that the
Issuing Lender shall have no obligation to issue any Letter of Credit if, after
giving effect to such issuance, (i) the L/C Obligations would exceed the L/C
Commitment or (ii) the Available Commitment of any Lender would be less than
zero. Each Letter of Credit shall (A) be denominated in Dollars in a minimum
amount of $50,000, (B) be a standby letter of credit issued to support
obligations of the Borrower or any of its Subsidiaries, contingent or
otherwise, incurred in the ordinary course of business, (C) expire on a date
reasonably satisfactory to the Issuing Lender, which date shall be no later
than the Termination Date and (D) be subject to the Uniform Customs. The
Issuing Lender shall not at any time be obligated to issue any Letter of Credit
hereunder if such issuance would conflict with, or cause the Issuing Lender or
any L/C Participant to exceed any limits imposed by, any Applicable Law.
References herein to "issue" and
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derivations thereof with respect to Letters of Credit shall also include
extensions or modifications of any existing Letters of Credit, unless the
context otherwise requires.
SECTION 3.2 Procedure for Issuance of Letters of Credit. The Borrower may
from time to time request that the Issuing Lender issue a Letter of Credit by
delivering to the Issuing Lender at the Administrative Agent's Office an
Application therefor, completed to the reasonable satisfaction of the Issuing
Lender, and such other certificates, documents and other papers and information
as the Issuing Lender may reasonably request. Upon receipt of any Application,
the Issuing Lender shall process such Application and the certificates,
documents and other papers and information delivered to it in connection
therewith in accordance with its customary procedures and shall, subject to
Section 3.1 and Article V hereof, promptly issue the Letter of Credit requested
thereby (but in no event shall the Issuing Lender be required to issue any
Letter of Credit earlier than three Business Days after its receipt of the
Application therefor and all such other certificates, documents and other
papers and information relating thereto) by issuing the original of such Letter
of Credit to the beneficiary thereof or as otherwise may be agreed by the
Issuing Lender and the Borrower. The Issuing Lender shall furnish to the
Borrower a copy of such Letter of Credit and furnish to each Lender a copy of
such Letter of Credit and the amount of each Lender's L/C Participation
therein, all promptly following the issuance of such Letter of Credit.
SECTION 3.3 Commissions and Other Charges.
(a) The Borrower shall pay to the Administrative Agent, for the account of
the Issuing Lender and the L/C Participants, a letter of credit commission with
respect to each Letter of Credit issued under the Letter of Credit Facility
provided for in this Article III in an amount equal to the product of (i) the
Applicable Margin with respect to LIBOR Rate Loans (on a per annum basis) and
(ii) the face amount of such Letter of Credit. Such commissions shall be
payable quarterly in arrears on the last Business Day of each fiscal quarter of
the Borrower and on the Termination Date.
(b) In addition to the foregoing commissions, the Borrower shall pay the
Issuing Lender an issuance fee of 1/8 of 1% per annum on the face amount of
each Letter of Credit, payable quarterly in arrears on the last Business Day of
each fiscal quarter of the Borrower and on the Termination Date.
(c) The Administrative Agent shall, promptly following its receipt thereof,
distribute to the Issuing Lender and the L/C Participants all commissions
received by the Administrative Agent in accordance with their respective
Commitment Percentages.
SECTION 3.4 L/C Participations.
(a) The Issuing Lender irrevocably agrees to grant and hereby grants to
each L/C Participant, and, to induce the Issuing Lender
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to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees
to accept and purchase and hereby accepts and purchases from the Issuing
Lender, on the terms and conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's Commitment Percentage in the Issuing Lender's obligations and
rights under each Letter of Credit issued hereunder and the amount of each
draft paid by the Issuing Lender thereunder. Each L/C Participant
unconditionally and irrevocably agrees with the Issuing Lender that, if a draft
is paid under any Letter of Credit for which the Issuing Lender is not
reimbursed in full by the Borrower in accordance with the terms of this
Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at
the Issuing Lender's address for notices specified herein an amount equal to
such L/C Participant's Commitment Percentage of the amount of such draft, or
any part thereof, which is not so reimbursed.
(b) Upon becoming aware of any amount required to be paid by any L/C
Participant to the Issuing Lender pursuant to Section 3.4(a) in respect of any
unreimbursed portion of any payment made by the Issuing Lender under any Letter
of Credit, the Issuing Lender shall notify each L/C Participant of the amount
and due date of such required payment and such L/C Participant shall pay to the
Issuing Lender the amount specified on the applicable due date. If any such
amount is paid to the Issuing Lender after the date such payment is due, such
L/C Participant shall pay to the Issuing Lender on demand, in addition to such
amount, the product of (i) such amount, times (ii) the daily average Federal
Funds Rate as determined by the Administrative Agent during the period from and
including the date such payment is due to the date on which such payment is
immediately available to the Issuing Lender, times (iii) a fraction the
numerator of which is the number of days that elapse during such period and the
denominator of which is 360. A certificate of the Issuing Lender with respect
to any amounts owing under this Section shall be conclusive in the absence of
manifest error. With respect to payment to the Issuing Lender of the
unreimbursed amounts described in this Section 3.4(b), if the L/C Participants
receive notice that any such payment is due (A) prior to 1:00 p.m. (Columbus
time) on any Business Day, such payment shall be due that Business Day, and (B)
after 1:00 p.m. (Columbus time) on any Business Day, such payment shall be due
on the following Business Day.
(c) Whenever, at any time after the Issuing Lender has made payment under
any Letter of Credit and has received from any L/C Participant its Commitment
Percentage of such payment in accordance with this Section 3.4, the Issuing
Lender receives any payment related to such Letter of Credit (whether directly
from the Borrower or otherwise, or any payment of interest on account thereof,
the Issuing Lender will distribute to such L/C Participant its pro rata share
thereof; provided, that in the event that any such payment received by the
Issuing Lender shall be required to be returned by the Issuing Lender, such L/C
Participant shall return to the Issuing Lender the portion thereof previously
distributed by the Issuing Lender to it.
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SECTION 3.5 Reimbursement Obligation of the Borrower. The Borrower agrees
to reimburse the Issuing Lender on each date on which the Issuing Lender
notifies the Borrower of the date and amount of a draft paid under any Letter
of Credit for the amount of (a) such draft so paid and (b) any taxes, fees,
charges or other costs or expenses incurred by the Issuing Lender in connection
with such payment. Each such payment shall be made to the Issuing Lender at
its address for notices specified herein in lawful money of the United States
and in immediately available funds. Interest shall be payable on any and all
amounts remaining unpaid by the Borrower under this Article III from the date
such amounts become payable (whether at stated maturity, by acceleration or
otherwise) until payment in full at the rate which would be payable on any
outstanding Base Rate Loans. If the Borrower fails to timely reimburse the
Issuing Lender on the date the Borrower receives the notice referred to in this
Section 3.5, the Borrower shall be deemed to have timely given a Notice of
Borrowing hereunder to the Administrative Agent requesting the Lenders to make
a Base Rate Loan on such date in an amount equal to the amount of such drawing
and, subject to the satisfaction or waiver of the conditions precedent
specified in Article V, the Lenders shall make Base Rate Loans in such amount,
the proceeds of which shall be applied to reimburse the Issuing Lender for the
amount of the related drawing and costs and expenses.
SECTION 3.6 Obligations Absolute. The Borrower's obligations under this
Article III (including without limitation the Reimbursement Obligation) shall
be absolute and unconditional under any and all circumstances and irrespective
of any set-off, counterclaim or defense to payment which the Borrower may have
or have had against the Issuing Lender or any beneficiary of a Letter of
Credit. The Borrower also agrees with the Issuing Lender that the Issuing
Lender shall not be responsible for, and the Borrower's Reimbursement
Obligation under Section 3.5 shall not be affected by, among other things, the
validity or genuineness of documents or of any endorsements thereon, even
though such documents shall in fact prove to be invalid, fraudulent or forged,
or any dispute between or among the Borrower and any beneficiary of any Letter
of Credit or any other party to which such Letter of Credit may be transferred
or any claims whatsoever of a Borrower against any beneficiary of such Letter
of Credit or any such transferee. The Issuing Lender shall not be liable for
any error, omission, interruption or delay in transmission, dispatch or
delivery of any message or advice, however transmitted, in connection with any
Letter of Credit, except for errors or omissions caused by the Issuing Lender's
gross negligence or willful misconduct. The Borrower agrees that any action
taken or omitted by the Issuing Lender under or in connection with any Letter
of Credit or the related drafts or documents, if done in the absence of gross
negligence or willful misconduct and in accordance with the standards of care
specified in the Uniform Customs and, to the extent not inconsistent therewith,
the UCC, shall be binding on the Borrower and shall not result in any liability
of the Issuing Lender to the Borrower. The responsibility of the Issuing
Lender to the Borrower in connection with any draft presented for payment
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under any Letter of Credit shall, in addition to any payment obligation
expressly provided for in such Letter of Credit, be limited to determining that
the documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are in conformity with such Letter of Credit.
SECTION 3.7 Effect of Application. To the extent that any provision of
any Application related to any Letter of Credit is inconsistent with the
provisions of this Article III, the provisions of this Article III shall apply.
ARTICLE IV
GENERAL LOAN PROVISIONS
SECTION 4.1. Interest.
(a) Interest Rate Options. Subject to the provisions of this Section 4.1,
at the election of the Borrower, the aggregate principal balance of the Notes
or any portion thereof shall bear interest at the Base Rate or the LIBOR Rate
plus, in each case, the Applicable Margin as set forth below. The Borrower
shall select the rate of interest and Interest Period, if any, applicable to
any Loan at the time a Notice of Borrowing is given pursuant to Section 2.2 or
at the time a Notice of Conversion/Continuation is given pursuant to Section
4.2. Each Loan or portion thereof bearing interest based on the Base Rate
shall be a "Base Rate Loan", and each Loan or portion thereof bearing interest
based on the LIBOR Rate shall be a "LIBOR Rate Loan". Any Loan or any portion
thereof as to which the Borrower has not duly specified an interest rate as
provided herein shall be deemed a Base Rate Loan.
(b) Interest Periods. In connection with each LIBOR Rate Loan, the
Borrower, by giving notice at the times described in Section 4.1(a), shall
elect an interest period (each, an "Interest Period") to be applicable to such
Loan, which Interest Period shall be a period of one, two, three, or six
months; provided that:
(i) the Interest Period shall commence on the date of advance of or
conversion to any LIBOR Rate Loan and, in the case of immediately successive
Interest Periods, each successive Interest Period shall commence on the date on
which the next preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a day that is not
a Business Day, such Interest Period shall expire on the next succeeding
Business Day; provided, that if any Interest Period would otherwise expire on a
day that is not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such Interest Period shall expire on the
next preceding Business Day;
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(iii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest Period;
(iv)no Interest Period shall extend beyond the Termination Date and no
Interest Period shall be selected by the Borrower which, in connection with
mandatory reductions of the Aggregate Commitment pursuant to Section 2.5(b),
would cause the early termination of such Interest Period; and
(v) there shall be no more than seven (7) Interest Periods outstanding
at any time.
(c) Applicable Margin. The Applicable Margin provided for in Section
4.1(a) with respect to the Loans (the "Applicable Margin") shall (i) on the
Closing Date equal the percentages set forth in the certificate delivered
pursuant to Section 5.2(d)(ii) and (ii) for each fiscal quarter thereafter be
determined by reference to the Leverage Ratio as of the end of the fiscal
quarter immediately preceding the delivery of the applicable Officer's
Compliance Certificate as follows:
Applicable Margin Per Annum
Leverage Ratio Base Rate + LIBOR Rate +
------------------------ ----------------------------
Equal to or greater than 2.0 -0- 1.25%
to 1.0.
Equal to or greater than -0- 1.00%
1.5 to 1.0 but less than
2.0 to 1.0.
Less than 1.5 to 1.0. -0- 0.75%
Adjustments, if any, in the Applicable Margin shall be made by the
Administrative Agent upon receipt by the Administrative Agent of quarterly
financial statements for ALC and its Subsidiaries and the accompanying
Officer's Compliance Certificate setting forth the Leverage Ratio of ALC and
its Subsidiaries as of the most recent fiscal quarter end. Subject to Section
4.1(d), in the event the Borrower fails to deliver such financial statements
and certificate within the time required by Section 7.2(c) hereof, the
Applicable Margin shall be the highest Applicable Margin set forth above until
the delivery of such financial statements and certificate.
(d) Default Rate. Upon the occurrence and during the continuance of an
Event of Default, (i) the Borrower shall no longer have the option to request
LIBOR Rate Loans, (ii) all outstanding LIBOR Rate Loans shall bear interest at
a rate per annum two percent (2%) in excess of the rate then applicable to
LIBOR Rate Loans until the end of the applicable Interest Period
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and thereafter at a rate equal to two percent (2%) in excess of the rate then
applicable to Base Rate Loans, and (iii) all outstanding Base Rate Loans shall
bear interest at a rate per annum equal to two percent (2%) in excess of the
rate then applicable to Base Rate Loans. Interest shall continue to accrue on
the Notes after the filing by or against the Borrower of any petition seeking
any relief in bankruptcy or under any act or law pertaining to insolvency or
debtor relief, whether state, federal or foreign.
(e) Interest Payment and Computation. Interest on each Base Rate Loan
shall be payable in arrears on the last Business Day of each fiscal quarter
commencing March 31, 1995, and interest on each LIBOR Rate Loan shall be
payable on the last day of each Interest Period applicable thereto, and if such
Interest Period extends over three (3) months, at the end of each three month
interval during such Interest Period. All interest rates, fees and commissions
provided hereunder shall be computed on the basis of a 360-day year and
assessed for the actual number of days elapsed, except that interest with
respect to each Base Rate Loan and the commitment fee referenced in Section
4.3(a) shall be computed on the basis of a 365/366-day year.
(f) Maximum Rate. In no contingency or event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under any of the Notes
charged or collected pursuant to the terms of this Agreement or pursuant to any
of the Notes exceed the highest rate permissible under any Applicable Law which
a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that such a court determines that the Lenders
have charged or received interest hereunder in excess of the highest applicable
rate, the rate in effect hereunder shall automatically be reduced to the
maximum rate permitted by Applicable Law and the Lenders shall at the
Administrative Agent's option promptly refund to the Borrower any interest
received by Lenders in excess of the maximum lawful rate or shall apply such
excess to the principal balance of the Obligations. It is the intent hereof
that the Borrower not pay or contract to pay, and that no Agent or any Lender
receive or contract to receive, directly or indirectly in any manner
whatsoever, interest in excess of that which may be paid by the Borrower under
Applicable Law.
SECTION 4.2. Notice and Manner of Conversion or Continuation of Loans.
Provided that no Event of Default has occurred and is then continuing, the
Borrower shall have the option to (a) convert at any time all or any portion of
its outstanding Base Rate Loans in a principal amount equal to $5,000,000 or
any whole multiple of $1,000,000 in excess thereof into one or more LIBOR Rate
Loans, and (b) upon the expiration of any Interest Period, convert all or any
part of its outstanding LIBOR Rate Loans in a principal amount equal to
$1,000,000 or a whole multiple of $500,000 in excess thereof into Base Rate
Loans or to continue such LIBOR Rate Loans as LIBOR Rate Loans. Whenever the
Borrower desires to convert or continue Loans as provided above, the Borrower
shall give the Administrative Agent irrevocable prior written notice in the
form attached as Exhibit C (a "Notice of Conversion/Continuation") not
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later than 11:00 a.m. (Columbus time) three (3) Business Days before the day on
which a proposed conversion or continuation of such Loan is to be effective
specifying (i) the Loans to be converted or continued, and, in the case of a
LIBOR Rate Loan to be converted or continued, the last day of the Interest
Period therefor, (ii) the effective date of such conversion or continuation
(which shall be a Business Day), (iii) the principal amount of such Loans to be
converted or continued, and (iv) the Interest Period to be applicable to such
converted or continued LIBOR Rate Loan. The Administrative Agent shall
promptly notify the Lenders of such Notice of Conversion/Continuation.
SECTION 4.3. Commitment and Agency Fees.
(a) Commitment Fee. Commencing on the Closing Date, the Borrower shall
pay to the Administrative Agent, for the account of the Lenders, a
non-refundable commitment fee at a rate per annum equal to 1/4 of 1% on the
average daily unused portion of the Aggregate Commitment. The commitment fee
shall be payable in arrears on the last Business Day of each fiscal quarter
during the term of this Agreement commencing March 31, 1995, and on the
Termination Date. Such commitment fee shall be distributed by the
Administrative Agent to the Lenders pro rata in accordance with the Lenders'
respective Commitment Percentages.
(b) Facility Fees. The Borrower shall pay to the Administrative Agent,
for the account of the Lenders, a non-refundable facility fee in accordance
with the fee letter agreement referred to in paragraph (c) of this Section.
(c) Agents' and Other Fees. In order to compensate the Agents for
structuring the Loans and their other obligations hereunder and the Syndication
Agent for syndicating the Credit Facility, the Borrower agrees to pay to each
such Person for their respective accounts the fees set forth in the separate
fee letter agreement executed by the Borrower dated December 6, 1994.
SECTION 4.4. Manner of Payment. Each payment (including repayments
described in Article II) by the Borrower on account of the principal of or
interest on the Loans or of any fee, commission or other amounts (including the
Reimbursement Obligation) payable to the Lenders under this Agreement or any
Note shall be made not later than 1:00 p.m. (Columbus time) on the date
specified for payment under this Agreement to the Administrative Agent for the
account of the Lenders pro rata in accordance with their respective Commitment
Percentages at the Administrative Agent's Office, in Dollars, in immediately
available funds and shall be made without any set-off, counterclaim or
deduction whatsoever. Any payment received after such time but before 2:00
p.m. (Columbus time) on such day shall be deemed a payment on such date for the
purposes of Section 12.1, but for all other purposes shall be deemed to have
been made on the next succeeding Business Day. Any payment received after 2:00
p.m. (Columbus time) shall be deemed to have been made on the next succeeding
Business Day for all purposes. Upon receipt by the Administrative Agent of each
such payment the
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Administrative Agent shall credit each Lender's account with its pro rata share
of such payment in accordance with such Lender's Commitment Percentage and
shall wire advice of the amount of such credit to each Lender. Each payment to
the Administrative Agent of Agents' or Issuing Lender's fees or L/C
Participants' commissions shall be made in like manner, but for the account of
the applicable Agent, the Issuing Lender or the L/C Participants, as the case
may be. Subject to Section 4.1(b)(ii), if any payment under this Agreement or
any Note shall be specified to be made upon a day which is not a Business Day,
it shall be made on the next succeeding day which is a Business Day and such
extension of time shall in such case be included in computing any interest if
payable along with such payment.
SECTION 4.5. Crediting of Payments and Proceeds. In the event that the
Borrower shall fail to pay any of the Obligations when due and the Obligations
have been accelerated pursuant to Section 12.2, all payments received by the
Lenders upon the Notes and the other Obligations and all net proceeds from the
enforcement of the Obligations shall be applied first to all expenses then due
and payable by the Borrower hereunder, then to all indemnity obligations then
due and payable by the Borrower hereunder, then to all Agents' and Issuing
Lender's fees then due and payable, then to all commitment and other fees and
commissions then due and payable, then to accrued and unpaid interest on the
Notes and the Reimbursement Obligation, then to the principal amount of the
Notes and Reimbursement Obligation, then to the cash collateral account
described in Section 12.2(b) hereof to the extent of any L/C Obligations then
outstanding, and then to any termination payments due in respect of a Hedging
Agreement with any Lender, in that order.
SECTION 4.6. Nature of Obligations of Lenders Regarding Extensions of
Credit; Assumption by Administrative Agent. The obligations of the Lenders
under this Agreement to make the Loans and issue or participate in Letters of
Credit are several and are not joint or joint and several. Unless the
Administrative Agent shall have received notice from a Lender prior to a
proposed borrowing date that such Lender will not make available to the
Administrative Agent such Lender's ratable portion of the amount to be borrowed
on such date (which notice shall not release such Lender of its obligations
hereunder), the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the proposed borrowing date in
accordance with Section 2.2(b) and the Administrative Agent may, in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If such amount is made available to the Administrative
Agent on a date after such borrowing date, such Lender shall pay to the
Administrative Agent on demand an amount, until paid, equal to the product of
(a) the amount of such Lender's Commitment Percentage of such borrowing, times
(b) the daily average Federal Funds Rate during such period as determined by
the Administrative Agent, times (c) a fraction the numerator of which is the
number of days that elapse from and including such borrowing date to the date
on which such Lender's Commitment Percentage of
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such borrowing shall have become immediately available to the Administrative
Agent and the denominator of which is 360. A certificate of the Administrative
Agent with respect to any amounts owing under this Section shall be conclusive,
absent manifest error. If such Lender's Commitment Percentage of such
borrowing is not made available to the Administrative Agent by such Lender
within three Business Days of such borrowing date, the Administrative Agent
shall be entitled to recover such amount made available by the Administrative
Agent with interest thereon at the rate per annum applicable to Base Rate Loans
hereunder, on demand, from the Borrower. The failure of any Lender to make its
Commitment Percentage of any Loan available shall not relieve it or any other
Lender of its obligation, if any, hereunder to make its Commitment Percentage
of such Loan available on such borrowing date, but no Lender shall be
responsible for the failure of any other Lender to make its Commitment
Percentage of such Loan available on the borrowing date.
SECTION 4.7. Changed Circumstances.
(a) Circumstances Affecting LIBOR Rate Availability. If with respect to
any Interest Period the Administrative Agent or any Lender (after consultation
with Administrative Agent) shall determine that, by reason of circumstances
affecting the foreign exchange and interbank markets generally, deposits in
eurodollars, in the applicable amounts are not being quoted via Telerate Page
3750 or offered to the Administrative Agent or such Lender for such Interest
Period, then the Administrative Agent shall forthwith give notice thereof to
the Borrower. Thereafter, until the Administrative Agent notifies the Borrower
that such circumstances no longer exist, the obligation of the Lenders to make
LIBOR Rate Loans, and the right of the Borrower to convert any Loan to or
continue any Loan as a LIBOR Rate Loan, shall be suspended, and the Borrower
shall repay in full (or cause to be repaid in full) the then outstanding
principal amount of each such LIBOR Rate Loan, together with accrued interest
thereon, on the last day of the then current Interest Period applicable to such
LIBOR Rate Loan or convert the then outstanding principal amount of each such
LIBOR Rate Loan to a Base Rate Loan as of the last day of such Interest Period.
(b) Laws Affecting LIBOR Rate Availability. If, after the date hereof,
the introduction of, or any change in, any Applicable Law or any change in the
interpretation or administration thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender (or any of their respective Lending
Offices) with any request or directive (whether or not having the force of law)
of any such Authority, central bank or comparable agency, shall make it
unlawful or impossible for any of the Lenders (or any of their respective
Lending Offices) to honor its obligations hereunder to make or maintain any
LIBOR Rate Loan, such Lender shall promptly give notice thereof to the
Administrative Agent and the Administrative Agent shall promptly give notice to
the Borrower and the other Lenders. Thereafter, until
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Administrative Agent notifies the Borrower that such circumstances no longer
exist (which notification shall be given as soon as practicable, but in any
event not later than thirty (30) days after the Administrative Agent obtains
actual knowledge that such circumstances no longer exist), (i) the obligations
of the Lenders to make LIBOR Rate Loans and the right of the Borrower to
convert any Loan or continue any Loan as a LIBOR Rate Loan shall be suspended
and thereafter the Borrower may select only Base Rate Loans hereunder, and (ii)
if any of the Lenders may not lawfully continue to maintain a LIBOR Rate Loan
to the end of the then current Interest Period applicable thereto as a LIBOR
Rate Loan, the applicable LIBOR Rate Loan shall immediately be converted to a
Base Rate Loan for the remainder of such Interest Period.
(c) Increased Costs. If, after the date hereof, the introduction of, or
any change in, any Applicable Law, or in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by any
of the Lenders (or any of their respective Lending Offices) with any request or
directive (whether or not having the force of law) of such Authority, central
bank or comparable agency:
(i) shall subject any of the Lenders (or any of their respective
Lending Offices) to any tax, duty or other charge with respect to any LIBOR
Rate Loan or any Note, Letter of Credit or Application or shall change the
basis of taxation of payments to any of the Lenders (or any of their respective
Lending Offices) of the principal of or interest on any LIBOR Rate Loan or any
Note, Letter of Credit or Application or any other amounts due under this
Agreement in respect thereof (except for changes in the rate of tax on the
overall net income of any of the Lenders or any of their respective Lending
Offices imposed by the jurisdiction in which such Lender is organized or is or
should be qualified to do business or such Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the Federal
Reserve System), special deposit, insurance or capital or similar requirement
against assets of, deposits with or for the account of, or credit extended by
any of the Lenders (or any of their respective Lending Offices) or shall impose
on any of the Lenders (or any of their respective Lending Offices) or the
foreign exchange and interbank markets any other condition affecting any LIBOR
Rate Loan or any Note, Letter of Credit or Application;
and the result of any of the foregoing is to increase the costs to any of the
Lenders of maintaining any LIBOR Rate Loan or issuing or participating in
Letters of Credit or to reduce the yield or amount of any sum received or
receivable by any of the Lenders under this Agreement or under the Notes in
respect of a LIBOR Rate Loan or Letter of Credit or Application, then such
Lender shall promptly notify the Administrative Agent, and the Administrative
Agent shall promptly notify the Borrower of such fact and demand compensation
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therefor and, within fifteen (15) days after such notice by Administrative
Agent, the Borrower shall pay to such Lender such additional amount or amounts
as will compensate such Lender or Lenders for such increased cost or reduction.
The Administrative Agent will promptly notify the Borrower of any event of
which it has knowledge which will entitle such Lender to compensation pursuant
to this Section 4.7(c); provided, that the Administrative Agent shall incur no
liability whatsoever to the Lenders or the Borrower in the event it fails to do
so. A certificate of the Administrative Agent setting forth the basis for
determining such additional amount or amounts necessary to compensate such
Lender or Lenders shall be conclusively presumed to be correct save for
manifest error.
SECTION 4.8. Indemnity. The Borrower hereby indemnifies each of the
Lenders against any loss or expense which may arise or be attributable to each
Lender's obtaining, liquidating or employing deposits or other funds acquired
to effect, fund or maintain the Loans (a) as a consequence of any failure by
the Borrower to make any payment when due of any amount due hereunder in
connection with a LIBOR Rate Loan, (b) due to any failure of the Borrower to
borrow on a date specified therefor in a Notice of Borrowing or Notice of
Continuation/Conversion with respect to any LIBOR Rate Loan or (c) due to any
payment, prepayment or conversion of any LIBOR Rate Loan on a date other than
the last day of the Interest Period therefor. Each Lender's calculations of
any such loss or expense shall be furnished to the Borrower and shall be
conclusive, absent manifest error.
SECTION 4.9. Capital Requirements. If either (a) the introduction of, or
any change in, or in the interpretation of, any Applicable Law or (b)
compliance with any guideline or request from any central bank or comparable
agency or other Governmental Authority (whether or not having the force of
law), has or would have the effect of reducing the rate of return on the
capital of, or has affected or would affect the amount of capital required to
be maintained by, any Lender or any corporation controlling such Lender as a
consequence of, or with reference to the Commitments and other commitments of
this type, below the rate which the Lender or such other corporation could have
achieved but for such introduction, change or compliance, then within five (5)
Business Days after written demand by any such Lender, the Borrower shall pay
to such Lender from time to time as specified by such Lender additional amounts
sufficient to compensate such Lender or other corporation for such reduction.
A certificate as to such amounts submitted to the Borrower and the
Administrative Agent by such Lender, shall, in the absence of manifest error,
be presumed to be correct and binding for all purposes.
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SECTION 4.10. Taxes.
(a) Payments Free and Clear. Any and all payments by the Borrower
hereunder or under the Notes or the Letters of Credit shall be made free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholding, and all liabilities with respect
thereto excluding, (i) in the case of each Lender and each Agent, income and
franchise taxes imposed by the jurisdiction under the laws of which such Lender
or Agent (as the case may be) is organized or is or should be qualified to do
business or any political subdivision thereof and (ii) in the case of each
Lender, income and franchise taxes imposed by the jurisdiction of such Lender's
Lending Office or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law
to deduct any Taxes from or in respect of any sum payable hereunder or under
any Note or Letter of Credit to any Lender or any Agent, (A) the sum payable
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 4.10) such Lender or Agent (as the case may be) receives an amount
equal to the amount such party would have received had no such deductions been
made, (B) the Borrower shall make such deductions, (C) the Borrower shall pay
the full amount deducted to the relevant taxing authority or other authority in
accordance with applicable law, and (D) the Borrower shall deliver to the
Administrative Agent evidence of such payment to the relevant taxing authority
or other authority in the manner provided in Section 4.10(d).
(b) Stamp and Other Taxes. In addition, the Borrower shall pay any
present or future stamp, registration, recordation or documentary taxes or any
other similar fees or charges or excise or property taxes, levies of the United
States or any state or political subdivision thereof or any applicable foreign
jurisdiction which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, the
Loans, the Letters of Credit, the other Loan Documents, or the perfection of
any rights or security interest in respect thereto (hereinafter referred to as
"Other Taxes").
(c) Indemnity. The Borrower shall indemnify each Lender and each Agent
for the full amount of Taxes and Other Taxes (including, without limitation,
any Taxes and Other Taxes imposed by any jurisdiction on amounts payable under
this Section 4.10) paid by such Lender or Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or
with respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted. Such indemnification shall be made within thirty (30)
days from the date such Lender or Agent (as the case may be) makes written
demand therefor.
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(d) Evidence of Payment. Within thirty (30) days after the date of any
payment of Taxes or Other Taxes, the Borrower shall furnish to the
Administrative Agent, at its address referred to in Section 14.1, the original
or a certified copy of a receipt evidencing payment thereof or other evidence
of payment satisfactory to the Administrative Agent.
(e) Delivery of Tax Forms. Each Lender organized under the laws of a
jurisdiction other than the United States or any state thereof shall deliver to
the Borrower, with a copy to the Administrative Agent, on the Closing Date or
concurrently with the delivery of the relevant Assignment and Acceptance, as
applicable, (i) two United States Internal Revenue Service Forms 4224 or Forms
1001, as applicable (or successor forms) properly completed and certifying in
each case that such Lender is entitled to a complete exemption from withholding
or deduction for or on account of any United States federal income taxes, and
(ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form,
as the case may be, to establish an exemption from United States backup
withholding taxes. Each such Lender further agrees to deliver to the Borrower,
with a copy to the Administrative Agent, a Form 1001 or 4224 and Form W-8 or
W-9, or successor applicable forms or manner of certification, as the case may
be, on or before the date that any such form expires or becomes obsolete or
after the occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower, certifying in the case of a Form
1001 or 4224 that such Lender is entitled to receive payments under this
Agreement without deduction or withholding of any United States federal income
taxes (unless in any such case an event (including without limitation any
change in treaty, law or regulation) has occurred prior to the date on which
any such delivery would otherwise be required which renders such forms
inapplicable or the exemption to which such forms relate unavailable and such
Lender notifies the Borrower and the Administrative Agent that it is not
entitled to receive payments without deduction or withholding of United States
federal income taxes) and, in the case of a Form W-8 or W-9, establishing an
exemption from United States backup withholding tax.
(f) Survival. Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 4.10 shall survive the payment in full of the
Obligations and the termination of the Commitments.
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ARTICLE V
CLOSING; CONDITIONS OF CLOSING AND BORROWING
SECTION 5.1. Closing. The closing shall take place at the offices of
Kennedy Covington Lobdell & Hickman, L.L.P., 100 North Tryon Street, Suite
4200, Charlotte, North Carolina 28202 on January 20, 1995, or on such other
date as the parties hereto shall mutually agree.
SECTION 5.2. Conditions to Closing and Initial Extensions of Credit. The
obligation of the Lenders to close this Agreement and to make the initial Loan
or issue the initial Letter of Credit is subject to the satisfaction of each of
the following conditions:
(a) Executed Loan Documents. This Agreement and the Notes shall have been
duly authorized, executed and delivered to the Credit Agent by the parties
thereto, shall be in full force and effect and no default shall exist
thereunder, and the Borrower shall have delivered original counterparts thereof
to the Credit Agent.
(b) Closing Certificates; etc.
(i) Certificate of the Credit Parties. The Credit Agent shall have
received a certificate from the chief executive officer or chief financial
officer of the Credit Parties, in form and substance reasonably satisfactory to
the Credit Agent, to the effect that all representations and warranties of the
Credit Parties contained in this Agreement and the other Loan Documents are
true, correct and complete; that the Credit Parties are not in violation of any
of the covenants contained in this Agreement and the other Loan Documents;
that, after giving effect to the transactions contemplated by this Agreement,
no Default or Event of Default has occurred and is continuing; that the Credit
Parties have satisfied each of the closing conditions; and that the Credit
Parties have filed all required tax returns and owe no delinquent taxes.
(ii) Certificate of Secretary of each Credit Party. The Credit Agent
shall have received a certificate of the secretary or assistant secretary of
each Credit Party certifying, as applicable, that attached thereto is a true
and complete copy of the articles of incorporation of such Credit Party and all
amendments thereto, certified as of a recent date by the appropriate
Governmental Authority in its jurisdiction of incorporation; that attached
thereto is a true and complete copy of the bylaws of such Credit Party as in
effect on the date of such certification; that attached thereto is a true and
complete copy of resolutions duly adopted by the Board of Directors of such
Credit Party, authorizing, in the case of the Borrower, the borrowings
contemplated hereunder and the execution, delivery and performance of this
Agreement and the other Loan Documents to which it is a party; and as to the
incumbency and genuineness of the signature of each officer of such Credit
Party executing Loan Documents to which such Person is a party.
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(iii) Certificates of Good Standing. The Credit Agent shall have
received long-form certificates as of a recent date of the good standing of
each Credit Party under the laws of their respective jurisdictions of
organization and such other jurisdictions requested by the Agents.
(iv) Opinions of Counsel. The Credit Agent shall have received
favorable opinions of counsel to the Credit Parties addressed to the Agents and
Lenders (A) with respect to such Persons and the Loan Documents substantially
in the form of Exhibit G hereto and (B) with respect to FCC and PUC matters
substantially in the form of Exhibit H hereto.
(v) Tax Forms. The Administrative Agent shall have received copies of
the United States Internal Revenue Service forms required by Section 4.10(e)
hereof.
(c) Consents; No Adverse Change.
(i) Governmental and Third Party Approvals. All necessary approvals,
authorizations and consents, if any be required, of any Person and of all
Governmental Authorities and courts having jurisdiction with respect to the
execution and delivery of this Agreement and the other Loan Documents shall
have been obtained.
(ii) Permits and Licenses. All permits and licenses, including permits
and licenses required under Applicable Laws, necessary to the conduct of
business by ALC and its Subsidiaries shall have been obtained.
(iii) No Injunction, Etc. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any Governmental Authority to enjoin, restrain, or prohibit, or to
obtain substantial damages in respect of, or which is related to or arises out
of this Agreement or the other Loan Documents or the consummation of the
transactions contemplated hereby or thereby, or which, in the Managing Agents'
reasonable discretion, would make it inadvisable to consummate the transactions
contemplated by this Agreement and such other Loan Documents.
(iv) No Material Adverse Change. There shall not have occurred any
material adverse change in the business, condition (financial or otherwise)
operations, prospects or properties of ALC and its Subsidiaries taken as a
whole, or any event, condition or state of facts that will or could be
reasonably expected to have a Material Adverse Effect.
(v) No Event of Default. No Default or Event of Default shall have
occurred and be continuing.
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(d) Financial Matters.
(i) Financial Statements. The Credit Agent shall have received the
most recent audited Consolidated financial statements of ALC and its
Subsidiaries.
(ii) Financial Condition Certificate. The Borrower shall have delivered
to the Credit Agent a certificate, in form and substance reasonably
satisfactory to such Agent, and certified as accurate in all material respects
by the chief executive officer or chief financial officer of ALC, that (A)
attached thereto is a pro forma balance sheet of ALC and its Subsidiaries
setting forth on a pro forma basis the financial condition of ALC and its
Subsidiaries on a Consolidated basis as of that date, reflecting on a pro forma
basis the effect of the transactions contemplated herein, including all
material fees and expenses in connection therewith, and evidencing compliance
on a pro forma basis with the covenants contained in Articles IX and X hereof,
(B) the financial projections previously delivered to the Managing Agents
represent the good faith opinions of the Credit Parties and senior management
thereof as to the projected results contained therein, and (C) attached thereto
is a calculation of the Applicable Margin in accordance with Section 4.1(c) as
of September 30, 1994.
(iii) Payment at Closing; Fee Letters. There shall have been paid
by the Borrower to the Agents and the Lenders the fees set forth or referenced
in Section 4.3 and any other accrued and unpaid fees or commissions due
hereunder (including, without limitation, legal fees and expenses), and to any
other Person such amount as may be due thereto in connection with the
transactions contemplated hereby, including all taxes, fees and other charges
in connection with the execution, delivery, recording, filing and registration
of any of the Loan Documents. The Credit Agent shall have received duly
authorized and executed copies of the fee letter agreement referred to in
Section 4.3(c).
(e) Miscellaneous.
(i) Notice of Borrowing. The Administrative Agent shall have received
written instructions from the Borrower to the Administrative Agent directing
the payment of any proceeds of Loans made under this Agreement that are to be
paid on the Closing Date.
(ii) Proceedings and Documents. All opinions, certificates and other
instruments and all proceedings in connection with the transactions
contemplated by this Agreement shall be reasonably satisfactory in form and
substance to the Lenders. The Lenders shall have received copies of all other
instruments and other evidence as the Lender may reasonably request, in form
and substance reasonably satisfactory to the Lenders, with respect to the
transactions contemplated by this Agreement and the taking of all actions in
connection therewith.
(iii) Due Diligence and Other Documents. The Borrower shall have
delivered to the Credit Agent such other documents,
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certificates and opinions as the Agents reasonably request, including without
limitation copies of each document evidencing or governing the Subordinated
Debt, certified by a secretary or assistant secretary of the applicable Credit
Party as a true and correct copy thereof.
SECTION 5.3. Conditions to All Loans and Letters of Credit. The
obligations of the Lenders to make any Loan or issue any Letter of Credit is
subject to the satisfaction of the following conditions precedent on the
relevant borrowing or issue date, as applicable:
(i) Governmental and Third Party Approvals. All necessary approvals,
authorizations and consents of any Person and of all Governmental Authorities
and courts having jurisdiction with respect to making any Extension of Credit
contemplated by the Loan Documents shall have been obtained; provided, that all
such approvals, authorizations and consents with respect to the initial
Extension of Credit shall be obtained by June 30, 1995 or the Commitment of
each Lender shall automatically terminate on such date.
(ii) Continuation of Representations and Warranties. The
representations and warranties contained in Article VI shall be true and
correct on and as of such borrowing or issuance date with the same effect as if
made on and as of such date.
(iii) No Existing Default. No Default or Event of Default shall have
occurred and be continuing hereunder (A) on the borrowing date with respect to
such Loan or after giving effect to the Loans to be made on such date or (B) or
the issue date with respect to such Letter of Credit or after giving affect to
such Letters of Credit on such date.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CREDIT PARTIES
SECTION 6.1. Representations and Warranties. To induce the Agents to
enter into this Agreement and the Lenders to make the Loans or issue or
participate in the Letters of Credit, the Credit Parties hereby represent and
warrant to the Agents and Lenders that:
(a) Organization; Power; Qualification. Each of ALC and its Subsidiaries
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation, has the power and authority to
own its properties and to carry on its business as now being conducted and is
duly qualified and authorized to do business in each jurisdiction where failure
to be so qualified or so authorized could reasonably be expected to have a
Material Adverse Effect. The jurisdictions in which ALC and its Subsidiaries
are organized and qualified to do business are described on Schedule 6.1(a).
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(b) Ownership. Each Subsidiary of ALC is listed on Schedule 6.1(b). The
capitalization of ALC and its Subsidiaries consists of the number of shares,
authorized, issued and outstanding, of such classes and series, with or without
par value, described on Schedule 6.1(b). All outstanding shares have been duly
authorized and validly issued and are fully paid and nonassessable. The
shareholders of the Subsidiaries of ALC and the number of shares owned by each
are described on Schedule 6.1(b). There are no outstanding stock purchase
warrants, subscriptions, options, securities, instruments or other rights of
any type or nature whatsoever, which are convertible into, exchangeable for or
otherwise provide for or permit the issuance of capital stock of ALC or its
Subsidiaries, except as described on Schedule 6.1(b).
(c) Authorization of Agreement, Loan Documents and Borrowing. Each of ALC
and its Subsidiaries has the right, power and authority and has taken all
necessary corporate and other action to authorize the execution, delivery and
performance of this Agreement and each of the other Loan Documents to which it
is a party in accordance with their respective terms. As of the respective
dates described in Article V hereof, this Agreement and each of the other Loan
Documents have been duly executed and delivered by the duly authorized officers
of ALC and each of its Subsidiaries party thereto and, on and after such dates,
each such document constitutes the legal, valid and binding obligation of ALC
or its Subsidiary party thereto, enforceable in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar state or federal debtor relief laws from
time to time in effect which affect the enforcement of creditors' rights in
general and the availability of equitable remedies.
(d) Compliance of Agreement, Loan Documents and Borrowing with Laws, Etc.
The execution, delivery and performance by ALC and its Subsidiaries of the Loan
Documents to which each such Person is a party, in accordance with their
respective terms, the borrowings hereunder and the transactions contemplated
hereby do not and will not, by the passage of time, the giving of notice or
otherwise, (i) except as set forth on Schedule 6.1(d) hereto, require any
Governmental Approval or violate any Applicable Law relating to ALC or any of
its Subsidiaries; (ii) conflict with, result in a breach of or constitute a
default under the articles of incorporation, bylaws or other organizational
documents of ALC or any of its Subsidiaries or any material indenture,
agreement or other instrument to which such Person is a party or by which any
of its properties may be bound or any Governmental Approval relating to such
Person; or (iii) result in or require the creation or imposition of any Lien
upon or with respect to any material property now owned or hereafter acquired
by such Person other than Liens arising under the Loan Documents.
(e) Compliance with Law; Governmental Approvals. Each of ALC and its
Subsidiaries (i) has all Governmental Approvals required by any Applicable Law
for it to conduct its business, except where failure to have any such
Governmental Approval could not reasonably
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be expected to have a Material Adverse Effect. Each such Governmental Approval
is in full force and effect, is final and not subject to review on appeal and
is not the subject of any pending or, to the best of its knowledge, threatened
attack by direct or collateral proceeding; and (ii) is in compliance with each
Governmental Approval applicable to it and in compliance with all other
Applicable Laws relating to it or any of its respective properties, except to
the extent that the failure to so comply could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(f) Tax Returns and Payments. Each of ALC and its Subsidiaries has duly
filed or caused to be filed all federal, state, local and other tax returns
required by Applicable Law to be filed, and has paid, or made adequate
provision for the payment of, all federal, state, local and other taxes,
assessments and governmental charges or levies upon it and its property,
income, profits and assets which are due and payable, except where failure to
so pay could not reasonably be expected to have a Material Adverse Effect or
where the payment of such tax is being disputed in good faith and adequate
reserves have been established in accordance with GAAP. No Governmental
Authority has asserted any Lien or other claim against ALC or Subsidiary
thereof with respect to material unpaid taxes which has not been discharged or
resolved or is not being contested in good faith. The charges, accruals and
reserves on the books of ALC and any of its Subsidiaries in respect of federal,
state, local and other taxes for all Fiscal Years and portions thereof since
1988 are in the judgment of ALC adequate, and ALC does not anticipate any
additional material taxes or assessments for any of such years.
(g) Environmental Matters. (i) The properties of ALC and its Subsidiaries
do not contain, and to the best knowledge of the Credit Parties, have not
previously contained, any Hazardous Materials in amounts or concentrations
which (A) constitute or constituted a violation of, or (B) could give rise to
material liability under, applicable Environmental Laws;
(ii) Such properties and all operations conducted in connection
therewith are in material compliance, and have been in material compliance,
with all applicable Environmental Laws, and to the best knowledge of the Credit
Parties, there is no contamination at or under such properties or such
operations in violation of applicable Environmental Laws or which could
materially interfere with the continued operation of such properties or, if
such properties are owned by any such Person, materially impair the fair
saleable value thereof;
(iii) Neither ALC nor any Subsidiary thereof has received any notice
of material violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of their properties or the operations
conducted in connection therewith, nor does ALC or any Subsidiary thereof have
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knowledge or reason to believe that any such notice will be received or is
being threatened;
(iv) Hazardous Materials have not been transported or disposed of from
the properties of ALC and its Subsidiaries in violation of, or in a manner or
to a location which could give rise to material liability under, Environmental
Laws, nor to the best knowledge of the Credit Parties, have any Hazardous
Materials been generated, treated, stored or disposed of at, on or under any of
such properties in material violation of, or in a manner that could give rise
to material liability under, any applicable Environmental Laws;
(v) No judicial proceedings or governmental or administrative action
is pending, or to the best knowledge of the Credit Parties, threatened, under
any Environmental Law to which ALC or any Subsidiary thereof is or will be
named as a party with respect to such properties or operations conducted in
connection therewith, nor are there any consent decrees or other decrees,
consent orders, administrative orders or other orders, or other administrative
or judicial requirements outstanding under any Environmental Law with respect
to such properties or such operations; and
(vi) There has been no release, or to the best knowledge of the Credit
Parties, threat of release, of Hazardous Materials at or from such properties,
in violation of or in amounts or in a manner that could give rise to material
liability under Environmental Laws.
(h) ERISA.
(i) Neither ALC nor any ERISA Affiliate maintains or contributes to,
or has any obligation under, any Employee Benefit Plans other than those
identified on Schedule 6.1(h);
(ii) ALC and each ERISA Affiliate is in material compliance with all
applicable provisions of ERISA and the regulations and published
interpretations thereunder with respect to all Employee Benefit Plans except
for any required amendments for which the remedial amendment period as defined
in Section 401(b) of the Code has not yet expired. Each Employee Benefit Plan
that is intended to be qualified under Section 401(a) of the Code has been
determined by the Internal Revenue Service to be so qualified, and each trust
related to such plan has been determined to be exempt under Section 501(a) of
the Code. No liability has been incurred by ALC or any ERISA Affiliate which
remains unsatisfied for any taxes or penalties with respect to any Employee
Benefit Plan or any Multiemployer Plan;
(iii) No Pension Plan has been terminated, nor has any accumulated
funding deficiency (as defined in Section 412 of the Code) been incurred
(without regard to any waiver granted under Section 412 of the Code), nor has
any funding waiver from the Internal Revenue Service been received or requested
with respect to any Pension Plan, nor has ALC or any ERISA Affiliate failed to
make
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any contributions or to pay any amounts due and owing as required by Section
412 of the Code, Section 302 of ERISA or the terms of any Pension Plan prior to
the due dates of such contributions under Section 412 of the Code or Section
302 of ERISA, nor has there been any event requiring any disclosure under
Section 4041(c)(3)(C) or 4063(a) of ERISA with respect to any Pension Plan;
(iv) Neither ALC nor any ERISA Affiliate has: (A) engaged in a
nonexempt prohibited transaction described in Section 406 of the ERISA or
Section 4975 of the Code; (B) incurred any liability to the PBGC which remains
outstanding other than the payment of premiums and there are no premium
payments which are due and unpaid; (C) failed to make a required contribution
or payment to a Multiemployer Plan; or (D) failed to make a required
installment or other required payment under Section 412 of the Code;
(v) No Termination Event has occurred or is reasonably expected to
occur; and
(vi) No material proceeding, claim, lawsuit and/or investigation is
existing or, to the best knowledge of ALC after due inquiry, threatened
concerning or involving any (A) employee welfare benefit plan (as defined in
Section 3(1) of ERISA) currently maintained or contributed to by ALC or any
ERISA Affiliate, (B) Pension Plan or (C) Multiemployer Plan.
(i) Margin Stock. Neither ALC nor any Subsidiary thereof is engaged
principally or as one of its activities in the business of extending credit for
the purpose of "purchasing" or "carrying" any "margin stock" (as each such term
is defined or used in Regulations G and U of the Board of Governors of the
Federal Reserve System). No part of the proceeds of any of the Loans or
Letters of Credit will be used for purchasing or carrying margin stock or for
any purpose which violates, or which would be inconsistent with, the provisions
of Regulation G, T, U or X of such Board of Governors.
(j) Government Regulation. Neither ALC nor any Subsidiary thereof is an
"investment company" or a company "controlled" by an "investment company" (as
each such term is defined or used in the Investment Company Act of 1940, as
amended) and neither ALC nor any Subsidiary thereof is, or after giving effect
to any Extension of Credit will be a "Holding Company" or a "Subsidiary
Company" of a "Holding Company" or an "Affiliate" of a "Holding Company" within
the respective meanings of each of the quoted terms of the Public Utility
Holding Company Act of 1935 as amended, or any other Applicable Law which
materially limits its ability to incur or consummate the transactions
contemplated hereby.
(k) Patents, Copyrights and Trademarks. Each of ALC and its Subsidiaries
owns or possesses all patent, copyright and trademark rights which are required
to conduct its business without infringing upon any validly asserted rights of
others. No event has occurred which permits, or after notice or lapse of time
or both would permit, the revocation or termination of any such
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rights. Neither ALC nor any of its Subsidiaries have been threatened with any
litigation regarding patents, copyrights or trademarks that would present a
material impediment to the business of any such Person for which
indemnification has not been obtained or for which a license has not been
negotiated.
(l) Material Contracts. Schedule 6.1(l) sets forth a complete and
accurate list of all Material Contracts of ALC and its Subsidiaries in effect
as of October 31, 1994 not listed on any other Schedule hereto; to the best
knowledge of the Credit Parties, no Material Contract has been entered into by
a Credit Party or any Subsidiary thereof after such date and prior to or on the
Closing Date; other than as set forth in Schedule 6.1(l), each of ALC and any
Subsidiary thereof party thereto has performed all of its obligations under the
Material Contracts listed on such Schedule and, to the best knowledge of the
Credit Parties, each other party thereto is in compliance with each such
Material Contract, and each such Material Contract is, and after giving effect
to the consummation of the transactions contemplated by the Loan Documents will
be, in full force and effect in accordance with the terms thereof. At the
request of the Credit Agent, ALC and its Subsidiaries shall deliver to the
Credit Agent a true and complete copy of each Material Contract required to be
listed on Schedule 6.1(m).
(m) Employee Relations. Each of ALC and its Subsidiaries is not, except
as set forth on Schedule 6.1(n), party to any collective bargaining agreement
nor has any labor union been recognized as the representative of its employees.
ALC knows of no pending, threatened or contemplated strikes, work stoppage or
other collective labor disputes involving its employees or those of its
Subsidiaries.
(n) Burdensome Provisions. Neither ALC nor any Subsidiary thereof is a
party to any indenture, agreement, lease or other instrument, or subject to any
corporate or partnership restriction, Governmental Approval or Applicable Law
which is so unusual or burdensome as in the foreseeable future could be
reasonably expected to have a Material Adverse Effect. ALC and its
Subsidiaries do not presently anticipate that future expenditures needed to
meet the provisions of any statutes, orders, rules or regulations of a
Governmental Authority will be so burdensome as to have a Material Adverse
Effect.
(o) Financial Statements. The (i) Consolidated balance sheets of ALC and
its Subsidiaries as of December 31, 1993, and the related statements of income
and retained earnings and cash flows for the Fiscal Years then ended and (ii)
unaudited Consolidated balance sheet of ALC and its Subsidiaries as of
September 30, 1994, and related unaudited interim statements of revenue and
retained earnings, copies of which have been furnished to the Credit Agent and
each Lender, are complete and correct and fairly present the assets,
liabilities and financial position of ALC and its Subsidiaries, as at such
dates, and the results of the operations and changes of financial position for
the periods then ended. All
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such financial statements, including the related schedules and notes thereto,
have been prepared in accordance with GAAP. ALC and its Subsidiaries have no
material Debt, obligation or other unusual forward or long-term commitment
which is not disclosed in the foregoing financial statements or in the notes
thereto.
(p) No Material Adverse Change. Since December 31, 1993, there has been
no material adverse change in the properties, business, operations, prospects,
or condition (financial or otherwise) of ALC and its Subsidiaries, including,
but not limited to, any material adverse change resulting from any fire,
explosion, accident, drought, storm, hail, earthquake, embargo, act of God, or
of the public enemy or other casualty (whether or not covered by insurance).
(q) Solvency. As of the Closing Date and after giving effect to each
Extension of Credit made hereunder, ALC and each of its Subsidiaries taken as a
whole will be Solvent.
(r) Titles to Properties. Each of ALC and its Subsidiaries has such title
to the real property owned by it and a valid leasehold interest in the real
property leased by it as is necessary or desirable to the conduct of its
business and good and marketable title to all of its personal property
sufficient to carry on its business, except such property as has been disposed
of by ALC or its Subsidiaries subsequent to such date which dispositions have
been in the ordinary course of business or as otherwise expressly permitted
hereunder.
(s) Liens. None of the properties and assets of ALC or any Subsidiary
thereof is subject to any Lien in the State of Michigan, and to the best
knowledge of the Credit Parties, in any other jurisdiction, except in each case
Liens permitted pursuant to Section 10.3. No financing statement under the
Uniform Commercial Code of any state which names ALC or any Subsidiary thereof
or any of their respective trade names or divisions as debtor and which has not
been terminated, has been filed in any state or other jurisdiction and neither
ALC nor any Subsidiary thereof has signed any such financing statement or any
security agreement authorizing any secured party thereunder to file any such
financing statement, except to perfect those Liens permitted by Section 10.3
hereof.
(t) Debt and Contingent Obligations. Schedule 6.1(t) is a complete and
correct listing of all Debt and Contingent Obligations of ALC and its
Subsidiaries in excess of $1,000,000. ALC and its Subsidiaries have performed
and are in material compliance with all of the terms of such Debt and
Contingent Obligations and all instruments and agreements relating thereto, and
no default or event of default, or event or condition which with notice or
lapse of time or both would constitute such a default or event of default on
the part of ALC or its Subsidiaries exists with respect to any such Debt or
Contingent Obligation.
(u) Litigation. Except as set forth on Schedule 6.1(u), there are no
actions, suits or proceedings pending nor, to the
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knowledge of ALC, threatened against or in any other way relating adversely to
or affecting ALC or any Subsidiary thereof or any of their respective
properties in any court or before any arbitrator of any kind or before or by
any Governmental Authority, which could reasonably be expected to have a
Material Adverse Effect.
(v) FCC and PUC Regulatory Matters.
(i) Each Network Agreement has been duly executed and delivered by the
respective parties thereto, is in full force and effect and neither the Credit
Parties, any Subsidiary thereof nor, to the best knowledge of the Credit
Parties, any of the other parties thereto, is in default of any of the
provisions thereof in any material respect.
(ii) Schedule 6.1(v) hereto sets forth, as of the date hereof, a true and
complete list of the following information for each FCC License or PUC
Authorization issued to ALC or any its Subsidiaries: (A) for all FCC Licenses,
the name of the licensee, the type of service and the expiration dates; and (B)
for each PUC Authorization, the geographic area covered by such PUC
Authorization, the services that may be provided thereunder and the expiration
date, if any.
(iii) The FCC Licenses and PUC Authorizations specified on Schedule
6.1(v) hereto are valid and in full force and effect without conditions except
for such conditions as are generally applicable to holders of such FCC Licenses
and PUC Authorizations. No event has occurred and is continuing which could
reasonably be expected to (A) result in the imposition of a material forfeiture
or the revocation, termination or adverse modification of any such FCC License
or PUC Authorization or (B) materially and adversely affect any rights of ALC
or any of its Subsidiaries thereunder. ALC has no reason to believe and has no
knowledge that FCC Licenses and PUC Authorizations will not be renewed in the
ordinary course.
(iv) All of the material properties, equipment and systems owned, leased or
managed by ALC and its Subsidiaries are, and (to the best knowledge of ALC) all
such property, equipment and systems to be acquired or added in connection with
any contemplated system expansion or construction will be, in good repair,
working order and condition (reasonable wear and tear excepted) and are and
will be in compliance with all terms and conditions of the FCC Licenses and PUC
Authorizations and all standards or rules imposed by any Governmental Authority
or as imposed under any agreements with telephone companies and customers.
(v) ALC and each of its Subsidiaries have paid all franchise, license or
other fees and charges which have become due pursuant to any Governmental
Approval in respect of its business and has made appropriate provision as is
required by GAAP for any such fees and charges which have accrued.
(w) Absence of Defaults. No event has occurred or is continuing which
constitutes a Default or an Event of Default, or
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which constitutes, or which with the passage of time or giving of notice or
both would constitute, a default or event of default by ALC or any Subsidiary
thereof under any Material Contract or judgment, decree or order to which ALC
or its Subsidiaries is a party or by which ALC or its Subsidiaries or any of
their respective properties may be bound or which would require ALC or its
Subsidiaries to make any payment thereunder prior to the scheduled maturity
date therefor.
(x) Senior Debt. All of the Obligations of ALC and its Subsidiaries under
the Loan Documents constitute "Senior Indebtedness" as such term is used (and
defined) in the Indenture, and the Lenders are entitled to the benefits of the
subordination provisions of the Indenture and all other documents evidencing
any Subordinated Debt. ALC acknowledges that the Agents and Lenders are
entering into this Agreement and the Lenders are making Extensions of Credit
hereunder in reliance upon such subordination provisions.
(y) Accuracy and Completeness of Information. All written information,
reports and other papers and data produced by or on behalf of ALC or any
Subsidiary thereof and furnished to the Lenders were, at the time the same were
so furnished, complete and correct in all material respects. No document
furnished or written statement made to the Agents or the Lenders by ALC or any
Subsidiary thereof in connection with the negotiation, preparation or execution
of this Agreement or any of the Loan Documents contains or will contain any
untrue statement of a fact material to the creditworthiness of ALC or its
Subsidiaries or omits or will omit to state a material fact necessary in order
to make the statements contained therein not misleading. ALC is not aware of
any facts which it has not disclosed in writing to the Agents having a Material
Adverse Effect, or insofar as ALC can now foresee, could reasonably be expected
to have a Material Adverse Effect.
SECTION 6.2. Survival of Representations and Warranties, Etc. All
representations and warranties set forth in this Article VI and all
representations and warranties contained in any certificate, or any of the Loan
Documents (including but not limited to any such representation or warranty
made in or in connection with any amendment thereto) shall constitute
representations and warranties made under this Agreement. All representations
and warranties made under this Agreement shall be made or deemed to be made at
and as of the Closing Date, shall survive the Closing Date and shall not be
waived by the execution and delivery of this Agreement, any investigation made
by or on behalf of the Lenders or any borrowing hereunder.
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ARTICLE VII
FINANCIAL INFORMATION AND NOTICES
Until all the Obligations have been finally and indefeasibly paid and
satisfied in full and the Commitments terminated, unless consent has been
obtained in the manner set forth in Section 14.11 hereof, the applicable Credit
Party will furnish or cause to be furnished to the Administrative Agent at the
Administrative Agent's Office (with copies for each Lender) and the Credit
Agent at its address set forth in Section 14.1 hereof, or such other office as
may be designated by such Agents from time to time:
SECTION 7.1. Financial Statements and Projections.
(a) Quarterly Financial Statements. As soon as practicable and in any
event within forty-five (45) days after the end of each fiscal quarter, an
unaudited Consolidated balance sheet of ALC and its Subsidiaries as of the
close of such fiscal quarter and unaudited Consolidated statements of income,
retained earnings and cash flows for the fiscal quarter then ended and that
portion of the Fiscal Year then ended, including the notes thereto, all in
reasonable detail setting forth in comparative form the corresponding figures
for the preceding Fiscal Year and prepared by ALC in accordance with GAAP, and
certified by the chief financial officer of ALC to present fairly in all
material respects the financial condition of ALC and its Subsidiaries as of
their respective dates and the results of operations of ALC and its
Subsidiaries for the respective periods then ended, subject to normal year end
adjustments. The Lenders agree that so long as ALC has a class of equity
securities registered under section 12 of the Exchange Act, the Lenders will
accept the report on Form 10-Q filed by ALC with the Securities and Exchange
Commission.
(b) Annual Financial Statements. As soon as practicable and in any event
within one hundred and twenty (120) days after the end of each Fiscal Year, an
audited Consolidated balance sheet of ALC and its Subsidiaries as of the close
of such Fiscal Year and audited Consolidated statements of income, retained
earnings and cash flows for the Fiscal Year then ended, including the notes
thereto, all in reasonable detail setting forth in comparative form the
corresponding figures for the preceding Fiscal Year and prepared by an
independent certified public accounting firm of nationally recognized standing
in accordance with GAAP, and accompanied by a report thereon by such certified
public accountants that is not qualified with respect to scope limitations
imposed by ALC or any of its Subsidiaries or with respect to accounting
principles followed by ALC or any of its Subsidiaries not in accordance with
GAAP. The Lenders agree that so long as ALC has a class of equity securities
registered under section 12 of the Exchange Act, the Lenders will accept the
report on Form 10-K filed by ALC with the Securities and Exchange Commission.
(c) Annual Business Plan and Financial Projections. As soon as
practicable and in any event within thirty (30) days prior to
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the beginning of each Fiscal Year, a business plan of ALC and its Subsidiaries
for the ensuing four fiscal quarters, such plan to be prepared in accordance
with GAAP and to include, on a quarterly basis, the following: a quarterly
operating and capital budget, a projected income statement, statement of cash
flows and balance sheet and a report containing management's discussion and
analysis of such projections (such business plan and projections, the
"Projections"), accompanied by a certificate from the chief financial officer
of ALC to the effect that, to the best of such officer's knowledge, the
Projections are good faith estimates of the financial condition and operations
of ALC and its Subsidiaries for such four quarter period.
SECTION 7.2. Officer's Compliance Certificate. At each time financial
statements are delivered pursuant to Sections 7.1(a) or (b), a certificate of
the chief financial officer or the Vice President-Controller or Vice
President-Treasurer of the Credit Parties in the form of Exhibit D attached
hereto (an "Officer's Compliance Certificate"):
(a) stating that such officers have reviewed such financial statements and
such statements fairly present the financial condition of each Credit Party as
of the dates indicated and the results of their operations and cash flows for
the periods indicated;
(b) stating that to such officers' knowledge, based on a reasonable
examination, no Default or Event of Default exists, or, if such is not the
case, specifying such Default or Event of Default and its nature, when it
occurred, whether it is continuing and the steps being taken by the Credit
Parties with respect to such Default or Event of Default; and
(c) setting forth as at the end of such fiscal quarter or Fiscal Year, as
the case may be, the calculations required to establish whether or not ALC and
its Subsidiaries were in compliance with the financial covenants set forth in
Article IX hereof as at the end of each respective period, and the calculation
of the Applicable Margin pursuant to Section 4.1(c) as at the end of each
respective period.
SECTION 7.3. Accountants' Certificate. At each time financial statements
are delivered pursuant to Section 7.1(b), a certificate of the independent
public accountants certifying such financial statements addressed to the
Managing Agents for the benefit of the Lenders:
(a) stating that in making the examination necessary for the certification
of such financial statements, they obtained no knowledge of any Default or
Event of Default or, if such is not the case, specifying such Default or Event
of Default and its nature and period of existence; and
(b) including the calculations prepared by such accountants required to
establish whether or not ALC and its Subsidiaries are
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in compliance with the financial covenants set forth in Article IX hereof as at
the end of each respective period.
SECTION 7.4. Other Reports.
(a) Promptly upon receipt thereof, copies of any management report and any
management responses thereto submitted to any Credit Party or its Board of
Directors by its independent public accountants in connection with their
auditing function;
(b) As soon as available and in any event within forty-five (45) days
after the end of each Fiscal Year of the Credit Parties, an updated Schedule
6.1(w) accompanied by a report identifying any FCC License or material PUC
Authorization lost, surrendered or canceled during such period, and within ten
(10) Business Days after the receipt by ALC or any of its Subsidiaries of
notice that any FCC License or material PUC Authorization has been lost or
canceled, copies of any such notice accompanied by a report describing the
measures undertaken by ALC or any of its Subsidiaries to prevent such loss or
cancellation (and the anticipated impact, if any, that such loss or
cancellation will have upon the business of ALC and its Subsidiaries); and
(c) Such other information regarding the operations, business affairs and
financial condition of ALC or any of its Subsidiaries as the Agents or any
Lender may reasonably request.
SECTION 7.5. Notice of Litigation and Other Matters. Prompt (but in no
event later than ten (10) days after a Responsible Officer of the applicable
Credit Party obtains knowledge thereof) telephonic and written notice of:
(a) the commencement of all material proceedings and investigations by or
before any Governmental Authority and all actions and proceedings in any court
or before any arbitrator against or involving ALC or any Subsidiary thereof or
any of their respective properties, assets or businesses;
(b) any notice of any material violation received by ALC or any Subsidiary
thereof from any Governmental Authority including, without limitation, any
notice of a material violation of Environmental Laws;
(c) any labor controversy that has resulted in, or could reasonably be
expected to result in, a strike or other work action against ALC or any
Subsidiary thereof;
(d) any attachment, judgment, lien, levy or order exceeding $5,000,000
that may be assessed against or threatened against ALC or any Subsidiary
thereof;
(e) any Default or Event of Default, or any event which constitutes or
which with the passage of time or giving of notice or both would constitute a
default or event of default under any Subordinated Debt or other Material
Contract to which ALC or any of
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its Subsidiaries is a party or by which ALC or any Subsidiary thereof or any of
their respective properties may be bound;
(f) (i) the establishment of any new Pension Plan, the commencement of
contributions to any Pension Plan to which the Borrower or any ERISA Affiliate
was not previously contributing or any increase in the benefits of any existing
Pension Plan, the cost of which increase in benefits would exceed $5,000,000 in
the aggregate; (ii) each funding waiver request filed with respect to any
Employee Benefit Plan and all communications received or sent by ALC or any
ERISA Affiliate with respect to such request; (iii) the failure of ALC or any
ERISA Affiliate to make a required installment or payment under Section 302 of
ERISA or Section 412 of the Code by the due date; (iv) any Termination Event or
"prohibited transaction", as such term is defined in Section 406 of ERISA or
Section 4975 of the Code, in connection with any Employee Benefit Plan or any
trust created thereunder, along with a description of the nature thereof, what
action ALC has taken, is taking or proposes to take with respect thereto and,
when known, any action taken or threatened by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto; (v) all notices received
by ALC or any ERISA Affiliate of the PBGC's intent to terminate any Pension
Plan or to have a trustee appointed to administer any Pension Plan; (vi) each
Schedule B (Actuarial Information) to the annual report (Form 5500 Series)
filed by ALC or any ERISA Affiliate with the Internal Revenue Service with
respect to each Pension Plan; (vii) all notices received by ALC or any ERISA
Affiliate from a Multiemployer Plan sponsor concerning the imposition or amount
of withdrawal liability pursuant to Section 4202 of ERISA; and (viii) any
Credit Party obtaining knowledge or reason to know that ALC or any ERISA
Affiliate has filed or intends to file a notice of intent to terminate any
Pension Plan under a distress termination within the meaning of Section 4041(c)
of ERISA;
(g) the enactment or promulgation after the date hereof of any federal,
state or local statute, regulation or ordinance or judicial or administrative
decision or order (or, to the extent the any Credit Party has knowledge
thereof, any such proposed statute, regulation, ordinance, decision or order,
whether by the introduction of legislation or the commencement of rulemaking or
similar proceedings or otherwise) having a material effect or relating to the
operation of the Network Facilities by ALC or any of its Subsidiaries
(including, without limitation, any statutes, decisions or orders affecting
long distance telecommunication resellers generally and not directed against
ALC or any of its Subsidiaries specifically) which have been issued or adopted
(or which have been proposed) and which could reasonably be expected to have a
Material Adverse Effect; or
(h) any event which makes any of the representations set forth in Section
6.1 inaccurate in any material respect.
SECTION 7.6. Accuracy of Information. All written information, reports,
statements and other papers and data furnished by
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or on behalf of any Credit Party to any Agent or any Lender (other than
financial forecasts) whether pursuant to this Article VII or any other
provision of this Agreement, or any of the Security Documents, shall be, at the
time the same is so furnished, complete and correct in all material respects
based on the applicable Credit Party's knowledge thereof.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Until all of the Obligations have been finally and indefeasibly paid and
satisfied in full and the Commitments terminated, unless consent has been
obtained in the manner provided for in Section 14.11, each Credit Party will,
and will cause each of its Subsidiaries to:
SECTION 8.1. Preservation of Corporate Existence and Related Matters.
Except as permitted by Section 10.5, preserve and maintain its separate
corporate existence and all rights, franchises, licenses and privileges
necessary to the conduct of its business; and qualify and remain qualified as a
foreign corporation and authorized to do business in each jurisdiction in which
the failure to so qualify would have a Material Adverse Effect.
SECTION 8.2. Maintenance of Property. Protect and preserve all properties
useful in and material to its business, including material copyrights, patents,
trade names and trademarks; maintain in good working order and condition all
buildings (reasonable wear and tear excepted), equipment and other tangible
real and personal property; and from time to time make or cause to be made all
renewals, replacements and additions to such property necessary in the
reasonable judgement of the Credit Parties for the conduct of its business, so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
SECTION 8.3. Insurance. Maintain insurance with financially sound and
reputable insurance companies against such risks and in such amounts as are
customarily maintained by similar businesses and as may be required by
Applicable Law, and on the Closing Date and from time to time thereafter
deliver to the Credit Agent upon its request a detailed list of the insurance
then in effect, stating the names of the insurance companies, the amounts and
rates of the insurance, the dates of the expiration thereof and the properties
and risks covered thereby.
SECTION 8.4. Accounting Methods and Financial Records. Maintain a system
of accounting, and keep such books, records and accounts (which shall be true
and complete in all material respects) as may be required or as may be
necessary to permit the preparation of financial statements in accordance with
GAAP and in compliance with the regulations of any Governmental Authority
having jurisdiction over it or any of its properties.
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SECTION 8.5. Payment and Performance of Obligations. Pay and perform all
Obligations under this Agreement and the other Loan Documents and pay or
perform (a) all taxes, assessments and other governmental charges that may be
levied or assessed upon it or any of its property, and (b) all other
indebtedness, obligations and liabilities in accordance with customary trade
practices; provided, that ALC or such Subsidiary may contest any item described
in clauses (a) and (b) hereof in good faith so long as adequate reserves are
maintained with respect thereto in accordance with GAAP.
SECTION 8.6. Compliance With Laws and Approvals. Observe and remain in
material compliance with all Applicable Laws and maintain in full force and
effect all material Governmental Approvals, in each case applicable or
necessary to the conduct of its business.
SECTION 8.7. Environmental Laws. In addition to and without limiting the
generality of Section 8.6, (a) comply in all material respects with, and use
its best efforts to ensure such compliance by all of its tenants and
subtenants, if any, with, all applicable Environmental Laws and obtain and
comply with and maintain, and use its best efforts to ensure that all of its
tenants and subtenants obtain and comply with and maintain, any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws; (b) conduct and complete all investigations,
studies, sampling and testing, and all remedial, removal and other actions
required under Environmental Laws, and timely comply with all lawful orders and
directives of any Governmental Authority regarding Environmental Laws; and (c)
defend, indemnify and hold harmless the Agents and the Lenders, and their
respective parents, Subsidiaries, Affiliates, employees, agents, officers and
directors, from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature known or
unknown, contingent or otherwise, arising out of, or in any way relating to the
violation of, noncompliance with or liability under any Environmental Laws
applicable to the operations of ALC or such Subsidiary, or any orders,
requirements or demands of Governmental Authorities related thereto, including,
without limitation, reasonable attorney's and consultant's fees, investigation
and laboratory fees, response costs, court costs and litigation expenses,
except to the extent that any of the foregoing arise out of or relate to the
gross negligence or willful misconduct of the party seeking indemnification
therefor.
SECTION 8.8. Compliance with ERISA. In addition to and without limiting
the generality of Section 8.6, make timely payment of contributions required to
meet the minimum funding standards set forth in ERISA with respect to any
Employee Benefit Plan; not take any action or fail to take action the result of
which could be a liability to the PBGC or to a Multiemployer Plan; not
participate in any prohibited transaction that could result in any civil
penalty under ERISA or tax under the Code; furnish to the Credit Agent upon the
Credit Agent's request such additional information about any Employee Benefit
Plan as may be reasonably requested by
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the Credit Agent; and operate each Employee Benefit Plan in such a manner that
will not incur any tax liability under Section 4980B of the Code or any
liability to any qualified beneficiary as defined in Section 4980B of the Code.
SECTION 8.9. Compliance With Agreements. Comply in all material respects
with each term, condition and provision of all leases, agreements and other
instruments entered into in the conduct of its business including, without
limitation, any Material Contract; provided, that ALC or such Subsidiary may
contest any such lease, agreement or other instrument in good faith so long as
adequate reserves are maintained in accordance with GAAP.
SECTION 8.10. Conduct of Business. Engage only in businesses in
substantially the same fields as the businesses conducted on the Closing Date
and, to the extent permitted by Section 10.4(c), in lines of business
reasonably related thereto.
SECTION 8.11. Visits and Inspections. Upon reasonable notice therefrom
and during normal business hours, permit representatives of any of the Agents
from time to time and, upon the occurrence and during the continuation of an
Event of Default, any Lender, to visit and inspect its properties; inspect,
audit and make extracts from its books, records and files, including, but not
limited to, management letters prepared by independent accountants; and discuss
with its principal officers, and its independent accountants, its business,
assets, liabilities, financial condition, results of operations and business
prospects.
SECTION 8.12. Material Subsidiaries. Concurrently with the creation of
any Material Subsidiary (a) cause such Material Subsidiary to execute and
deliver to the Credit Agent a Subsidiary Guaranty; provided, that if such
Material Subsidiary is organized under the laws of any jurisdiction other than
the United States, any State thereof or the District of Columbia (a "Foreign
Material Subsidiary"), in lieu of delivering a Subsidiary Guaranty, the Credit
Parties shall pledge or cause to be pledged to the Credit Agent for the ratable
benefit of the Agents and Lenders 65% of the capital stock of such Foreign
Material Subsidiary (which capital stock shall have ordinary voting power to
elect a majority of the board of directors of the pledgee) upon terms and
pursuant to a pledge agreement acceptable to the Credit Agent and the Required
Lenders, and (b) cause to be delivered to the Credit Agent such other documents
as the Credit Agent shall reasonably request, including without limitation,
officers' certificates, financial statements, opinions of counsel addressed to
the Agents and Lenders with respect to such Subsidiary Guarantee or pledge
agreement and any opinion of counsel delivered in connection with a related
acquisition, board resolutions, charter documents, certificates of existence
and authority to do business and any other closing certificates and documents
described in Section 5.2.
SECTION 8.13. Further Assurances. Make, execute and deliver all such
additional and further acts, things, deeds and instruments as any Agent or
Lender may reasonably require to document and
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consummate the transactions contemplated hereby and to vest completely in and
insure each Agent and the Lenders their respective rights under this Agreement,
the Notes, the Letters of Credit and the other Loan Documents.
ARTICLE IX
FINANCIAL COVENANTS
Until all of the Obligations have been finally and indefeasibly paid and
satisfied in full and the Commitments terminated, unless consent has been
obtained in the manner set forth in Section 14.11 hereof, ALC and its
Subsidiaries on a Consolidated basis will not:
SECTION 9.1. Maximum Leverage Ratio. As of the end of each fiscal quarter
during the applicable period set forth below, permit the ratio (the "Leveraged
Ratio") of (a) Total Debt as of such fiscal quarter end to (b) Consolidated
Operating Cash Flow for the period of four (4) consecutive fiscal quarters
ending on such fiscal quarter end, to exceed the corresponding ratio set forth
below:
Period Ratio
------ -----
Closing Date through
December 31, 1996 2.50 to 1.00
Fiscal Year 1997 2.25 to 1.00
Fiscal Year 1998 2.00 to 1.00
Fiscal Year 1999 1.75 to 1.00
SECTION 9.2. Minimum Debt Service Coverage Ratio. As of the end of each
fiscal quarter on and after the Closing Date, permit the ratio of (a) Operating
Cash Flow for the period of four (4) consecutive fiscal quarters ending on such
fiscal quarter end, to (b) Debt Service for such period, to be less than 1.50
to 1.00.
SECTION 9.3. Fixed Charge Coverage Ratio. As of the end of each fiscal
quarter on and after the Closing Date, permit the ratio of (a) (i) Operating
Cash Flow for the period of four (4) consecutive fiscal quarters ending on such
fiscal quarter end minus (ii) the sum of Capital Expenditures during such
period and income and franchise taxes paid or payable in cash during such
period, to (b) Fixed Charges for such period, to be less than 1.25 to 1.00.
SECTION 9.4. Minimum Net Worth. Permit Consolidated Net Worth at any time
to be less than (a) $100,000,000 plus (b) fifty percent (50%) of Consolidated
Net Income of ALC and its Subsidiaries as of each fiscal quarter end occurring
after the Closing Date plus (c) one hundred percent (100%) of the aggregate net
cash proceeds of any offering of capital stock of ALC or any of its
Wholly-Owned Subsidiaries received thereby after the Closing Date. For the
purposes of this Section 9.4, the minimum required
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Consolidated Net Worth shall not be reduced if Consolidated Net Income as of
any fiscal quarter end is less than zero.
ARTICLE X
NEGATIVE COVENANTS
Until all of the Obligations have been finally and indefeasibly paid and
satisfied in full and the Commitments terminated, unless consent has been
obtained in the manner set forth in Section 14.11 hereof, ALC has not and will
not permit any of its Subsidiaries to:
SECTION 10.1 Limitations on Debt. Create, incur, assume or suffer to
exist any Debt except (a) the Obligations, (b) Debt incurred in connection with
a Hedging Agreement with a counterparty and upon terms and conditions
reasonably satisfactory to the Managing Agents, (c) Subordinated Debt, the net
proceeds of which are utilized to repay the Obligations and permanently reduce
the Aggregate Commitment by the amount of such net proceeds, (d) existing Debt
set forth on Schedule 6.1(t) as of the Closing Date and the renewal and
refinancing (but not the increase) thereof, (e) Debt of ALC and its
Subsidiaries incurred in connection with Capitalized Leases in an aggregate
amount not to exceed $25,000,000 on any date of determination, (f) purchase
money Debt of ALC and its Subsidiaries in an aggregate amount not to exceed
$20,000,000 on any date of determination, (g) Debt consisting of Contingent
Obligations permitted by Section 10.2, and (h) unsecured Debt of ALC and its
Subsidiaries in an aggregate amount not to exceed $15,000,000 on any date of
determination; provided, that none of the Debt permitted to be incurred by this
Section shall restrict, limit or otherwise encumber (by covenant or otherwise)
the ability of ALC or any of its Subsidiaries to make any payment to the
Borrower (in the form of dividends, intercompany advances or otherwise) for the
purpose of enabling the Borrower to pay the Obligations.
SECTION 10.2. Limitations on Contingent Obligations. Create, incur,
assume or suffer to exist any Contingent Obligations except (a) Contingent
Obligations in favor of the Credit Agent for the benefit of the Agents and the
Lenders, (b) Contingent Obligations in an aggregate amount not to exceed
$5,000,000 to secure payment or performance of customer service contracts
incurred in the ordinary course of business, (c) Contingent Obligations in
respect of Network Agreements and Network Facilities incurred in the ordinary
course of business, (d) Contingent Obligations in an aggregate amount not to
exceed $15,000,000 incurred as a general or joint venture partner in connection
with any investment in a partnership or joint venture permitted pursuant to
Section 10.4, (e) Contingent Obligations not covered by clauses (b), (c) or (d)
of this Section incurred in connection with an acquisition permitted by Section
10.4(c) in an aggregate amount not to exceed $15,000,000, and (f) Contingent
Obligations consisting of guarantees by a Subsidiary of any Debt of ALC, the
Borrower or
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any other Subsidiary which Debt is permitted to be incurred hereunder.
SECTION 10.3. Limitations on Liens. Create, incur, assume or suffer to
exist, any Lien on or with respect to any of its assets or properties
(including shares of capital stock), real or personal, whether now owned or
hereafter acquired, except:
(a) Liens for taxes, assessments and other governmental charges or levies
(excluding any Lien imposed pursuant to any of the provisions of ERISA or
Environmental Laws) not yet due or as to which the period of grace (not to
exceed thirty (30) days), if any, related thereto has not expired or which are
being contested in good faith and by appropriate proceedings if adequate
reserves are maintained to the extent required by GAAP;
(b) the claims of materialmen, mechanics, carriers, warehousemen,
processors or landlords for labor, materials, supplies or rentals incurred in
the ordinary course of business, (i) which are not overdue for a period of more
than thirty (30) days or (ii) which are being contested in good faith and by
appropriate proceedings;
(c) Liens consisting of deposits or pledges made in the ordinary course of
business in connection with, or to secure payment of, obligations under
workers' compensation, unemployment insurance or similar legislation or
obligations (not to exceed $2,000,000) under customer service contracts;
(d) Liens constituting encumbrances in the nature of zoning restrictions,
easements and rights or restrictions of record on the use of real property,
which in the aggregate are not substantial in amount and which do not, in any
case, materially detract from the value of such property or impair the use
thereof in the ordinary conduct of business;
(e) Liens of the Credit Agent for the benefit of the Agents and the
Lenders;
(f) Existing liens described on Schedule 10.3;
(g) Liens securing Debt permitted under Section 10.1(e); and
(h) Liens securing Debt permitted under Section 10.1(f); provided that (i)
such Liens shall be created substantially simultaneously with the acquisition
of the related Capital Asset, (ii) such Liens do not at any time encumber any
property other than the property financed by such Debt, (iii) the amount of
Debt secured thereby is not increased and (iv) the principal amount of Debt
secured by any such Lien shall at no time exceed 100% of the original purchase
price of such property at the time it was acquired.
SECTION 10.4. Limitations on Loans, Advances, Investments and
Acquisitions. Purchase, own, invest in or otherwise acquire,
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directly or indirectly, any capital stock, interests in any partnership or
joint venture, evidence of Debt or other obligation or security, substantially
all or a material portion of the business or assets of any other Person or any
other investment or interest whatsoever in any other Person; or make or permit
to exist, directly or indirectly, any loans, advances or extensions of credit
to, or any investment in cash or by delivery of property in, any Person; or
enter into, directly or indirectly, any commitment or option in respect of the
foregoing except:
(a) loans or advances by any Subsidiary to ALC, the Borrower or any other
Subsidiary, and the other existing loans, advances and investments described on
Schedule 10.4;
(b) investments in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency
thereof maturing within one (1) year from the date of acquisition thereof, (ii)
commercial paper maturing no more than 120 days from the date of creation
thereof and currently having the highest rating obtainable from either Standard
& Poor's Corporation or Moody's Investors Service, Inc., (iii) certificates of
deposit maturing no more than 120 days from the date of creation thereof issued
by commercial banks incorporated under the laws of the United States of
America, each having combined capital, surplus and undivided profits of not
less than $500,000,000 and having a rating of "A" or better by a nationally
recognized rating agency; provided, that the aggregate amount invested in such
certificates of deposit shall not at any time exceed $5,000,000 for any one
such certificate of deposit and $10,000,000 for any one such bank, or (iv) time
deposits maturing no more than 30 days from the date of creation thereof with
commercial banks or savings banks or savings and loan associations each having
membership either in the Federal Deposit Insurance Corporation ("FDIC") or the
deposits of which are insured by the FDIC and in amounts not exceeding the
maximum amounts of insurance thereunder;
(c) investments by ALC or any Subsidiary in the form of acquisitions of
all or substantially all of the business or a line of business (whether by the
acquisition of capital stock, assets or any combination thereof) of any other
Person if each such acquisition meets all of the following requirements: (i)
the Person to be acquired shall be a provider of long distance telephone
service or related communications business, (ii) ALC or any Wholly-Owned
Subsidiary thereof shall be the surviving Person and no Change in Control shall
have been effected thereby, (iii) the Credit Parties shall have demonstrated
pro forma compliance with each covenant contained in Articles VIII, IX and X
hereof prior to consummating the acquisition, (iv) a description of the
acquisition shall have been delivered to the Managing Agents at least fifteen
(15) Business Days prior to the consummation of the acquisition, (v) if such
acquisition causes the aggregate fair market value of the consideration
provided by ALC or any Subsidiary in connection with all acquisitions permitted
in this Section 10.4(c) and investments referred to in Section 10.4(d) during
the immediately preceding four (4) fiscal quarter period to exceed
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$75,000,000, the Required Lenders shall have consented to such acquisition,
(vi) a Subsidiary Guaranty executed by the Person acquired in connection with
such acquisition shall be delivered to the Credit Agent upon the consummation
thereof in accordance with Section 8.12 if such acquired Person is a Material
Subsidiary and (vii) if the total fair market value of the consideration paid
by the acquiror in connection with such acquisition exceeds $15,000,000 or
causes the aggregate fair market value of the consideration paid by ALC or any
Subsidiary thereof in connection with all acquisitions during the immediately
preceding four (4) full fiscal quarters to exceed $30,000,000, the Borrower
shall provide evidence satisfactory to the Agent and Required Lenders of
receipt of all Governmental Approvals required to be obtained in connection
with such acquisition; and
(d) investments by ALC or any Subsidiary thereof in joint venture and
other partnership interests in an aggregate amount not to exceed $75,000,000
during the term of this Agreement.
SECTION 10.5. Limitations on Mergers and Liquidation. Merge, consolidate
or enter into any similar combination with any other Person or liquidate,
wind-up or dissolve itself (or suffer any liquidation or dissolution) except
(a) any Wholly-Owned Subsidiary of ALC which is not a Material Subsidiary may
be liquidated, wound-up or dissolved, (b) any Wholly-Owned Subsidiary of ALC
may merge with ALC or any other Wholly-Owned Subsidiary of ALC; provided, that
if any such merger involves the Borrower, the Borrower shall be the surviving
entity and (c) any Wholly-Owned Subsidiary may merge into the Person such
Wholly-Owned Subsidiary was formed to acquire in connection with an acquisition
permitted by Section 10.4(c).
SECTION 10.6. Limitations on Sale of Assets. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, the sale of any receivables and leasehold
interests and any sale-leaseback or similar transaction), whether now owned or
hereafter acquired except:
(a) the sale of inventory in the ordinary course of business;
(b) the sale of obsolete assets no longer used or usable in the business
of ALC or any of its Subsidiaries;
(c) the sale or discount without recourse of accounts receivable arising
in the ordinary course of business in connection with the compromise or
collection thereof;
(d) the transfer by any Subsidiary of any of its property to any other
Subsidiary, ALC or the Borrower; and
(e) any other asset sale; provided that (i) no Default or Event of Default
shall exist or would be created thereby and (ii) on the date of consummation of
any such sale, the aggregate gross proceeds of all such asset sales (including,
on a pro forma basis,
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the proposed sale) during the period of four (4) consecutive fiscal quarters
ending on, or most recently ended prior to, such date would not exceed ten
percent (10%) of Operating Cash Flow of ALC and its Subsidiaries for such
period.
SECTION 10.7. Limitations on Dividends and Distributions. Declare or pay
any dividends upon any of its capital stock; purchase, redeem, retire or
otherwise acquire, directly or indirectly, any shares of its capital stock, or
make any distribution of cash, property or assets among the holders of shares
of its capital stock; or make any material change in its capital structure that
could reasonably be expected to have a Material Adverse Effect; provided that
(a) any Credit Party may pay dividends in shares of its own capital stock, (b)
any Subsidiary may pay dividends or make other distributions in respect of its
capital stock to any Credit Party or another Subsidiary, (c) any Subsidiary may
make payments on any Debt or other obligation owed to any other Subsidiary or
any Credit Party which Debt or other obligation is permitted hereunder, and (d)
the Credit Parties may pay cash dividends and may redeem or repurchase shares
of their respective capital stock (i) in an aggregate amount not to exceed
thirty percent (30%) of cumulative Consolidated Net Income after the Closing
Date and (ii) if at the time of such payment, redemption or repurchase, no
Default or Event of Default shall exist or would be created thereby.
SECTION 10.8. Limitations on Exchange and Issuance of Capital Stock.
Issue, sell or otherwise dispose of any class or series of capital stock that,
by its terms or by the terms of any security into which it is convertible or
exchangeable, is, or upon the happening of an event or passage of time would
be, (a) convertible or exchangeable into Debt or (b) required to be redeemed or
repurchased, including at the option of the holder, in whole or in part, or
has, or upon the happening of an event or passage of time would have, a
redemption or similar payment due.
SECTION 10.9. Transactions with Affiliates. Directly or indirectly: (a)
make any loan or advance to, or purchase or assume any note or other obligation
to or from, any of its officers, directors, shareholders or other Affiliates,
or to or from any member of the immediate family of any of its officers,
directors, shareholders or other Affiliates, or subcontract any operations to
any of its Affiliates, or (b) enter into, or be a party to, any transaction
with any of its Affiliates, except pursuant to the reasonable requirements of
its business and upon fair and reasonable terms that are fully disclosed to the
Required Lenders and are no less favorable to it than would obtain in a
comparable arm's length transaction with a Person not its Affiliate.
SECTION 10.10. Certain Accounting Changes. Change its Fiscal Year end, or
make any material change in its accounting treatment and reporting practices
except as required by GAAP.
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SECTION 10.11. Amendments; Payments and Prepayments of Subordinated Debt.
Amend or modify (or permit the modification or amendment of) any of the terms
or provisions of any Subordinated Debt; or cancel or forgive, make any
voluntary or optional payment or prepayment on, or redeem or acquire for value
(including without limitation by way of depositing with any trustee with
respect thereto money or securities before due for the purpose of paying when
due) any Subordinated Debt, except that the Subordinated Notes may be redeemed
in part by the Borrower (i) at any time after May 15, 1998 in accordance with
the terms of the form of Subordinated Note attached as Exhibit A to the
Indenture in an aggregate amount not to exceed $10,000,000 in any consecutive
four (4) calendar quarter period and (ii) with any Excess Proceeds (as defined
in the Indenture) in accordance with Section 4.13(b) thereof.
SECTION 10.12. Compliance with ERISA. (a) Permit the occurrence of any
Termination Event which would result in a liability to ALC or any ERISA
Affiliate in excess of $250,000 (b) permit the present value of all benefit
liabilities under all Pension Plans (determined under the actuarial assumptions
used for Code and ERISA funding purposes) to exceed the current value of the
assets of such Pension Plans allocable to such benefit liabilities by more than
$250,000; (c) permit any accumulated funding deficiency (as defined in Section
302 of ERISA and Section 412 of the Code) with respect to any Pension Plan,
whether or not waived; (d) fail to make any contribution or payment to any
Multiemployer Plan which ALC or any ERISA Affiliate may be required to make
under any agreement relating to such Multiemployer Plan, or any law pertaining
thereto which results in or is likely to result in a liability in excess of
$250,000; (e) engage, or permit ALC or any ERISA Affiliate to engage, in any
prohibited transaction under Section 406 of ERISA or Section 4975 of the Code
for which a civil penalty pursuant to Section 502(i) of ERISA or a tax pursuant
to Section 4975 of the Code in excess of $250,000 is imposed; (f) permit the
establishment of any Employee Benefit Plan providing post-retirement welfare
benefits or establish or amend any Employee Benefit Plan which establishment or
amendment could result in liability to ALC or any ERISA Affiliate or increase
the obligation of ALC or any ERISA Affiliate to a Multiemployer Plan which
liability or increase, individually or together with all similar liabilities
and increases, is material to ALC or any ERISA Affiliate; or (g) fail, or
permit ALC or any ERISA Affiliate to fail, to establish, maintain and operate
each Employee Benefit Plan in compliance in all material respects with the
provisions of ERISA, the Code and all other applicable laws and the regulations
and interpretations thereof.
SECTION 10.13. Restrictive Agreements. Enter into any Debt which contains
any negative pledge on assets or any covenants materially more restrictive than
the provisions of Articles VIII, IX and X hereof, or which restricts, limits or
otherwise encumbers its ability to incur Liens on or with respect to any of its
assets or properties other than the assets or properties securing such Debt.
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ARTICLE XI
UNCONDITIONAL GUARANTY
SECTION 11.1. Guaranty of Obligations of Borrower. The Guarantor hereby
unconditionally guarantees to the Credit Agent for the ratable benefit of the
Agents and the Lenders, and their respective successors, endorsees, transferees
and assigns, the prompt payment and performance of all Obligations of the
Borrower, whether primary or secondary (whether by way of endorsement or
otherwise), whether now existing or hereafter arising, whether or not from time
to time reduced or extinguished (except by payment thereof) or hereafter
increased or incurred, whether or not recovery may be or hereafter become
barred by the statute of limitations, whether enforceable or unenforceable as
against the Borrower, whether or not discharged, stayed or otherwise affected
by any bankruptcy, insolvency or other similar law or proceeding, whether
created directly with any Agent or Lender or acquired by any Agent or Lender
through assignment, endorsement or otherwise, whether matured or unmatured,
whether joint or several, as and when the same become due and payable (whether
at maturity or earlier, by reason of acceleration, mandatory repayment or
otherwise), in accordance with the terms of any such instruments evidencing any
such obligations, including all renewals, extensions or modifications thereof
(all Obligations of the Borrower to any Agent or Lender, including all of the
foregoing, being hereinafter collectively referred to as the "Guaranteed
Obligations").
SECTION 11.2. Nature of Guaranty. The Guarantor agrees that this Guaranty
is a continuing, unconditional guaranty of payment and performance and not of
collection, and that its obligations under this Guaranty shall be primary,
absolute and unconditional, irrespective of, and unaffected by (a) the
genuineness, validity, regularity, enforceability or any future amendment of,
or change in, this Agreement or any other Loan Document or any other agreement,
document or instrument to which ALC or any Subsidiary thereof is or may become
a party, (b) the absence of any action to enforce this Guaranty, this Agreement
or any other Loan Document or the waiver or consent by the Credit Agent or any
Lender with respect to any of the provisions of this Guaranty, this Agreement
or any other Loan Document, (c) the existence, value or condition of, or
failure to perfect its Lien against, any security for or other guaranty of the
Guaranteed Obligations or any action, or the absence of any action, by the
Credit Agent or any Lender in respect of such security or guaranty (including,
without limitation, the release of any such security or guaranty) or (d) any
other action or circumstances which might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor; it being agreed by the
Guarantor that its obligations under this Guaranty shall not be discharged
until the final and indefeasible payment and performance, in full, of the
Guaranteed Obligations and the termination of the Commitments. The Guarantor
expressly waives all rights it may now or in the future have under any statute
(including without limitation North Carolina General Statutes Section 26-7, et
seq. or
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similar law), or at law or in equity, or otherwise, to compel the Credit Agent
or any Lender to proceed in respect of the Guaranteed Obligations against the
Borrower or any other party or against any security for or other guaranty of
the payment and performance of the Guaranteed Obligations before proceeding
against, or as a condition to proceeding against, the Guarantor. The Guarantor
further expressly waives and agrees not to assert or take advantage of any
defense based upon the failure of the Credit Agent or any Lender to commence an
action in respect of the Guaranteed Obligations against the Borrower, the
Guarantor, any Subsidiary Guarantor or any other party or any security for the
payment and performance of the Guaranteed Obligations. The Guarantor agrees
that any notice or directive given at any time to the Credit Agent or any
Lender which is inconsistent with the waivers in the preceding two sentences
shall be null and void and may be ignored by the Credit Agent or Lender, and,
in addition, may not be pleaded or introduced as evidence in any litigation
relating to this Guaranty for the reason that such pleading or introduction
would be at variance with the written terms of this Guaranty, unless the Credit
Agent and the Required Lenders have specifically agreed otherwise in writing.
The foregoing waivers are of the essence of the transaction contemplated by the
Loan Documents and, but for this Guaranty and such waivers, the Agents and
Lenders would decline to enter into this Agreement.
SECTION 11.3. Demand by the Credit Agent. In addition to the terms set
forth in Section 11.2, and in no manner imposing any limitation on such terms,
if all or any portion of the then outstanding Guaranteed Obligations under this
Agreement are declared to be immediately due and payable, then the Guarantor
shall, upon demand in writing therefor by the Credit Agent to the Guarantor,
pay all or such portion of the outstanding Guaranteed Obligations then declared
due and payable. Payment by the Guarantor shall be made to the Credit Agent,
to be credited and applied upon the Guaranteed Obligations, in immediately
available Dollars to an account designated by the Credit Agent or at the
address referenced herein for the giving of notice to the Credit Agent or at
any other address that may be specified in writing from time to time by the
Credit Agent.
SECTION 11.4. Waivers. In addition to the waivers contained in Section
11.2, the Guarantor waives, and agrees that it shall not at any time insist
upon, plead or in any manner whatever claim or take the benefit or advantage
of, any appraisal, valuation, stay, extension, marshalling of assets or
redemption laws, or exemption, whether now or at any time hereafter in force,
which may delay, prevent or otherwise affect the performance by the Guarantor
of its obligations under, or the enforcement by the Credit Agent or the Lenders
of, this Guaranty. The Guarantor further hereby waives diligence, presentment,
demand, protest and notice of whatever kind or nature with respect to any of
the Guaranteed Obligations and waive the benefit of all provisions of law which
are or might be in conflict with the terms of this Guaranty. The Guarantor
represents, warrants and agrees that its obligations under this Guaranty are
not and shall not be subject to any counterclaims, offsets or
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defenses of any kind against the Credit Agent, the Lenders or the Borrower
whether now existing or which may arise in the future.
SECTION 11.5. Modification of Loan Documents etc. If the Credit Agent or
the Lenders shall at any time or from time to time, with or without the consent
of, or notice to, the Guarantor (a) change or extend the manner, place or terms
of payment of, or renew or alter all or any portion of, the Guaranteed
Obligations, (b) take any action under or in respect of the Loan Documents in
the exercise of any remedy, power or privilege contained therein or available
to it at law, in equity or otherwise, or waive or refrain from exercising any
such remedies, powers or privileges, (c) amend or modify, in any manner
whatsoever, the Loan Documents (other than an amendment to the Credit Agreement
executed pursuant to Section 2.6 increasing the Aggregate Commitment), (d)
extend or waive the time for performance by the Guarantor, any Subsidiary
Guarantor, the Borrower or any other Person of, or compliance with, any term,
covenant or agreement on its part to be performed or observed under a Loan
Document (other than this Guaranty), or waive such performance or compliance or
consent to a failure of, or departure from, such performance or compliance, (e)
take and hold security or collateral for the payment of the Guaranteed
Obligations or sell, exchange, release, dispose of, or otherwise deal with, any
property pledged, mortgaged or conveyed, or in which the Credit Agent or the
Lenders have been granted a Lien, to secure any Debt of the Guarantor, the
Subsidiary Guarantors or the Borrower to any Agent or the Lenders, (f) release
anyone who may be liable in any manner for the payment of any amounts owed by
the Guarantor, the Subsidiary Guarantors or the Borrower to any Agent or
Lender, (g) modify or terminate the terms of any intercreditor or subordination
agreement pursuant to which claims of other creditors of the Guarantor, the
Subsidiary Guarantors or the Borrower are subordinated to the claims of any
Agent or Lender or (h) apply any sums by whomever paid or however realized to
any amounts owing by the Guarantor, the Subsidiary Guarantors or the Borrower
to any Agent or Lender on account of the Obligations in such manner as the
Credit Agent or any Lender shall determine in its reasonable discretion; then
neither the Credit Agent nor any Lender shall incur any liability to the
Guarantor as a result thereof, and no such action shall impair or release the
obligations of the Guarantor under this Guaranty.
SECTION 11.6. Reinstatement. The Guarantor agrees that, if any payment
made by the Borrower or any other Person applied to the Obligations is at any
time annulled, set aside, rescinded, invalidated, declared to be fraudulent or
preferential or otherwise required to be refunded or repaid, or the proceeds of
Collateral are required to be returned by any Agent or Lender to the Borrower,
its estate, trustee, receiver or any other party, including, without
limitation, the Guarantor, under any Applicable Law or equitable cause, then,
to the extent of such payment or repayment, the Guarantor's liability hereunder
(and any Lien or Collateral securing such liability) shall be and remain in
full force and effect, as fully as if such payment had never been made, and, if
prior thereto, this Guaranty shall have been canceled or surren-
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dered (and if any Lien or Collateral securing the Guarantor's liability
hereunder shall have been released or terminated by virtue of such cancellation
or surrender), this Guaranty (and such Lien or Collateral) shall be reinstated
in full force and effect, and such prior cancellation or surrender shall not
diminish, release, discharge, impair or otherwise affect the obligations of the
Guarantor in respect of the amount of such payment (or any Lien or Collateral
securing such obligation).
SECTION 11.7. No Subrogation. Until all amounts owing to the Agents and
Lenders on account of the Obligations are paid in full and the Commitments are
terminated, the Guarantor hereby waives any claims or other rights which it may
now or hereafter acquire against the Borrower that arise from the existence or
performance of the Guarantor's obligations under this Guaranty, including,
without limitation, any right of subrogation, reimbursement, exoneration,
indemnification, any right to participate in any claim or remedy of the Credit
Agent or the Lenders against the Borrower or any Collateral which the Credit
Agent or the Lenders now have or may hereafter acquire, whether or not such
claim, remedy or right arises in equity or under contract, statute or common
law, by any payment made hereunder or otherwise, including without limitation,
the right to take or receive from the Borrower, directly or indirectly, in cash
or other property or by set-off or in any other manner, payment or security on
account of such claim or other rights. If any amount shall be paid to the
Guarantor on account of such rights at any time when all of the Obligations
shall not have been paid in full, such amount shall be held by the Guarantor in
trust for the Credit Agent, segregated from other funds of the Guarantor, and
shall, forthwith upon receipt by the Guarantor, be turned over to the Credit
Agent in the exact form received by the Guarantor (duly indorsed by the
Guarantor to the Credit Agent, if required) to be applied against the
Obligations, whether matured or unmatured, in such order as set forth herein.
ARTICLE XII
DEFAULT AND REMEDIES
SECTION 12.1. Events of Default. Each of the following shall constitute
an Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
Governmental Authority or otherwise:
(a) Default in Payment of Principal of Loans and Reimbursement
Obligations. The Borrower shall default in any payment of principal of any
Loan, Note or Reimbursement Obligation when and as due (whether at maturity, by
reason of acceleration or otherwise).
(b) Other Payment Default. The Borrower shall default in the payment when
and as due (whether at maturity, by reason of
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acceleration or otherwise) of interest on any Loan, Note or Reimbursement
Obligation or the payment of any other Obligation, and such default shall
continue unremedied for five (5) Business Days.
(c) Misrepresentation. Any representation or warranty made or deemed to
be made by the Credit Parties or any of their Subsidiaries under this
Agreement, any Loan Document or any amendment hereto or thereto, shall at any
time prove to have been incorrect or misleading in any material respect when
made or deemed made.
(d) Default in Performance of Certain Covenants. Any Credit Party shall
default in the performance or observance of any covenant or agreement contained
in Sections 7.5(e) or 8.12 or Articles IX or X of this Agreement.
(e) Default in Performance of Other Covenants and Conditions. Any Credit
Party or Subsidiary thereof shall default in the performance or observance of
any term, covenant, condition or agreement contained in this Agreement (other
than as specifically provided for otherwise in this Section 12.1) or any other
Loan Document and such default shall continue for a period of thirty (30) days
after written notice thereof has been given to the Borrower by the Credit
Agent.
(f) Hedging Agreement. Any termination payment shall be due by the
Borrower under any Hedging Agreement and such amount is not paid within ten
(10) Business Days of the due date thereof.
(g) Debt Cross-Default. ALC or any of its Subsidiaries shall (i) default
in the payment of any Debt (other than the Notes or any Reimbursement
Obligation) the aggregate outstanding amount of which is in excess of
$5,000,000 beyond the period of grace if any, provided in the instrument or
agreement under which such Debt was created; or (ii) default in the observance
or performance of any other agreement or condition relating to any Debt (other
than the Notes or any Reimbursement Obligation) the aggregate outstanding
amount of which is in excess of $5,000,000 or contained in any instrument or
agreement evidencing, securing or relating thereto or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Debt (or a
trustee or agent on behalf of such holder or holders) to cause, with the giving
of notice if required, any such Debt to become due prior to its stated maturity
(any applicable grace period having expired).
(h) Other Cross-Defaults. ALC or any of its Subsidiaries shall default in
the payment when due, or in the performance or observance, of any obligation or
condition of any Material Contract the breach of which could reasonably be
expected to have a Material Adverse Effect unless, but only as long as, the
existence of any such default is being contested by ALC or such Subsidiary in
good faith by appropriate proceedings and adequate reserves in respect
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thereof have been established on the books of ALC or such Subsidiary to the
extent required by GAAP.
(i) Change in Control. (a) Any person or group of persons (within the
meaning of Section 13(d) of the Exchange Act) other than current management
thereof, shall obtain "beneficial ownership" (within the meaning of Rule 13d-3
of the Exchange Act, except that a Person shall have been deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is excerisable immediately or only after the
passage of time) in one or more series of transactions of more than forty
percent (40%) of the common stock and forty percent (40%) of the voting power
of ALC entitled to vote in the election of members of the board of directors of
ALC or there shall have occurred under any indenture or other instrument
evidencing any Debt in excess of $5,000,000 any "change in control" (as defined
in such indenture or other evidence of Debt) obligating ALC to repurchase,
redeem or repay all or any part of the Debt or capital stock provided for
therein or (b) any person or group of persons (within the meaning of Section
13(d) of the Securities Exchange Act of 1934, as amended) other than ALC, shall
obtain ownership or control in one or more series of transactions of more than
fifty percent (50%) of the common stock and fifty percent (50%) of the voting
power of the Borrower entitled to vote in the election of members of the board
of directors of the Borrower or there shall have occurred under the Indenture
or other instrument evidencing any Debt in excess of $5,000,000 any "change in
control" (as defined in such Indenture or other evidence of Debt) obligating
the Borrower to repurchase, redeem or repay all or any part of the Debt or
capital stock provided for therein (any such event referred to in clause (a) or
(b), a "Change in Control").
(j) Voluntary Bankruptcy Proceeding. ALC or any Subsidiary thereof shall
(i) commence a voluntary case under the federal bankruptcy laws (as now or
hereafter in effect); (ii) file a petition seeking to take advantage of any
other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition for adjustment of debts; (iii)
consent to or fail to contest within sixty (60) days of the filing thereof any
petition filed against it in an involuntary case under such bankruptcy laws or
other laws; (iv) apply for or consent to, or fail to contest in a timely and
appropriate manner, the appointment of, or the taking of possession by, a
receiver, custodian, trustee, or liquidator of itself or of a substantial part
of its property, domestic or foreign; (v) admit in writing its inability to pay
its debts as they become due; (vi) make a general assignment for the benefit of
creditors; or (vii) take any corporate action for the purpose of authorizing
any of the foregoing.
(k) Involuntary Bankruptcy Proceeding. A case or other proceeding shall
be commenced against ALC or any Subsidiary thereof in any court of competent
jurisdiction seeking (i) relief under the federal bankruptcy laws (as now or
hereafter in effect) or under any other laws, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, winding up or adjustment of debts; or
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(ii) the appointment of a trustee, receiver, custodian, liquidator or the like
for ALC or any Subsidiary thereof or for all or any substantial part of their
respective assets, domestic or foreign, and such case or proceeding shall
continue undismissed or unstayed for a period of sixty (60) consecutive
calendar days, or an order granting the relief requested in such case or
proceeding (including, but not limited to, an order for relief under such
federal bankruptcy laws) shall be entered.
(l) Failure of Agreements. Any material provision of this
Agreement or of any other Loan Document shall for any reason cease to be valid
and binding on any Credit Party or Subsidiary Guarantor or any such Person
shall so state in writing, or this Agreement or any other Loan Document shall
for any reason cease to create a valid and perfected first priority Lien on, or
security interest in, any of the Collateral purported to be covered thereby, in
each case other than in accordance with the express terms hereof or thereof.
(m) Termination Event. The occurrence of any of the following
events: (i) the Borrower or any ERISA Affiliate fails to make full payment
when due of all amounts which, under the provisions of any Pension Plan or
Section 412 of the Code, ALC or any ERISA Affiliate is required to pay as
contributions thereto; (ii) an accumulated funding deficiency in excess of
$1,000,000 occurs or exists, whether or not waived, with respect to any Pension
Plan; (iii) a Termination Event; or (iv) the Borrower or any ERISA Affiliate as
employers under one or more Multiemployer Plan makes a complete or partial
withdrawal from any such Multiemployer Plan and the plan sponsor of such
Multiemployer Plans notifies such withdrawing employer that such employer has
incurred a withdrawal liability requiring payments in an amount exceeding
$100,000.
(n) Judgment. A judgment or order for the payment of money which
exceeds $5,000,000 in amount shall be entered against the ALC or any of its
Subsidiaries by any court and such judgment or order shall continue
undischarged or unstayed for a period of thirty (30) days.
(o) Attachment. A warrant or writ of attachment or execution or
similar process shall be issued against any property of the ALC or any of its
Subsidiaries which exceeds $5,000,000 in value and such warrant or process
shall continue undischarged or unstayed for a period of thirty (30) days.
(p) Loss of Approval. Any FCC License or PUC Authorization of ALC
or any Subsidiary thereof shall expire, terminate, be canceled or otherwise
lost or any application therefor be rejected, which event could reasonably be
expected to have a Material Adverse Effect.
SECTION 12.2. Remedies. Upon the occurrence of an Event of Default,
with the consent of the Required Lenders, the Credit Agent
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may, or upon the request of the Required Lenders, the Credit Agent shall, by
notice to the Borrower:
(a) Acceleration; Termination of Facilities. Declare the principal
of and interest on the Loans, the Notes and the Reimbursement Obligations at
the time outstanding, and all other amounts owed to the Lenders and to the
Agents under this Agreement or any of the other Loan Documents (including,
without limitation, all L/C Obligations, whether or not the beneficiaries of
the then outstanding Letters of Credit shall have presented the documents
required thereunder) and all other Obligations, to be forthwith due and
payable, whereupon the same shall immediately become due and payable without
presentment, demand, protest or other notice of any kind, all of which are
expressly waived, anything in this Agreement or the other Loan Documents to the
contrary notwithstanding, and terminate the Credit Facility and any right of
the Borrower to request borrowings or Letters of Credit thereunder; provided,
that upon the occurrence of an Event of Default specified in Section 12.1(j) or
(k), the Credit Facility shall be automatically terminated and all Obligations
shall automatically become due and payable.
(b) Letters of Credit. With respect to all Letters of Credit with
respect to which presentment for honor shall not have occurred at the time of
an acceleration pursuant to the preceding paragraph, require the Borrower at
such time to deposit in a cash collateral account opened by the Administrative
Agent an amount equal to the aggregate then undrawn and unexpired amount of
such Letters of Credit. Amounts held in such cash collateral account shall be
applied by the Administrative Agent to the payment of drafts drawn under such
Letters of Credit, and the unused portion thereof after all such Letters of
Credit shall have expired or been fully drawn upon, if any, shall be applied to
repay the other Obligations. After all such Letters of Credit shall have
expired or been fully drawn upon, the Reimbursement Obligation shall have been
satisfied and all other Obligations shall have been paid in full, the balance,
if any, in such cash collateral account shall be returned to the Borrower.
(c) Rights of Collection. Exercise on behalf of the Lenders all of
its other rights and remedies under this Agreement, the other Loan Documents
and Applicable Law, in order to satisfy all of the Borrower's Obligations.
SECTION 12.3. Rights and Remedies Cumulative; Non-Waiver; etc. The
enumeration of the rights and remedies of the Agents and the Lenders set forth
in this Agreement is not intended to be exhaustive and the exercise by the
Agents and the Lenders of any right or remedy shall not preclude the exercise
of any other rights or remedies, all of which shall be cumulative, and shall be
in addition to any other right or remedy given hereunder or under the Loan
Documents or that may now or hereafter exist in law or in equity or by suit or
otherwise. No delay or failure to take action on the part of any Agent or
Lender in exercising any right, power or privilege shall operate as a waiver
thereof, nor shall any
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single or partial exercise of any such right, power or privilege preclude other
or further exercise thereof or the exercise of any other right, power or
privilege or shall be construed to be a waiver of any Event of Default. No
course of dealing between the Credit Parties, the Agents and the Lenders or
their respective agents or employees shall be effective to change, modify or
discharge any provision of this Agreement or any of the other Loan Documents or
to constitute a waiver of any Event of Default. In addition, any election of
remedies which results in the denial or impairment of the right of the Credit
Agent to seek a deficiency judgment against the Borrower shall not impair the
Guarantor's obligation to pay the full amount of the Guaranteed Obligations.
SECTION 12.4. Consents. The Credit Parties acknowledge that certain
transactions contemplated by this Agreement and the other Loan Documents and
certain actions which may be taken by the Agents or the Lenders in the exercise
of their respective rights under this Agreement and the other Loan Documents
may require the consent of the FCC or a PUC. If counsel to any Agent
reasonably determines that the consent of the FCC or a PUC is required in
connection with the execution, delivery and performance of any of the aforesaid
documents or any documents delivered to the Agents or the Lenders in connection
therewith or as a result of any action which may be taken pursuant thereto,
then the Credit Parties, at their sole cost and expense, agree to use their
best efforts to secure such consent and to cooperate with the Agents and the
Lenders in any action commenced by any Agent or Lender to secure such consent.
ARTICLE XIII
THE AGENTS
SECTION 13.1. Appointment. Each of the Lenders hereby irrevocably
designates and appoints First Union as Credit Agent and Managing Agent and
Syndication Agent of such Lender and Bank One as Administrative Agent and
Managing Agent of such Lender under this Agreement and the other Loan Documents
and each such Lender irrevocably authorizes First Union as Credit Agent,
Managing Agent and Syndication Agent, and Bank One as Administrative Agent and
Managing Agent, respectively, for such Lender, to take such action on its
behalf under the provisions of this Agreement and the other Loan Documents and
to exercise such powers and perform such duties as are expressly delegated to
each such Agent by the terms of this Agreement and such other Loan Documents,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement or
such other Loan Documents, none of the Agents shall have any duties or
responsibilities, except those expressly set forth herein and therein, or any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or the other Loan Documents or otherwise exist against such Agent.
To the extent any provision of this Agreement permits action by any Agent, such
Agent shall, subject to the provisions of Section 14.11 hereof and of
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this Article XIII, take such action if directed in writing to do so by the
Required Lenders.
SECTION 13.2. Delegation of Duties. Each of the Agents may execute
any of its respective duties under this Agreement and the other Loan Documents
by or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. No Agent shall be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by such Agent with reasonable care.
SECTION 13.3. Exculpatory Provisions. Neither any Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or
Affiliates shall be (a) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or the
other Loan Documents (except for its or such Person's own gross negligence or
willful misconduct), or (b) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by the Credit
Parties or any of their Subsidiaries or any officer thereof contained in this
Agreement or the other Loan Documents or in any certificate, report, statement
or other document referred to or provided for in, or received by such Agent
under or in connection with, this Agreement or the other Loan Documents or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or the other Loan Documents or for any failure of the Credit
Parties or any of their Subsidiaries to perform its obligations hereunder or
thereunder. No Agent shall be under any obligation to any Lender to ascertain
or to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement, or to inspect the properties,
books or records of the Credit Parties or any of their Subsidiaries.
SECTION 13.4. Reliance by Agents. Each of the Agents shall be
entitled to rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to the
Credit Parties), independent accountants and other experts selected by any
Agent. Each of the Agents may deem and treat the payee of any Note as the
owner thereof for all purposes unless such Note shall have been transferred in
accordance with Section 14.10 hereof. Each of the Agents shall be fully
justified in failing or refusing to take any action under this Agreement and
the other Loan Documents unless it shall first receive such advice or
concurrence of the Required Lenders (or, when expressly required hereby or by
the relevant other Loan Document, all the Lenders) as it deems appropriate or
it shall first be indemnified to its satisfaction by the Lenders against any
and all liability and expense which may be incurred by it by reason of taking
or continuing to take any such action except for its own gross negligence or
willful misconduct.
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Each of the Agents shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the Notes in accordance with a
request of the Required Lenders (or, when expressly required hereby, all the
Lenders), and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders and all future holders of the
Notes.
SECTION 13.5. Notice of Default. None of the Agents shall be deemed
to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless it has received notice from a Lender or a Credit Party
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that any Agent
receives such a notice, it shall promptly give notice thereof to the Credit
Agent who shall promptly give notice thereof to the Lenders. The Credit Agent
shall take such action with respect to such Default or Event of Default as
shall be reasonably directed by the Required Lenders; provided that unless and
until the Credit Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Lenders.
SECTION 13.6. Non-Reliance on Such Agents and Other Lenders. Each
Lender expressly acknowledges that none of the Agents nor any of their
respective officers, directors, employees, agents, attorneys-in-fact,
Subsidiaries or Affiliates has made any representations or warranties to it and
that no act by any Agent hereinafter taken, including any review of the affairs
of the Credit Parties or any of its Subsidiaries, shall be deemed to
constitute any representation or warranty by such Agent to any Lender. Each
Lender represents to the Agents that it has, independently and without reliance
upon the Agents or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Credit Parties and their Subsidiaries and
made its own decision to make its Loans and issue or participate in Letters of
Credit hereunder and enter into this Agreement. Each Lender also represents
that it will, independently and without reliance upon any Agent or any other
Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
and creditworthiness of the Credit Parties and their Subsidiaries. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by any Agent hereunder or by the other Loan Documents, no Agent shall
have any duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, financial and other
condition or creditworthiness of the Credit Parties or any of their
Subsidiaries which may come into the possession of such Agent or any of its
respective
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officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or
Affiliates.
SECTION 13.7. Indemnification. The Lenders agree to indemnify the
Credit Agent, Administrative Agent, Syndication Agent and the Managing Agents
in their capacities as such and (to the extent not reimbursed by the Borrower
and without limiting the obligation of the Borrower to do so), ratably
according to the respective amounts of their Commitment Percentages, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including, without limitation, at any time
following the payment of the Notes or any Reimbursement Obligation) be imposed
on, incurred by or asserted against any such Agent in any way relating to or
arising out of this Agreement or the other Loan Documents, or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by such Agent
under or in connection with any of the foregoing; provided that no Lender shall
be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from such Agent's bad faith, gross negligence or
willful misconduct. The agreements in this Section 13.7 shall survive the
payment of the Notes, any Reimbursement Obligation and all other amounts
payable hereunder and the termination of this Agreement.
SECTION 13.8. Each of the Agents in Its Individual Capacity. Each
Agent and its respective Subsidiaries and Affiliates may make loans to, accept
deposits from and generally engage in any kind of business with each Credit
Party as though such Agent were not an Agent hereunder. With respect to any
Loans made or renewed by it and any Note issued to it and with respect to any
Letter of Credit issued by it or participated in by it, each Agent shall have
the same rights and powers under this Agreement and the other Loan Documents as
any Lender and may exercise the same as though it were not an Agent, and the
terms "Lender" and "Lenders" shall include the Credit Agents, Administrative
Agent, Syndication Agent and the Managing Agents in their individual capacity.
SECTION 13.9. Resignation of Agents; Successor Agents. Subject to
the appointment and acceptance of a successor as provided below, the Credit
Agent or Administrative Agent may resign at any time by giving notice thereof
to the Lenders and the Borrower. Upon any such resignation, the Required
Lenders shall have the right to appoint a successor Credit Agent or
Administrative Agent, as the case may be, which successor shall have minimum
capital and surplus of at least $500,000,000 and be consented to by the
Borrower, such consent not to be unreasonably withheld. If no successor Credit
Agent or Administrative Agent, as the case may be, shall have been so appointed
by the Required Lenders and shall have accepted such appointment within thirty
(30) days after the retiring Agent's giving of notice of resignation, then the
retiring Agent may, on behalf of the Lenders, appoint a
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successor Credit Agent or Administrative Agent, as the case may be, which
successor shall have minimum capital and surplus of at least $500,000,000.
Upon the acceptance of any appointment as Credit Agent or Administrative Agent
hereunder by a successor Credit Agent or Administrative Agent, as the case may
be, such successor Agent shall thereupon succeed to and become vested with all
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation or removal hereunder as Credit Agent or
Administrative Agent, as the case may be, the provisions of this Section 13.9
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Credit Agent or Administrative
Agent, as the case may be.
SECTION 13.10 Credit and Administrative Agent. The Credit Agent and
Administrative Agent hereby agree that with respect to any amendment,
modification or waiver of this Agreement and the other Loan Documents, the
Credit Agent shall be responsible for the preparation, documentation and
execution thereof. In addition, with respect to any action or decision
requiring consent or approval of any Lenders, the Credit Agent shall be
responsible for obtaining such consent or approval.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1. Notices.
(a) Method of Communication. Except as otherwise provided in this
Agreement, all notices and communications hereunder shall be in writing, or by
telephone subsequently confirmed in writing. Any notice shall be effective if
delivered by hand delivery or sent via telecopy, recognized overnight courier
service or certified mail, return receipt requested, and shall be presumed to
be received by a party hereto (i) on the date of delivery if delivered by hand
or sent by telecopy, (ii) on the next Business Day if sent by recognized
overnight courier service and (iii) on the third Business Day following the
date sent by certified mail, return receipt requested. A telephonic notice to
any Agent as understood by such Agent will be deemed to be the controlling and
proper notice in the event of a discrepancy with or failure to receive a
confirming written notice.
(b) Addresses for Notices. Notices to any party shall be sent to
it at the following addresses, or any other address as to which all the other
parties are notified in writing.
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If to the Borrower Allnet Communication Services, Inc.
or ALC: 30300 Telegraph Road
Bingham Farms, Michigan 48025-4510
Attention: David J. Thomas
Telephone No.: (810) 433-4312
Telecopy No.: (810) 433-5393
With copies to: Jaffe, Raitt, Heuer & Weiss
Suite 2400, One Woodward Avenue
Detroit, Michigan 48226
Attention: Ralph R. Margulis
Telephone No.: (313) 961-8380
Telecopy No.: (313) 961-8358
If to First Union as First Union National Bank of
Credit Agent, North Carolina
Managing Agent, One First Union Center, TW-19
Syndication Agent 301 S. College Street
or Lender: Charlotte, North Carolina 28288-0735
Attention: Bruce B. Levy
Telephone No.: (704) 383-5292
Telecopy No.: (704) 374-4092
If to Bank One as Bank One, Columbus, NA
Administrative Agent, 100 East Broad Street
Managing Agent, Issuing Columbus, Ohio 43271-0209
Lender or Lender: Attention: Douglas H. Klamfoth
Telephone No.: (614) 248-5839
Telecopy No.: (614) 248-5518
(c) Administrative Agent's Office. The Administrative Agent
hereby designates its office located at the address set forth above, or any
subsequent office which shall have been specified for such purpose by written
notice to the Borrower and Lenders, as the Administrative Agent's Office
referred to herein, to which payments due are to be made and at which Loans
will be disbursed and Letters of Credit issued.
SECTION 14.2. Expenses. (a) The Borrower will pay all out-of-pocket
expenses of (i) the Credit Agent in connection with the preparation, execution
and delivery of this Agreement and each of the other Loan Documents, whenever
the same shall be executed and delivered, including all out-of-pocket
syndication and due diligence expenses, appraiser's fees, search fees, title
insurance premiums, recording fees, taxes and reasonable fees and disbursements
of counsel for the Credit Agent; (ii) the Credit Agent in connection with the
preparation, execution and delivery of any waiver, amendment or consent by the
Agents or the Lenders relating to this Agreement or any of the other Loan
Documents including reasonable fees and disbursements of counsel for the
Agents, search fees, appraiser's fees, recording fees and taxes imposed in
connection therewith; and (iii) the Agents in connection with administering the
Credit Facility, including consulting with one or more Persons, including
appraisers, accountants, engineers and
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attorneys, concerning or related to the nature, scope or value of any right or
remedy of any Agent or any of the Lenders hereunder or under any of the other
Loan Documents, including any review of factual matters in connection
therewith, which expenses shall include the reasonable fees and disbursements
of such Persons.
(b) The Guarantor agrees that it will reimburse the Credit Agent, each
Agent and each Lender for all expenses (including reasonable attorneys fees and
expenses) incurred by the Credit Agent, each Agent or Lender in connection with
the obligations of the Guarantor under the Guaranty and any other Loan
Documents and all expenses (including reasonable attorneys fees and expenses)
incurred by the Credit Agent, any Agent or any Lender in connection with the
enforcement of the Guaranty, in each case upon the occurrence and during the
continuation of an Event of Default.
SECTION 14.3. Set-off. In addition to any rights now or hereafter
granted under Applicable Law and not by way of limitation of any such rights,
upon and after the occurrence of any Event of Default and during the
continuance thereof, the Lenders and any assignee or participant of a Lender in
accordance with Section 14.10 are hereby authorized by the Borrower at any time
or from time to time, without notice to the Borrower or to any other Person,
any such notice being hereby expressly waived, to set off and to appropriate
and to apply any and all deposits (general or special, time or demand,
including, but not limited to, indebtedness evidenced by certificates of
deposit, whether matured or unmatured, excluding government securities required
by Applicable Law to be held as security for worker's compensation and similar
claims) and any other indebtedness at any time held or owing by the Lenders, or
any such assignee or participant to or for the credit or the account of the
Borrower against and on account of the Obligations irrespective of whether or
not (a) the Lenders shall have made any demand under this Agreement or any of
the other Loan Documents or (b) the Credit Agent shall have declared any or all
of the Obligations to be due and payable as permitted by Section 12.2 and
although such Obligations shall be contingent or unmatured.
SECTION 14.4. Governing Law. This Agreement, the Notes and the other
Loan Documents, unless otherwise expressly set forth therein, shall be governed
by, construed and enforced in accordance with the laws of the State of North
Carolina, without reference to the conflicts or choice of law principles
thereof.
SECTION 14.5. Consent to Jurisdiction. The Credit Parties hereby
irrevocably consent to the personal jurisdiction of the state and federal
courts located in Mecklenburg County, North Carolina, in any action, claim or
other proceeding arising out of any dispute in connection with this Agreement,
the Notes and the other Loan Documents, any rights or obligations hereunder or
thereunder, or the performance of such rights and obligations. The Credit
Parties hereby irrevocably consents to the service of a summons and complaint
and other process in any action, claim or proceeding brought by any Agent or
Lender in connection with this
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Agreement, the Notes or the other Loan Documents, any rights or obligations
hereunder or thereunder, or the performance of such rights and obligations, on
behalf of itself or its property, in the manner specified in Section 14.1.
Nothing in this Section 14.5 shall affect the right of any Agent or Lender to
serve legal process in any other manner permitted by Applicable Law or affect
the right of any Agent or Lender to bring any action or proceeding against any
Credit Party or its properties in the courts of any other jurisdictions.
SECTION 14.6. WAIVER OF JURY TRIAL. EACH AGENT, LENDER AND EACH
CREDIT PARTY HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL
WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY
DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE OTHER LOAN
DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
SECTION 14.7. Reversal of Payments. To the extent the Borrower makes
a payment or payments to the Administrative Agent or other Agent for the
ratable benefit of the Lenders (or the other Agents) or the Administrative
Agent or other Agent receives any payment or proceeds of the Collateral which
payments or proceeds or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, state or federal
law, common law or equitable cause, then, to the extent of such payment or
proceeds repaid, the Obligations or part thereof intended to be satisfied shall
be revived and continued in full force and effect as if such payment or
proceeds had not been received by any Agent.
SECTION 14.8. Injunctive Relief. The Credit Parties recognize that,
in the event the Credit Parties fail to perform, observe or discharge any of
their obligations or liabilities under this Agreement, any remedy of law may
prove to be inadequate relief to the Lenders. Therefore, the Credit Parties
agree that the Lenders, at the Lenders' option, shall be entitled to temporary
and permanent injunctive relief in any such case without the necessity of
proving actual damages.
SECTION 14.9. Accounting Matters. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Agreement, including, without limitation, all computations utilized by the
Credit Parties or any Subsidiary thereof to determine compliance with any
covenant contained herein, shall, except as otherwise expressly contemplated
hereby or unless there is an express written direction by the Credit Agent to
the contrary agreed to by the Credit Parties, be performed in accordance with
GAAP. In the event that changes in GAAP shall be mandated by the Financial
Accounting Standards Board, or any similar accounting body of comparable
standing, or shall be recommended by the Credit Party's certified public
accountants, to the extent that such changes would modify such accounting terms
or the interpretation or computation thereof, such changes shall be
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followed in defining such accounting terms only from and after the date the
Credit and the Lenders shall have amended this Agreement to the extent
necessary to reflect any such changes in the financial covenants and other
terms and conditions of this Agreement.
SECTION 14.10. Successors and Assigns; Participations.
(a) Benefit of Agreement. This Agreement shall be binding upon
and inure to the benefit of the Credit Parties, each Agent and the Lenders, all
future holders of the Notes, and their respective successors and assigns,
except that no Credit Party shall assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of each
Lender. Nothing set forth in the Guaranty shall impair, as between the
Borrower, the Agents and the Lenders, the obligations of the Borrower hereunder
and under the other Loan Documents.
(b) Assignment by Lenders. Each Lender may, with the consent of
the Agents, and as long as no Event of Default has occurred and is continuing,
with the consent of the Borrower, which consents shall not be unreasonably
withheld, assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Agreement (including, without
limitation, all or a portion of the Extensions of Credit at the time owing to
it and the Notes held by it); provided that:
(i) each such assignment shall be of a constant, and not a
varying, percentage of all the assigning Lender's rights and
obligations under this Agreement;
(ii) the Commitment so assigned shall not be less than $10,000,000;
(iii) the parties to each such assignment shall execute and deliver
to the Administrative Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance in the form of Exhibit E
attached hereto (an "Assignment and Acceptance"), together with any
Note or Notes subject to such assignment;
(iv) such assignment shall not, without the consent of the
Borrower, require the Borrower to file a registration statement with
the Securities and Exchange Commission or apply to or qualify the
Loans or the Notes under the blue sky laws of any state; and
(v) the assigning Lender shall pay to the Administrative Agent an
assignment fee of $2,500 upon the execution by such Lender of the
Assignment and Acceptance; provided that no such fee shall be payable
upon any assignment by a Lender to an Affiliate thereof.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Accep-
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tance, which effective date shall be at least five (5) Business Days after the
execution thereof, (A) the assignee thereunder shall be a party hereto and, to
the extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereby and (B) the Lender thereunder shall, to the
extent provided in such assignment, be released from its obligations under this
Agreement.
(c) Rights and Duties Upon Assignment. By executing and
delivering an Assignment and Acceptance, the assigning Lender thereunder and
the assignee thereunder confirm to and agree with each other and the other
parties hereto as follows:
(i) other than the representation and warranty that it is the
legal and beneficial owner of the interest being assigned thereby free
and clear of any adverse claim, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or
any other instrument or document furnished pursuant hereto;
(ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of
the Credit Parties or their Subsidiaries or the performance or
observance by the Credit Parties and their Subsidiaries of any of
their obligations under this Agreement or any other instrument or
document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy of this
Agreement, together with copies of the financial statements referred
to in Section 6.1(o) and the most recent financial statements
delivered to the Assignor pursuant to Section 7.1 and such other
documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and
Acceptance;
(iv) such assignee will, independently and without reliance upon
any Agent, such assigning Lender or any other Lender, and based on
such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not
taking action under this Agreement;
(v) such assignee confirms that it is an Eligible Assignee;
(vi) such assignee appoints and authorizes each Agent to take such
action as agent on its behalf and to exercise such powers under this
Agreement and the other Loan Documents as are delegated to such Agent
by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto; and
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(vii) such assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(d) Register. The Administrative Agent shall maintain a copy of
each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders and the amount of the
Extensions of Credit with respect to each Lender from time to time (the
"Register"). The entries in the Register shall be conclusive, in the absence
of manifest error, and the Credit Parties, the Agents and the Lenders may treat
each person whose name is recorded in the Register as a Lender hereunder for
all purposes of this Agreement. The Register shall be available for inspection
by the Credit Parties or Lender at any reasonable time and from time to time
upon reasonable prior notice.
(e) Issuance of New Notes. Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender and an Eligible Assignee together
with any Note or Notes subject to such assignment and the written consent to
such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is substantially in the form of Exhibit E:
(i) accept such Assignment and Acceptance;
(ii) record the information contained therein in the Register;
(iii) give prompt notice thereof to the Lenders and the Borrower;
and
(iv) promptly deliver a copy of such Assignment and Acceptance to
the Borrower.
Within five (5) Business Days after receipt of notice, the Borrower shall
execute and deliver to the Administrative Agent, in exchange for the
surrendered Note or Notes, a new Note or Notes to the order of such Eligible
Assignee in amounts equal to the Commitment assumed by it pursuant to such
Assignment and Acceptance and a new Note or Notes to the order of the assigning
Lender in an amount equal to the Commitment retained by it hereunder. Such new
Note or Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Note or Notes, shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form of the assigned Notes delivered to the assigning Lender.
Each surrendered Note or Notes shall be canceled and returned to the Borrower.
(f) Participations. Each Lender may, with the consent of the
Agents and, as long as no Event of Default has occurred and is continuing, with
the consent of the Borrower, which consents shall not be unreasonably withheld,
sell participations to one or more banks or other entities in all or a portion
of its rights and obligations under this Agreement (including, without
limitation,
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all or a portion of its Commitment and its Extensions of Credit and the Notes
held by it); provided that:
(i) each such participation shall be in an amount not less than
$5,000,000;
(ii) such Lender's obligations under this Agreement (including,
without limitation, its Commitment) shall remain unchanged;
(iii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations;
(iv) such Lender shall remain the holder of the Notes held by it
for all purposes of this Agreement;
(v) the Credit Parties, the Agents and the other Lenders shall
continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement;
(vi) such Lender shall not permit such participant the right to
approve any waivers, amendments or other modifications to this
Agreement or any other Loan Document other than waivers, amendments or
modifications which would reduce the principal of or the interest rate
on any Loan or Reimbursement Obligation, extend the term or increase
the amount of the Commitment of such participant, reduce the amount of
any fees to which such participant is entitled, extend any scheduled
payment date for principal or, except as expressly contemplated hereby
or thereby, release any Collateral or Security Document;
(vii) any such disposition shall not, without the consent of the
Borrower, require the Borrower to file a registration statement with
the Securities and Exchange Commission to apply to qualify the Loans
or the Notes under the blue sky law of any state; and
(viii) no Borrower consent shall be required in connection with the
grant of any participation by a Lender to an Affiliate thereof.
(g) Disclosure of Information; Confidentiality. The
Administrative Agent and the Lenders shall hold all non-public information
obtained pursuant to the Loan Documents in accordance with their customary
procedures for handling confidential information. Any Lender may, in
connection with any assignment, proposed assignment, participation or proposed
participation pursuant to this Section 14.10, disclose to the assignee,
participant, proposed assignee or proposed participant, any information
relating to the Credit Parties furnished to such Lender by or on behalf of the
Borrower; provided, that prior to any such disclosure, each such assignee,
proposed assignee, participant or proposed participant shall agree with the
Credit Parties or such Lender
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(which in the case of an agreement with only such Lender, the Borrower shall be
recognized as a third party beneficiary thereof) to preserve the
confidentiality of any confidential information relating to the Credit Parties
received from such Lender.
(h) Certain Pledges or Assignments. Nothing herein shall prohibit
any Lender from pledging or assigning any Note to any Federal Reserve Bank in
accordance with Applicable Law.
SECTION 14.11. Amendments, Waivers and Consents; Renewal.
(a) Except as set forth below, any term, covenant, agreement or
condition of this Agreement or any of the other Loan Documents may be amended
or waived by the Lenders, and any consent given by the Lenders, if, but only
if, such amendment, waiver or consent is in writing signed by the Required
Lenders (or by the Credit Agent with the consent of the Required Lenders) and
delivered to the Credit Agent and, in the case of an amendment, signed by the
Borrower; provided, that no amendment, waiver or consent shall (i) increase the
amount or extend the time of the obligation of the Lenders to make Loans or
issue or participate in Letters of Credit (including without limitation
pursuant to Section 2.6 or Section 2.7), (ii) extend the originally scheduled
time or times of payment of the principal of any Loan or Reimbursement
Obligation or the time or times of payment of interest on any Loan or
Reimbursement Obligation, (iii) reduce the rate of interest or fees payable on
any Loan or Reimbursement Obligation, (iv) permit any subordination of the
principal or interest on any Loan or Reimbursement Obligation, (v) release any
Collateral or Security Document (other than release of a Subsidiary Guaranty of
the non-surviving Subsidiary Guarantor in connection with a merger of any
Subsidiary Guarantor into another Subsidiary Guarantor or the Borrower) or (vi)
amend the provisions of Section 2.5(b), this Section 14.11 or the definition of
Required Lenders, without the prior written consent of each Lender. In
addition, no amendment, waiver or consent to the provisions of Article XIII
shall be made without the written consent of the affected Agents.
SECTION 14.12. Performance of Duties. The Credit Parties'
obligations under this Agreement and each of the Loan Documents shall be
performed by the applicable Credit Party at its sole cost and expense.
SECTION 14.13. Indemnification. Each of the Borrower and the
Guarantor agrees to reimburse each Agent and the Lenders for all reasonable
costs and expenses, including reasonable counsel, appraisal, or other expert or
consultant fees and disbursements incurred, and to indemnify and hold each
Agent and the Lenders harmless from and against all losses suffered by such
Agent and the Lenders in connection with (i) the exercise by the Agents or the
Lenders of any right or remedy granted to them under this Agreement or any of
the other Loan Documents upon the occurrence and during the continuation of an
Event of Default, (ii) any claim, and the prosecution or defense thereof,
arising out of or in any way connected with this Agreement or any of the other
Loan Documents,
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and (iii) the collection or enforcement of the Obligations or any of them;
provided, that the Borrower shall not be obligated to reimburse any Agent or
any Lender for costs and expenses, or indemnify any Agent or any Lender for any
loss, resulting from the gross negligence or willful misconduct of such Agent
or Lender.
SECTION 14.14. All Powers Coupled with Interest. All powers of
attorney and other authorizations granted to the Lenders, each Agent and any
Persons designated by such Agent or Lenders pursuant to any provisions of this
Agreement or any of the other Loan Documents shall be deemed coupled with an
interest and shall be irrevocable so long as any of the Obligations remain
unpaid or unsatisfied or the Credit Facility has not been terminated.
SECTION 14.15. Survival of Indemnities. Notwithstanding any
termination of this Agreement, the indemnities to which the Agents and the
Lenders are entitled under the provisions of this Article XIV and any other
provision of this Agreement and the Loan Documents shall continue in full force
and effect and shall protect the Agents and the Lenders against events arising
after such termination as well as before.
SECTION 14.16. Titles and Captions. Titles and captions of Articles,
Sections and subsections in this Agreement are for convenience only, and
neither limit nor amplify the provisions of this Agreement.
SECTION 14.17. Severability of Provisions. Any provision of this
Agreement or any other Loan Document which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating the
remainder of such provision or the remaining provisions hereof or thereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 14.18. Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and shall be binding upon all parties, their successors and assigns, and all of
which taken together shall constitute one and the same agreement.
SECTION 14.19. Term of Agreement. This Agreement shall remain in
effect from the Closing Date through and including the date upon which all
Obligations shall have been indefeasibly and irrevocably paid and satisfied in
full. No termination of this Agreement shall affect the rights and obligations
of the parties hereto arising prior to such termination.
SECTION 14.20. Adjustments. If any Lender (a "Benefitted Lender")
shall at any time receive any payment of all or part of its Extensions of
Credit, or interest thereon, or if any Lender shall at any time receive any
Collateral in respect to its Extensions of Credit (whether voluntarily or
involuntarily, by set-
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off or otherwise) in a greater proportion than any such payment to and
Collateral received by any other Lender, if any, in respect of such other
Lender's Extensions of Credit, or interest thereon, such Benefitted Lender
shall purchase for cash from the other Lenders such portion of each such other
Lender's Extensions of Credit, or shall provide such other Lenders with the
benefits of any such Collateral, or the proceeds thereof, as shall be necessary
to cause such Benefitted Lender to share the excess payment or benefits of such
Collateral or proceeds ratably with each of the Lenders; provided, that if all
or any portion of such excess payment or benefits is thereafter recovered from
such Benefitted Lender, such purchase shall be rescinded, and the purchase
price and benefits returned to the extent of such recovery, but without
interest. The Borrower agrees that each Lender so purchasing a portion of
another Lender's Extensions of Credit may exercise all rights of payment
(including, without limitation, rights of set-off) with respect to such portion
as fully as if such Lender were the direct holder of such portion.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers, all as of the day and year first
written above.
[CORPORATE SEAL] ALLNET COMMUNICATION SERVICES, INC.
By: /s/ David J. Thomas
Name: Vice President, Treasurer
Title: Vice President, Treasurer
[CORPORATE SEAL] ALC COMMUNICATIONS CORPORATION
By: /s/ David J. Thomas
Name: David J. Thomas
Title: Vice President, Treasurer
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as Credit Agent, Managing
Agent, Syndication Agent and Lender
By: /s/ Bruce B. Levy
Name: Bruce B. Levy
Title: Vice President
Commitment Percentage: 28.5714%
Commitment: $30,000,000
BANK ONE, COLUMBUS, NA, as
Administrative Agent, Managing Agent
and Lender
By: /s/ Douglas H. Klamfoth
Name: Douglas H. Klamfoth
Title: Vice President
Commitment Percentage: 28.5714%
Commitment: $30,000,000
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COMERICA BANK
By: /s/ David C. Bird
Name: David C. Bird
Title: Vice President
Commitment Percentage: 23.8095%
Commitment: $25,000,000
STAR BANK, NA
By: /s/ Nancy J. Cracolice
Name: Nancy J. Cracolice
Title: Vice President
Commitment Percentage: 19.0476%
Commitment: $20,000,000
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EXHIBIT A
to
Credit Agreement dated as of January 20, 1995
by and among
Allnet Communication Services, Inc.,
ALC Communications Corporation,
the Lenders party thereto,
First Union National Bank of North Carolina,
as Managing Agent, Credit Agent and Syndication Agent
and
Bank One, Columbus, NA,
as Managing Agent and Administrative Agent
REVOLVING CREDIT NOTE
$___________ January ___, 1995
FOR VALUE RECEIVED, the undersigned, ALLNET COMMUNICATION SERVICES,
INC., a corporation organized under the laws of Michigan (the "Borrower"),
hereby promises to pay to the order of _______________________________ (the
"Bank"), at the times, at the place and in the manner provided in the Credit
Agreement hereinafter referred to, the principal sum of up to
______________________ Dollars ($___________), or, if less, the aggregate
unpaid principal amount of all Loans disbursed by the Lenders under the Credit
Agreement referred to below, together with interest at the rates as in effect
from time to time with respect to each portion of the principal amount hereof,
determined and payable as provided in Article IV of the Credit Agreement.
This Note is the Note referred to in, and is entitled to the benefits
of, the Credit Agreement dated as of January __, 1995 as amended or
supplemented from time to time (the "Credit Agreement") by and among the
Borrower, ALC Communications Corporation, as Guarantor, the lenders (including
the Bank) party thereto (the "Lenders"), First Union National Bank of North
Carolina, as Managing Agent and Credit Agent, and Bank One, Columbus, NA, as
Managing Agent and Administrative Agent. The Credit Agreement contains, among
other things, provisions for the time, place and manner of payment of this
Note, the determination of the interest rate borne by and fees payable in
respect of this Note, acceleration of the payment of this Note upon the
happening of certain stated events and the mandatory repayment of this Note
under certain circumstances.
The Borrower agrees to pay on demand all costs of collection,
including reasonable attorneys' fees, if any part of this Note, principal or
interest, is collected after maturity with the aid of an attorney.
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Presentment for payment, notice of dishonor, protest and notice of
protest are hereby waived.
THIS NOTE IS MADE AND DELIVERED IN THE STATE OF NORTH CAROLINA AND
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NORTH CAROLINA.
The Debt evidenced by this Note is "Designated Senior Indebtedness" as
defined in the Indenture and is senior in right of payment to all Subordinated
Debt referred to in the Credit Agreement.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed
under seal by a duly authorized officer as of the day and year first above
written.
ALLNET COMMUNICATION SERVICES, INC.
[CORPORATE SEAL]
By:_________________________________
Name:____________________________
Title:___________________________
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EXHIBIT B
to
Credit Agreement dated as of January 20, 1995
by and among
Allnet Communication Services, Inc.,
ALC Communications Corporation,
the Lenders party thereto,
First Union National Bank of North Carolina,
as Managing Agent, Credit Agent and Syndication Agent
and
Bank One, Columbus, NA,
as Managing Agent and Administrative Agent
NOTICE OF BORROWING
Bank One, Columbus, NA,
as Administrative Agent
100 East Broad Street
Columbus, Ohio 43271-0209
Attn: Douglas H. Klamfoth
Ladies and Gentlemen:
This irrevocable Notice of Borrowing is delivered to you under Section
2.2 (a) of the Credit Agreement dated as of January __, 1995 (as amended or
supplemented from time to time, the "Credit Agreement"), by and among Allnet
Communication Services, Inc. ("the Borrower"), ALC Communications Corporation,
as Guarantor, the lenders party thereto (the "Lenders"), First Union National
Bank of North Carolina, as Managing Agent and Credit Agent, and Bank One,
Columbus, NA, as Managing Agent and Administrative Agent.
1. The Borrower hereby requests that the Lenders make a Loan in
the aggregate principal amount of $___________ (the "Loan). (FOR LIBOR RATE
LOANS COMPLETE WITH AN AMOUNT EQUAL TO AT LEAST $5,000,000 AND ANY INTEGRAL
MULTIPLE OF $1,000,000 IN EXCESS THEREOF AND FOR BASE RATE LOANS COMPLETE WITH
AN AMOUNT EQUAL TO $1,000,000 AND ANY INTEGRAL MULTIPLE OF $500,000 IN EXCESS
THEREOF.)
2. The Borrower hereby requests that the Loan be made on the
following Business Day: _____________________. (COMPLETE WITH A DATE ON OR
AFTER THE DATE OF THIS NOTICE FOR A BASE RATE LOAN AND AT LEAST THREE (3)
BUSINESS DAYS AFTER THE DATE OF THIS NOTICE FOR A LIBOR RATE LOAN.)
3. The Borrower hereby requests that the Loan bear interest at
the following interest rate, plus the Applicable Margin, as set forth below:
(CHECK ONE.)
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Principal Component Interest Interest
of Loan Rate Period
------------------- -------- (LIBOR Rate only)
-----------------
[Base Rate or [One, two, three
LIBOR Rate] or six months]
4. The principal amount of all Loans and L/C Obligations
outstanding as of the date hereof (including the requested Loan) does not
exceed the maximum amount permitted to be outstanding pursuant to the terms of
the Credit Agreement.
5. The obligations of the Borrower set forth in the Credit
Agreement and the other Loan Documents are valid, binding and enforceable
obligations of the Borrower as of the date hereof, both before and after giving
effect to the Loan requested herein.
6. All of the conditions applicable to the Loan requested herein
as set forth in the Credit Agreement have been satisfied as of the date hereof
and will remain satisfied to the date of such Loan.
7. No Default or Event of Default exists, and none will exist
upon the making of the Loan requested herein.
8. The representations and warranties of the Credit Parties under
the Credit Agreement and the other Loan Documents are true and correct in all
material respects as of the date hereof, both before and after giving effect to
the Loan requested herein.
9. All capitalized undefined terms used herein have the meanings
assigned thereto in the Credit Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Notice of
Borrowing this ____ day of _______, 19__.
ALLNET COMMUNICATION SERVICES, INC.
By:__________________________________
Name:_____________________________
Title:____________________________
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EXHIBIT C
to
Credit Agreement dated as of January 20, 1995
by and among
Allnet Communication Services, Inc.,
ALC Communications Corporation,
the Lenders party thereto,
First Union National Bank of North Carolina,
as Managing Agent, Credit Agent and Syndication Agent
and
Bank One, Columbus, NA,
as Managing Agent and Administrative Agent
NOTICE OF CONVERSION/CONTINUATION
Bank One, Columbus, NA,
as Administrative Agent
100 East Broad Street
Columbus, Ohio 43271
Attn: _______________________
Ladies and Gentlemen:
This irrevocable Notice of Conversion/Continuation is delivered to you
under Section 4.2 of the Credit Agreement dated as of January _ , 1995 (as
amended or supplemented from time to time, the "Credit Agreement"), by and
among Allnet Communication Services, Inc. ("the Borrower"), ALC Communications
Corporation, as Guarantor, the lenders party thereto (the "Lenders"), First
Union National Bank of North Carolina, as Managing Agent and Credit Agent, and
Bank One, Columbus, NA, as Managing Agent and Administrative Agent.
1. This Notice of Conversion/Continuation is submitted for the
purpose of: (Check one and complete applicable information.)
/ / Converting a Base Rate Loan into a LIBOR Rate Loan
(a) The aggregate outstanding principal balance of such
Loan is $_______________.
(b) The principal amount of such Loan to be converted is
$_______________. (Complete with an amount equal to
$5,000,000 or a whole multiple of $1,000,000 in
excess thereof.)
(c) The requested effective date of the conversion of
such Loan is _______________. (Complete with a
Business Day at least three (3) Business Days after
the date of this Notice.)
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(d) The requested Interest Period applicable to the
converted Loan is _______________. (Complete with a
period of one (1), two (2), three (3) or six (6)
months.)
/ / Converting a LIBOR Rate Loan into a Base Rate Loan
(a) The aggregate outstanding principal balance of such
Loan is $_______________.
(b) The last day of the current Interest Period for such
Loan is _______________.
(c) The principal amount of such Loan to be converted is
$_______________. (Complete with an amount equal to
$1,000,000 or a whole multiple of $500,000 in excess
thereof.)
(d) The requested effective date of the conversion of
such Loan is _______________. (Complete with a
Business Day which is the same date as that listed in
(b) above and which shall be at least three (3)
Business Days after the date of this Notice.)
/ / Continuing a LIBOR Rate Loan as a LIBOR Rate Loan
(a) The aggregate outstanding principal balance of such
Loan is $_______________.
(b) The last day of the current Interest Period for such
Loan is _______________.
(c) The principal amount of such Loan to be continued is
$_______________. (Complete with an amount equal to
$5,000,000 or an integral multiple of $1,000,000 in
excess thereof.)
(d) The requested effective date of the continuation of
such Loan is _______________. (Complete with a
Business Day which is the same date as that listed in
(b) above and which shall be at least three (3)
Business Days after the date of this Notice.)
(e) The requested Interest Period applicable to the
continued Loan is _______________. (Complete with a
period of one (1), two (2), three (3) or six (6)
months.)
2. The principal amount of all Loans and L/C Obligations
outstanding as of the date hereof does not exceed the maximum amount permitted
to be outstanding pursuant to the terms of the Credit Agreement.
3. The obligations of the Borrower set forth in the Credit
Agreement and the Loan Documents are valid, binding and enforceable obligations
of the Borrower as of the date hereof, both before and after giving effect to
the conversion or continuation of the Loan requested herein.
4. All of the conditions applicable to the conversion or
continuation of the Loan requested herein as set forth in the
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Credit Agreement have been satisfied as of the date hereof and will remain
satisfied to the date of such Loan.
5. No Default or Event of Default exists, and none will exist
upon the conversion or continuation of the Loan requested herein.
6. The representations and warranties of the Credit Parties under
the Credit Agreement and the other Loan Documents are true and correct in all
material respects as of the date hereof, both before and after giving effect to
the conversion or continuation of the Loan requested herein.
7. All capitalized undefined terms used herein have the meanings
assigned thereto in the Credit Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Notice of
Conversion/Continuation this ____ day of __________, 19__.
ALLNET COMMUNICATION SERVICES, INC.
By:__________________________________
Name:_____________________________
Title:____________________________
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EXHIBIT D
to
Credit Agreement dated as of January 20, 1995
by and among
Allnet Communication Services, Inc.,
ALC Communications Corporation,
the Lenders party thereto,
First Union National Bank of North Carolina,
as Managing Agent, Credit Agent and Syndication Agent
and
Bank One, Columbus, NA,
as Managing Agent and Administrative Agent
OFFICER'S COMPLIANCE CERTIFICATE
The undersigned, on behalf of Allnet Communication Services, Inc., a
corporation organized under the laws of Michigan (the "Borrower"), hereby
certifies to First Union National Bank of North Carolina, as Managing Agent and
Credit Agent ("First Union"), and Bank One, Columbus, NA, as Managing Agent and
Administrative Agent ("Bank One"), as follows:
1. This Certificate is delivered to you pursuant to Section 7.2
of the Credit Agreement dated as of January __, 1995 (as amended or
supplemented from time to time, the "Credit Agreement"), by and among the
Borrower, ALC Communications Corporation, as Guarantor ("ALC"), the lenders
party thereto (the "Lenders"), First Union, and Bank One. Capitalized terms
used herein and not defined herein shall have the meanings assigned thereto in
the Credit Agreement.
2. I have reviewed the financial statements of ALC and its
Subsidiaries dated as of _______________ and for the _______________ period[s]
then ended and such statements fairly present the financial condition of ALC
and its Subsidiaries and of the Borrower and its Subsidiaries, as applicable,
as of the dates indicated and the results of their operations and cash flows
for the period[s] indicated.
3. I have reviewed the terms of the Credit Agreement, the Note
and the related Loan Documents and have made, or caused to be made under my
supervision, a review in reasonable detail of the transactions and the
condition of ALC and its Subsidiaries during the accounting period covered by
the financial statements referred to in Paragraph 2 above. Such review has not
disclosed the existence during or at the end of such accounting period of any
condition or event that constitutes a Default or an Event of Default, nor do I
have any knowledge of the existence of any such condition or event as at the
date of this Certificate [except, [if such condition or event existed or
exists, describe the nature and
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period of existence thereof and what action the Credit Parties have taken, are
taking and propose to take with respect thereto]].
4. The Applicable Margin and calculations determining such figure
are set forth on the attached Schedule 1 and the Credit Parties and their
Subsidiaries are in compliance with the covenants contained in Article IX of
the Credit Agreement as shown on such Schedule 1 and the Credit Parties and
their Subsidiaries are in compliance with the other covenants and restrictions
contained in Articles VIII and X of the Credit Agreement.
WITNESS the following signatures as of the _____ day of _________,
199__.
ALC COMMUNICATIONS CORPORATION
By:_________________________________
Name:____________________________
Title:___________________________
ALLNET COMMUNICATION SERVICES, INC.
By:_________________________________
Name:____________________________
Title:___________________________
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Schedule 1
A. Leverage Ratio
--------------
1. Total Debt as of the immediately
preceding fiscal quarter end 1 _______
2. Consolidated Operating Cash
Flow for the period of four
(4) consecutive fiscal quarters
ending on such fiscal quarter
end
(a) Consolidated Net Income
for such period 2(a) _______
(b) Plus: The sum of the
following for such period
to the extent deducted in
the determination of such
Net Income: (i) income
and franchise taxes, (ii)
Interest Expense, and
(iii) amortization and
depreciation and other
non-cash charges 2(b) _______
(c) Less: The sum of the
following for such period:
(i) interest income, (ii)
non-cash income, (iii) any
items of gain (or plus any
non-cash items of loss)
included in the determi-
nation of Net Income and
not realized in the ordinary
course of business 2(c) _______
(d) Add lines 2(a) and 2(b)
and subtract line 2(c) 2(d) _______
3. Leverage Ratio: Divide line 1
by line 2(d) 3 _______
4. Maximum Ratio Permitted by
Section 9.1 as of the date
hereof 4 _______
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B. Debt Service Coverage Ratio
---------------------------
1. Consolidated Operating Cash Flow
for the period of four (4) consec-
utive fiscal quarters as of the
ending on the immediately preceding
fiscal quarter end (from line 2(d)
of Part A) 1 _______
2. Debt Service: The sum of the
following calculated without
duplication on a Consolidated
basis for such period.
(a) All payments of principal
or similar payments required
to be paid with respect to
Total Debt 2(a) _______
(b) Plus: Interest Expense
2(b) _______
(c) Add lines 2(a) and 2(b) 2(c) _______
3. Debt Service Coverage Ratio:
Divide line 1(d) by line 2(c) 3 _______
4. Minimum Permitted Ratio per
Section 9.2 1.50 to
1.00.
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C. Fixed Charge Coverage Ratio
1. Consolidated Operating Cash Flow
for the period of four (4) consec-
utive fiscal quarters as of the
ending on the immediately preceding
fiscal quarter end (from line 2(d)
of Part A) 1 _______
2. Less: The sum of the following
calculated without duplication
for such period
(a) Capital Expenditures
2(a) _______
(b) Income and franchise taxes
paid or payable in cash
2(b) _______
(c) Add lines 2(a) and 2(b) 2(c) _______
3. Add lines 1(d) and 2(c) 3 _______
4. Fixed Charges for such period.
(a) All principal payments or
similar amounts required to
be paid respect to Total
Debt 4(a) _______
(b) Plus: Interest Expense
required to be paid 4(b) _______
(c) Plus: Total cash dividends
paid by ALC 4(c) _______
(d) Plus: All payments in
respect of any retirement,
redemption or other acqui-
sition of the capital stock
of ALC and its Subsidiaries 4(d) _______
(e) Add lines 4(a), 4(b), 4(c),
and 4(d) 4(e) _______
5. Fixed Charge Coverage Ratio:
Divide line 3 by line 4(e) 5 _______
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6. Maximum Permitted Ratio per
Section 9.3 1.25 to
1.00
D. Net Worth
1. Fifty percent (50%) of Consol-
idated Net Income of ALC and
Subsidiaries as of the immediately
preceding fiscal quarter end 1 _______
2. One hundred percent (100%) of
the aggregate net cash proceeds
of capital stock issuances
by ALC and its Wholly-Owned Subsidiaries
received thereby after the Closing
Date 2 _______
3. Minimum Net Worth: Add
$100,000,000, line 1, and
line 2 3 _______
4. Actual Net Worth 4 _______
E. Applicable Margin
1. Leverage Ratio (as calculated
in Part A above) 1 _______
2. Applicable Margin per Section
4.1 2 _______
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103
EXHIBIT E
to
Credit Agreement dated as of January 20, 1995
by and among
Allnet Communication Services, Inc.,
ALC Communications Corporation,
the Lenders party thereto,
First Union National Bank of North Carolina,
as Managing Agent, Credit Agent and Syndication Agent
and
Bank One, Columbus, NA,
as Managing Agent and Administrative Agent
ASSIGNMENT AND ACCEPTANCE
Dated _________
Reference is made to the Credit Agreement dated as of January __,
1995 (as amended or supplemented from time to time, the "Credit Agreement"), by
and among Allnet Communication Services, Inc. ("the Borrower"), ALC
Communications Corporation, as Guarantor, the lenders party thereto (the
"Lenders"), First Union National Bank of North Carolina, as Managing Agent and
Credit Agent, and Bank One, Columbus, NA, as Managing Agent and Administrative
Agent. Capitalized terms which are defined in the Credit Agreement and which
are used herein without definition shall have the same meanings herein as in
the Credit Agreement.
___________________________ (the "Assignor") and ___________________
(the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, as of the Effective
Date (as defined below), a ____% interest in and to all of the Assignor's
interests, rights and obligations under the Credit Agreement and the Assignor
thereby retains ____% of its interest therein. This Assignment and Acceptance
is entered pursuant to, and authorized by, Section 14.10 of the Credit
Agreement.
2. The Assignor (i) represents that, as of the date hereof, its
Commitment Percentage (without giving effect to assignments thereof which have
not yet become effective) under the Credit Agreement is ____%, the outstanding
balance of its Loans (unreduced by any assignments thereof which have not yet
become effective) under the Credit Agreement is $___________, and the
outstanding balance of its Commitment Percentage of the L/C Obligations
(unreduced by any assignments thereof which have not yet become effective) is
$___________; (ii) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection
104
with the Credit Agreement or any other Loan Document or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Credit Agreement or any other instrument or document furnished pursuant
thereto, other than that the Assignor is the legal and beneficial owner of the
interest being assigned by it hereunder and that such interest is free and
clear of any adverse claim; (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the Credit
Parties or their Subsidiaries or the performance or observance by the Credit
Parties or their Subsidiaries of any of their obligations under the Credit
Agreement or any other Loan Document; and (iv) attaches the Revolving Credit
Note delivered to it under the Credit Agreement and requests that the Credit
Parties exchange such Note for new Notes payable to each of the Assignor and
the Assignee as follows:
Revolving Credit Note
Payable to the Order of: Principal Amount of Note:
------------------------ -------------------------
_____________________ $_________
_____________________ $_________
3. The Assignee (i) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (ii) confirms that it
has received a copy of the Credit Agreement, together with copies of the most
recent financial statements delivered pursuant to Section 7.1 thereof and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Acceptance;
(iii) agrees that it will, independently and without reliance upon the Assignor
or any other Lender or Agent and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under the Credit Agreement; (iv) confirms that
it is an Eligible Assignee; (v) appoints and authorizes _________________ to
take such action as agent on its behalf and to exercise such powers under the
Credit Agreement and the other Loan Documents as are delegated to such agent by
the terms thereof, together with such powers as are reasonably incidental
thereto; (vi) agrees that it will perform in accordance with their terms all
the obligations which by the terms of the Credit Agreement and the other Loan
Documents are required to be performed by it as a Lender; and (vii) agrees that
it will keep confidential all the information with respect to the Credit
Parties furnished to it by the Credit Parties or the Assignor (other than
information required or requested to be disclosed by it pursuant to regulatory
requirements or legal process; information requested by and disclosed to its
auditors, accountants and attorneys, provided that the Assignee shall use its
best efforts to have such Persons enter into a confidentiality agreement with
respect to such information; and information
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105
generally available to the public or otherwise available to the Assignee on a
nonconfidential basis).
4. The effective date for this Assignment and Acceptance shall be
____________ (the "Effective Date"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Agent for consent by the
Credit Parties and ________________ and acceptance and recording in the
Register.
5. Upon such consents, acceptance and recording, from and after
the Effective Date, (i) the Assignee shall be a party to the Credit Agreement
and the other Loan Documents to which Lenders are parties and, to the extent
provided in this Assignment and Acceptance, have the rights and obligations of
a Lender under each such agreement, and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement and the other Loan
Documents.
6. Upon such consents, acceptance and recording, from and after
the Effective Date, the Administrative Agent shall make all payments in respect
of the interest assigned hereby (including payments of principal, interest,
fees and other amounts) to the Assignee. The Assignor and Assignee shall make
all appropriate adjustments in payments for periods prior to the Effective Date
or with respect to the making of this assignment directly between themselves.
7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE DEEMED TO BE A
CONTRACT UNDER SEAL AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT REGARD TO CONFLICT OF LAW
PRINCIPLES.
ASSIGNOR
___________________________________
Commitment Percentage ____
By:________________________________
Title:_____________________________
ASSIGNEE
___________________________________
Commitment Percentage ____
By:________________________________
Title:_____________________________
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Acknowledged and Consented to:
ALC COMMUNICATIONS CORPORATION
[CORPORATE SEAL]
By:____________________________________
Name: _____________________________
Title: _____________________________
ALLNET COMMUNICATION SERVICES, INC.
[CORPORATE SEAL]
By:____________________________________
Name:_______________________________
Title:______________________________
Consented to and Accepted:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Managing Agent and Credit Agent
By:____________________________________
Title:______________________________
BANK ONE, COLUMBUS, NA,
as Managing Agent and Administrative Agent
By:____________________________________
Title:______________________________
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EXHIBIT F
to
Credit Agreement dated as of January 20, 1995
by and among
Allnet Communication Services, Inc.,
ALC Communications Corporation,
the Lenders party thereto,
First Union National Bank of North Carolina,
as Managing Agent, Credit Agent and Syndication Agent
and
Bank One, Columbus, NA,
as Managing Agent and Credit Agent
UNCONDITIONAL GUARANTY AGREEMENT
THIS UNCONDITIONAL GUARANTY AGREEMENT (this "Guaranty"), dated as of
__________ __, 199__, made by _______________________, a ________________
corporation (the "Guarantor"), in favor of FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, a national banking association ("First Union"), as Credit Agent for
the ratable benefit of the Agents and Lenders under the Credit Agreement dated
January ___, 1995 between Allnet Communication Services, Inc., a
________________ corporation, as Borrower, ALC Communications Corporation, a
________________ corporation ("ALC"), as Guarantor, such Lenders, First Union,
as Managing Agent and Credit Agent, and Bank One, Columbus, NA, a national
banking association, as Managing Agent and Administrative Agent (as amended or
modified, the "Credit Agreement").
STATEMENT OF PURPOSE
Pursuant to the terms of the Credit Agreement, the Lenders have agreed
to extend certain credit facilities to the Borrower in the aggregate principal
amount of up to the Aggregate Commitment.
The Borrower, ALC, the Guarantor and each other Subsidiary Guarantor
comprise one integrated financial enterprise, and all Extensions of Credit to
the Borrower will inure directly or indirectly, to the benefit of the
Guarantor.
In connection with the transactions contemplated by the Credit
Agreement, the Lenders have requested, and the Guarantor has agreed to execute
and deliver, this Guaranty.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, and to induce the Lenders to continue to make
available Extensions of Credit pursuant to the Credit Agreement, it is agreed
as follows:
SECTION 1. Definitions. Capitalized terms used herein (including the
preamble hereof) shall have the meanings assigned to them in the Credit
Agreement, unless the context otherwise requires or unless otherwise defined
herein. References in the Credit
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Agreement to a "Guaranty" or herein to this "Guaranty" shall include and mean
this Guaranty, including all amendments and supplements hereto now or hereafter
in effect, and references in the Credit Agreement to a Subsidiary Guarantor
shall include and mean this "Guarantor."
SECTION 2. Guaranty of Obligations of Borrower. The Guarantor hereby
unconditionally guarantees to the Credit Agent for the ratable benefit of the
Agents and the Lenders, and their respective successors, endorsees, transferees
and assigns, the prompt payment and performance of all Obligations of the
Borrower, whether primary or secondary (whether by way of endorsement or
otherwise), whether now existing or hereafter arising, whether or not from time
to time reduced or extinguished (except by payment thereof) or hereafter
increased or incurred, whether or not recovery may be or hereafter become
barred by the statute of limitations, whether enforceable or unenforceable as
against the Borrower, whether or not discharged, stayed or otherwise affected
by any bankruptcy, insolvency or other similar law or proceeding, whether
created directly with any Agent or Lender or acquired by any Agent or Lender
through assignment, endorsement or otherwise, whether matured or unmatured,
whether joint or several, as and when the same become due and payable (whether
at maturity or earlier, by reason of acceleration, mandatory repayment or
otherwise), in accordance with the terms of any such instruments evidencing any
such obligations, including all renewals, extensions or modifications thereof
(all Obligations of the Borrower to any Agent or Lender, including all of the
foregoing, being hereinafter collectively referred to as the "Guaranteed
Obligations"); provided, that notwithstanding anything to the contrary
contained herein, it is the intention of the Guarantor and the Lenders that the
amount of the Guarantor's obligations with respect to the Guaranteed
Obligations shall be in, but not in excess of, the maximum amount thereof not
subject to avoidance or recovery by operation of applicable law governing
bankruptcy, reorganization, arrangement, adjustment of debts, relief of
debtors, dissolution, insolvency, fraudulent transfers or conveyances or other
similar laws (including, without limitation, 11 U.S.C. Section 547, Section
548, Section 550 and other "avoidance" provisions of Title 11 of the United
States Code) applicable at any time to the Guarantor and this Guaranty
(collectively, "Applicable Insolvency Laws"). To that end, but only in the
event and to the extent that the Guarantor's obligations with respect to the
Guaranteed Obligations or any payment made pursuant to the Guaranteed
Obligations would, but for the operation of the foregoing proviso, be subject
to avoidance or recovery under Applicable Insolvency Laws, the amount of the
Guarantor's obligations with respect to the Guaranteed Obligations shall be
limited to the largest amount which, after giving effect thereto, would not,
under Applicable Insolvency Laws, render the Guarantor's obligations with
respect to such Guaranteed Obligations unenforceable or avoidable or otherwise
subject to recovery under Applicable Insolvency Laws. To the extent any
payment actually made pursuant to the Guaranteed Obligations exceeds the
limitation of the foregoing proviso, then the amount of such excess shall, from
and after the time of payment by Guarantor, be reimbursed by the Lenders upon
demand by Guarantor. The foregoing proviso is
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intended solely to preserve the rights of the Credit Agent hereunder against
the Guarantor to the maximum extent permitted by Applicable Insolvency Laws and
neither the Borrower or any other Guarantor under the Credit Agreement nor any
other Person shall have any right or claim under such proviso that would not
otherwise be available under Applicable Insolvency Laws.
SECTION 3. Nature of Guaranty. The Guarantor agrees that this
Guaranty is a continuing, unconditional guaranty of payment and performance and
not of collection, and that its obligations under this Guaranty shall be
primary, absolute and unconditional, irrespective of, and unaffected by:
(a) the genuineness, validity, regularity, enforceability
or any future amendment of, or change in, the Credit Agreement or any
other Loan Document or any other agreement, document or instrument to
which ALC or any Subsidiary thereof is or may become a party;
(b) the absence of any action to enforce this Guaranty,
the Credit Agreement or any other Loan Document or the waiver or
consent by the Credit Agent or any Lender with respect to any of the
provisions of this Guaranty, the Credit Agreement or any other Loan
Document;
(c) the existence, value or condition of, or failure to
perfect its Lien against, any security for or other guaranty of the
Guaranteed Obligations or any action, or the absence of any action, by
the Credit Agent or any Lender in respect of such security or guaranty
(including, without limitation, the release of any such security or
guaranty); or
(d) any other action or circumstances which might
otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor;
it being agreed by the Guarantor that, subject to the proviso in Section 2
hereof, its obligations under this Guaranty shall not be discharged until the
final and indefeasible payment and performance, in full, of the Guaranteed
Obligations and the termination of the Commitments. The Guarantor expressly
waives all rights it may now or in the future have under any statute (including
without limitation North Carolina General Statutes Section 26-7, et seq. or
similar law), or at law or in equity, or otherwise, to compel the Credit Agent
or any Lender to proceed in respect of the Guaranteed Obligations against the
Borrower or any other party or against any security for or other guaranty of
the payment and performance of the Guaranteed Obligations before proceeding
against, or as a condition to proceeding against, the Guarantor. The Guarantor
further expressly waives and agrees not to assert or take advantage of any
defense based upon the failure of the Credit Agent or any Lender to commence an
action in respect of the Guaranteed Obligations against the Borrower, the
Guarantor, any other Subsidiary Guarantor or any other party or any security
for the payment and performance of the Guaranteed Obligations. The Guarantor
agrees that any notice or directive given at any time to the Credit Agent
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110
or any Lender which is inconsistent with the waivers in the preceding two
sentences shall be null and void and may be ignored by the Credit Agent or
Lender, and, in addition, may not be pleaded or introduced as evidence in any
litigation relating to this Guaranty for the reason that such pleading or
introduction would be at variance with the written terms of this Guaranty,
unless the Credit Agent and the Required Lenders have specifically agreed
otherwise in writing. The foregoing waivers are of the essence of the
transaction contemplated by the Loan Documents and, but for this Guaranty and
such waivers, the Agents and Lenders would decline to enter into the Credit
Agreement.
SECTION 4. Demand by the Credit Agent. In addition to the terms set
forth in Section 3, and in no manner imposing any limitation on such terms, if
all or any portion of the then outstanding Guaranteed Obligations under the
Credit Agreement are declared to be immediately due and payable, then the
Guarantor shall, upon demand in writing therefor by the Credit Agent to the
Guarantor, pay all or such portion of the outstanding Guaranteed Obligations
then declared due and payable. Payment by the Guarantor shall be made to the
Credit Agent, to be credited and applied upon the Guaranteed Obligations, in
immediately available Dollars to an account designated by the Credit Agent or
at the address referenced herein for the giving of notice to the Credit Agent
or at any other address that may be specified in writing from time to time by
the Credit Agent.
SECTION 5. Waivers. In addition to the waivers contained in Section
3, the Guarantor waives, and agrees that it shall not at any time insist upon,
plead or in any manner whatever claim or take the benefit or advantage of, any
appraisal, valuation, stay, extension, marshalling of assets or redemption
laws, or exemption, whether now or at any time hereafter in force, which may
delay, prevent or otherwise affect the performance by the Guarantor of its
obligations under, or the enforcement by the Credit Agent or the Lenders of,
this Guaranty. The Guarantor further hereby waives diligence, presentment,
demand, protest and notice of whatever kind or nature with respect to any of
the Guaranteed Obligations and waives the benefit of all provisions of law
which are or might be in conflict with the terms of this Guaranty. The
Guarantor represents, warrants and agrees that its obligations under this
Guaranty are not and shall not be subject to any counterclaims, offsets or
defenses of any kind against the Credit Agent, the Lenders or the Borrower
whether now existing or which may arise in the future.
SECTION 6. Benefits of Guaranty. The provisions of this Guaranty are
for the benefit of the Credit Agent, the other Agents and the Lenders and their
respective successors, transferees, endorsees and assigns, and nothing herein
contained shall impair, as between the Borrower, the Agents and the Lenders,
the obligations of the Borrower under the Loan Documents. In the event all or
any part of the Guaranteed Obligations are transferred, endorsed or assigned by
the any Agent or Lender to any Person or Persons, any reference to any "Credit
Agent", "Agent" or "Lenders" herein shall be deemed to refer equally to such
Person or Persons.
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SECTION 7. Modification of Loan Documents etc. If the Credit Agent or
the Lenders shall at any time or from time to time, with or without the consent
of, or notice to, the Guarantor:
(a) change or extend the manner, place or terms of
payment of, or renew or alter all or any portion of, the Guaranteed
Obligations;
(b) take any action under or in respect of the Loan
Documents in the exercise of any remedy, power or privilege contained
therein or available to it at law, in equity or otherwise, or waive or
refrain from exercising any such remedies, powers or privileges;
(c) amend or modify, in any manner whatsoever, the Loan
Documents;
(d) extend or waive the time for performance by the
Guarantor, any other Subsidiary Guarantor, the Borrower or any other
Person of, or compliance with, any term, covenant or agreement on its
part to be performed or observed under a Loan Document (other than
this Guaranty), or waive such performance or compliance or consent to
a failure of, or departure from, such performance or compliance;
(e) take and hold security or collateral for the payment
of the Guaranteed Obligations or sell, exchange, release, dispose of,
or otherwise deal with, any property pledged, mortgaged or conveyed,
or in which the Credit Agent or the Lenders have been granted a Lien,
to secure any Debt of the Guarantor, any other Subsidiary Guarantor or
the Borrower to any Agent or the Lenders;
(f) release anyone who may be liable in any manner for
the payment of any amounts owed by the Guarantor, any other Subsidiary
Guarantor or the Borrower to any Agent or Lender;
(g) modify or terminate the terms of any intercreditor or
subordination agreement pursuant to which claims of other creditors of
the Guarantor, any other Subsidiary Guarantor or the Borrower are
subordinated to the claims of any Agent or Lender; or
(h) apply any sums by whomever paid or however realized
to any amounts owing by the Guarantor, any other Subsidiary Guarantor
or the Borrower to any Agent or Lender in such manner as the Credit
Agent or any Lender shall determine in its reasonable discretion;
then neither the Credit Agent nor any Lender shall incur any liability to the
Guarantor as a result thereof, and no such action shall impair or release the
obligations of the Guarantor under this Guaranty.
SECTION 8. Reinstatement. The Guarantor agrees that, if any payment
made by the Borrower or any other Person applied to the
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112
Obligations is at any time annulled, set aside, rescinded, invalidated,
declared to be fraudulent or preferential or otherwise required to be refunded
or repaid, or the proceeds of Collateral are required to be returned by any
Agent or Lender to the Borrower, its estate, trustee, receiver or any other
party, including, without limitation, the Guarantor, under any Applicable Law
or equitable cause, then, to the extent of such payment or repayment, the
Guarantor's liability hereunder (and any Lien or Collateral securing such
liability) shall be and remain in full force and effect, as fully as if such
payment had never been made, and, if prior thereto, this Guaranty shall have
been canceled or surrendered (and if any Lien or Collateral securing the
Guarantor's liability hereunder shall have been released or terminated by
virtue of such cancellation or surrender), this Guaranty (and such Lien or
Collateral) shall be reinstated in full force and effect, and such prior
cancellation or surrender shall not diminish, release, discharge, impair or
otherwise affect the obligations of the Guarantor in respect of the amount of
such payment (or any Lien or Collateral securing such obligation).
SECTION 9. Waiver of Subrogation and Contribution. Until all amounts
owing to the Agents and Lenders on account of the obligations are paid in full
and the Commitment is terminated, the Guarantor hereby waives any claims or
other rights which it may now or hereafter acquire against the Borrower that
arise from the existence or performance of the Guarantor's obligations under
this Guaranty, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution, indemnification, any right to
participate in any claim or remedy of the Credit Agent or the Lenders against
the Borrower or any security or collateral which the Credit Agent or the
Lenders now have or may hereafter acquire, whether or not such claim, remedy or
right arises in equity or under contract, statute or common law, by any payment
made hereunder or otherwise, including without limitation, the right to take or
receive from the Borrower, directly or indirectly, in cash or other property or
by set-off or in any other manner, payment or security on account of such claim
or other rights. If any amount shall be paid to the Guarantor on account of
any such rights at any time when all of the Obligations shall not have been
paid in full, such amount shall be held by the Guarantor in trust for the
Credit Agent, segregated from other funds of the Guarantor, and shall,
forthwith upon receipt by the Guarantor, be turned over to the Credit Agent
(duly indorsed by the Guarantor to the Credit Agent, if required) to be applied
against the Obligations, whether matured or unmatured, in such order as set
forth in the Credit Agreement.
SECTION 10. Representations and Warranties. To induce the Agents and
Lenders to execute the Credit Agreement and make any Extensions of Credit, the
Guarantor hereby represents and warrants that:
(a) the Guarantor has the right, power and authority to
execute, deliver and perform this Guaranty and has taken all necessary
corporate action to authorize its execution, delivery and performance
of, this Guaranty;
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(b) this Guaranty constitutes the legal, valid and
binding obligation of the Guarantor enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by the availability of
equitable remedies;
(c) the execution, delivery and performance of this
Guaranty will not violate any provision of any Applicable Law or
material contractual obligation of the Guarantor and will not result
in the creation or imposition of any Lien upon or with respect to any
material property or revenues of the Guarantor;
(d) except as contemplated in Section 12 hereof, no
consent or authorization of, filing with, or other act by or in
respect of, any arbitrator or Governmental Authority and no consent of
any other Person (including, without limitation, any stockholder or
creditor of the Guarantor), is required in connection with the
execution, delivery, performance, validity or enforceability of this
Guaranty;
(e) no actions, suits or proceedings before any
arbitrator or Governmental Authority are pending or, to the knowledge
of the Guarantor, threatened by or against the Guarantor or against
any of its properties with respect to this Guaranty or any of the
transactions contemplated hereby; and
(f) the Guarantor has such title to the real property
owned by it and a valid leasehold interest in the real property leased
by it, and has good and marketable title to all of its personal
property sufficient to carry on its business free of any and all Liens
of any type whatsoever, except those permitted by Section 10.3 of the
Credit Agreement.
SECTION 11. Remedies.
(a) Upon the occurrence of any Event of Default, with the consent of
the Required Lenders, the Credit Agent may, or upon the request of the Required
Lenders, the Credit Agent shall, enforce against the Guarantor its obligations
and liabilities hereunder and exercise such other rights and remedies as may be
available to the Credit Agent hereunder, under the Loan Documents or otherwise.
(b) No right or remedy herein conferred upon the Credit Agent is
intended to be exclusive of any other right or remedy contained herein or in
any other Loan Document or otherwise, and every such right or remedy contained
herein and therein or now or hereafter existing at law, or in equity, or by
statute, or otherwise shall be cumulative. The Required Lenders may instruct
the Credit Agent to pursue, or refrain from pursuing, any remedy available to
the Credit Agent at such times and in such order as the Required
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114
Lenders shall determine, and the Required Lenders election as to such remedies
shall not impair any remedies against the Guarantor not then exercised. In
addition, any election of remedies which results in the denial or impairment of
the right of the Credit Agent to seek a deficiency judgment against the
Borrower shall not impair the Guarantor's obligation to pay the full amount of
the Guaranteed Obligations.
SECTION 12. Regulatory Approvals. The Guarantor will, at its
expense, promptly execute and deliver, or cause the execution and delivery of,
all applications, certificates, instruments, registration statements, and all
other documents and papers the Credit Agent may reasonably request and as may
be required by law in connection with the obtaining of any consent, approval,
registration, qualification, or authorization of the FCC, any PUC or of any
other Person deemed necessary or appropriate by the Credit Agent for the
effective exercise of any rights under this Guaranty in any jurisdiction.
Without limitation of the foregoing, if an Event of Default shall have occurred
and be continuing, the Guarantor shall take any action which the Credit Agent
may reasonably request in order to transfer and assign to the Credit Agent, or
to such one or more third parties as the Credit Agent may designate, or to a
combination of the foregoing, each FCC License and PUC Authorization. To
enforce the provisions of this Section, the Credit Agent is empowered to
request the appointment of a receiver from any court of competent jurisdiction.
Such receiver shall be instructed to seek from the FCC and any applicable PUC
an involuntary transfer of control of each such FCC License and PUC
Authorization for the purpose of seeking a bona fide purchaser to whom control
will ultimately be transferred. The Guarantor hereby agrees to authorize such
an involuntary transfer of control upon the request of the receiver so
appointed and, if the Guarantor shall refuse to authorize the transfer, its
approval may be required by the court. Upon the occurrence and continuance of
an Event of Default, the Guarantor shall further use its best efforts to assist
in obtaining approval of the FCC and any applicable PUC, if required, for any
action or transactions contemplated by this Guaranty including, without
limitation, the preparation, execution and filing with the FCC and any
applicable PUC of the assignor's or transferor's portion of any application or
applications for consent to the assignment of any FCC License and PUC
Authorizations or transfer of control necessary or appropriate under the rules
and regulations of the FCC or any PUC for the approval of the transfer or
assignment of any portion of the assets of the Guarantor, together with any FCC
License and applicable PUC Authorizations. Because the Guarantor agrees that
the Agents' and Lenders' remedy at law for failure of the Guarantor to comply
with the provisions of this Section would be inadequate and that such failure
would not be adequately compensable in damages, the Guarantor agrees that the
covenants contained in this Section may be specifically enforced, and the
Guarantor hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants.
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SECTION 13. Miscellaneous.
(a) Entire Agreement; Amendments. This Guaranty, together with
the other Loan Documents, constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior agreements
with respect to the subject matter hereof and may not be amended or
supplemented except by a writing signed by the Guarantor and the Credit Agent.
(b) Headings. Titles and captions of sections and subsections in
this Guaranty are for convenience of reference only, and neither limit or
amplify the provisions of this Guaranty.
(c) Notices. All notices and communications hereunder
shall be given in accordance with Section 14.1 of the Credit Agreement.
(d) Binding Effect. This Guaranty shall bind the Guarantor and
shall inure to the benefit of the Agents and Lenders and their respective
successors and assigns. Subject to Section 14.11 of the Credit Agreement, the
Guarantor may not assign this Guaranty or delegate any of its duties hereunder.
(e) Non-Waiver. The failure of the Credit Agent or any Lender to
enforce any right or remedy hereunder, or promptly to enforce any such right or
remedy, shall not constitute a waiver thereof, nor give rise to any estoppel
against the Credit Agent or any Lender, nor excuse the Guarantor from its
obligations hereunder. Any waiver of any such right or remedy by the Lenders
must be in writing and signed by the Required Lenders.
(f) Termination. This Guaranty shall terminate and be of no
further force or effect on the date when the Guaranteed Obligations have been
indefeasibly paid in full.
(g) Governing Law. This Guaranty shall be governed by and
construed and enforced in accordance with the laws of the State of North
Carolina, without reference to the conflicts or choice of law principles
thereof.
(h) Consent to Jurisdiction. The Guarantor hereby irrevocably
consents to the personal jurisdiction of the state and federal courts located
in Mecklenburg County, North Carolina, in any action, claim or other proceeding
arising out of any dispute in connection with this Guaranty, any rights or
obligations hereunder, or the performance of such rights and obligations. The
Guarantor hereby irrevocably consents to the service of a summons and complaint
and other process in any action, claim or proceeding brought by the Credit
Agent or any Lender in connection with this Guaranty, any rights or obligations
hereunder, or the performance of such rights and obligations, on behalf of
itself or its property, in the manner referenced in Section 13(d). Nothing in
this Section 13(i) shall affect the right of the Credit Agent or any Lender to
serve legal process in any other manner permitted by Applicable Law or affect
the right of the Credit Agent or any Lender to bring any action or proceeding
against the Guarantor or its properties in the courts of any other
jurisdictions.
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(i) Waiver of Jury Trial. THE CREDIT AGENT, EACH AGENT AND LENDER
AND THE GUARANTOR HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY
DISPUTE IN CONNECTION WITH THIS GUARANTY, ANY RIGHTS OR OBLIGATIONS HEREUNDER
OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
(j) Expenses. The Guarantor agrees that it will reimburse the
Credit Agent, each Agent and each Lender for all expenses (including reasonable
attorneys fees and expenses) incurred by the Credit Agent, such Agent or Lender
in connection with the obligations of the Guarantor under this Guaranty and any
other Loan Documents and all expenses (including reasonable attorneys fees and
expenses) incurred by the Credit Agent, any Agent or any Lender in connection
with the enforcement of this Guaranty, in each case upon the occurrence and
during the continuation of an Event of Default.
(k) Indemnities. The Guarantor agrees to hold the Credit Agent,
each Agent and the Lenders harmless from and against all losses suffered by the
Agents and the Lenders in connection with (i) the exercise by the Lenders of
any right or remedy granted to them under this Guaranty upon the occurence and
during the continuation of an Event of Default, (ii) any claim, and the
prosecution or defense thereof, arising out of or in any way connected with
this Guaranty, and (iii) the collection or enforcement of the Obligations or
any of them; provided, that the Guarantor shall not be obligated to reimburse
any Agent or the Lenders for costs and expenses, or indemnify any Agent or the
Lenders for any loss, resulting from the gross negligence or willful misconduct
of such Agent or the Lenders. Notwithstanding any termination of this
Guaranty, the indemnities to which the Credit Agent, the Agents and Lenders are
entitled under this Guaranty shall continue in full force and effect and shall
protect the Credit Agent, the Agent and the Lenders against events arising
after such termination as well as before.
IN WITNESS WHEREOF, the Guarantor has executed and delivered this
Guaranty as of the date first above written.
[CORPORATE SEAL] [SUBSIDIARY GUARANTOR]
ATTEST:
___________________ By:_____________________________
Name: Name: _______________________
Title: Title: ______________________
10
117
EXHIBIT G
to
Credit Agreement dated as of January 20, 1995
by and among
Allnet Communication Services, Inc.,
ALC Communications Corporation,
the Lenders party thereto,
First Union National Bank of North Carolina,
as Managing Agent, Credit Agent and Syndication Agent
and
Bank One, Columbus, NA,
as Managing Agent and Credit Agent
January 20, 1995
To the Lenders party to the Credit
Agreement referred to below and
First Union National Bank of North
Carolina, as Managing Agent, Credit
Agent and Syndication Agent, and
Bank One, Columbus, NA, as Managing
Agent and Administrative Agent
Re: Allnet Communication Services, Inc. and ALC Communications
Corporation
Ladies and Gentlemen:
We have acted as legal counsel to Allnet Communication Services, Inc.,
a Michigan corporation (the "Borrower") and to ALC Communications Corporation,
a Delaware corporation (the "Guarantor") in connection with the transactions
contemplated by the Credit Agreement (the "Credit Agreement") by and among the
Borrower, the Guarantor, the Lenders who are or may become a party thereto,
First Union National Bank of North Carolina, as Managing Agent, Credit Agent
and Syndication Agent, and Bank One, Columbus, NA, as Managing Agent and
Administrative Agent (collectively, the "Agents") providing for loans to be
made by the Lenders to the Borrower in an aggregate principal amount not
exceeding $105,000,000. This opinion is being delivered pursuant to Section
5.2(b)(iv) of the Credit Agreement.
In rendering this opinion, we have examined and relied upon the
following documents, each dated of even date herewith unless otherwise noted:
A. Articles of Incorporation of the Borrower, certified by the
Michigan Department of Commerce as of January 10, 1995;
B. Restated Certificate of Incorporation of the Guarantor, certified
by the Secretary of State of Delaware as of January 12, 1995;
C. Bylaws of each of the Borrower and the Guarantor, certified to us
by an officer of such corporation;
D. Certificate of Good Standing of the Borrower issued by the
Secretary of State of Michigan as of January 10, 1995;
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January 20, 1995
Page 2
E. Certificates of Good Standing of the Guarantor issued by
Secretaries of State of Delaware and Michigan, respectively, as of
January 10, 1995;
F. Resolutions of the Borrower and the Guarantor authorizing the
transactions contemplated by the Loan Documents (as hereinafter
defined);
G. Credit Agreement;
H. Revolving Credit Notes payable to First Union National Bank of
North Carolina, Bank One, Columbus, NA, Comerica Bank and Star
Bank, NA;
I. Certificate of Facts from the Borrower and the Guarantor to us, a
copy of which is attached hereto (the "Certificate of Facts"); and
J. The Indenture.
The documents listed in paragraphs A through F above are collectively
referred to in this opinion as the "Organization Documents". The documents
listed in paragraphs G and H are collectively referred to as the "Loan
Documents", and the documents in paragraphs A through J are collectively
referred to as the "Documents." Unless otherwise defined herein, all
capitalized terms used herein shall have the meanings ascribed to them in the
Credit Agreement.
In rendering this opinion, we have assumed, without independent
investigation: (i) the genuineness of the signatures of all parties other than
those on behalf of the Borrower and the Guarantor; (ii) the authenticity of all
Documents submitted to us as originals; (iii) the conformity to original
documents of all Documents submitted to us as certified or photostatic copies;
(iv) the Loan Documents are valid, binding and enforceable against the Lender.
Our review has been limited to examining the Organization Documents,
the Loan Documents, the Indenture, applicable Michigan and federal law and the
General Corporation Law of Delaware. We expressly decline to opine as to the
laws of the State of North Carolina. In addition, we do not render any opinion
herein with respect to laws, rules or regulations governing the provision of
telecommunications services or the telecommunications industry. To the extent
that any opinion given herein is expressed in terms of our knowledge or
awareness, we have relied exclusively upon the assumptions stated above and the
representations of the Borrower and the Guarantor in the Certificate of Facts,
and we have not undertaken to independently verify such facts or information,
nor have we performed any litigation or other searches. In this regard, our
knowledge is limited to the conscious awareness of facts or other information
by (i) the attorney executing this opinion on behalf of our firm; (ii) the
following attorneys: Ralph R. Margulis, Judith Lowitz Adler and Jeffrey L.
Forman; or (iii) the attorney who is primarily responsible for providing the
response for a particular issue addressed in this opinion.
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January 20, 1995
Page 3
Based solely upon the foregoing, and subject to the qualifications and
limitations set forth below, we are of the opinion that:
1. Each of the Borrower and the Guarantor is a corporation
validly existing and in good standing under the laws of the
state of its incorporation. Based on our knowledge of the business and
properties of the Borrower and the Guarantor, each of the Borrower and
the Guarantor (a) has the full corporate power and authority to carry
on its business as now being conducted and (b) has been duly qualified
and authorized to do business in each jurisdiction in which the
character of its properties or the nature of its business requires such
qualification and authorization, except where the failure to be so
qualified and authorized would not have a Material Adverse Effect.
2. Each Credit Party has the full corporate power and
authority to execute, deliver and perform its obligations under the
Loan Documents to which it is a party. The execution, delivery and
performance by the Borrower and the Guarantor of the Loan Documents to
which they are parties have been duly authorized by all action
necessary on the part of each of them and the Loan Documents have been
duly executed and delivered on behalf of the Borrower and the
Guarantor. If Michigan law were to apply, the obligations of the
Borrower and the Guarantor contained in the Loan Documents would
constitute legal, valid and binding obligations of the Borrower and
the Guarantor respectively, enforceable against the Borrower and the
Guarantor in accordance with the terms of the Loan Documents.
3. The execution and delivery of the Loan Documents on
behalf of the Borrower and the Guarantor, the performance of the
Loan Documents to which each is a party by such party, and the
compliance with the provisions of such Loan Documents by the Borrower
and the Guarantor, will not result in a breach of, or constitute a
default under any provisions of the Organization Documents, the
Indenture or, to our knowledge, any other agreement to which the
Borrower or the Guarantor is a party or by which it or its property is
bound, or, to our knowledge, any judgment, writ, order or decree of any
judicial or administrative authority binding upon or applicable to
the Borrower or the Guarantor.
4. To our knowledge no consent, approval or authorization
of any third party, not heretofore obtained, is required in connection
with the execution, delivery or performance by the Credit Parties of
the Loan Documents except as disclosed to you in the Credit Agreement.
5. To our knowledge there is no action, proceeding or
investigation pending or threatened which questions the validity of the
Loan Documents or the consummation of any actions contemplated
thereby.
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January 29, 1995
Page 4
The foregoing opinions are qualified to the extent that the
enforceability of the rights and remedies set forth in the Loan Documents
may be limited by:
(i) Bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws relating to
or affecting the enforcement of creditors' rights and remedies;
and
(ii) The effect of any limitations imposed by general
principles of equity upon the specific enforceability of the
provisions of the Loan Documents.
In addition to the qualifications set forth above, we express no opinion as to
any of the following matters:
(a) The interrelation with, or effect on the validity,
enforceability or binding effect of the Loan Documents of
any documents to which the Borrower or the Guarantor is a party
of which we have no knowledge;
(b) The validity, binding effect or enforceability of provisions
in the Loan Documents: (i) appointing a party as Borrower's
attorney-in-fact; or (ii) waiving rights or defenses to
obligations where such waivers are against the statutes, laws
or public policy of the State of Michigan; and
(c) The validity, binding effect or enforceability under certain
circumstances of provisions of the Loan Documents that
provide that the rights and remedies of the parties
thereunder are not exclusive, that every right or remedy is
cumulative and may be exercised in addition to or with any
other right or remedy, or that the election of some remedy or
remedies does not preclude recourse to one or more other
remedies.
We do not purport to be experts or to express any opinion herein
concerning any laws other than the laws of the State of Michigan, the General
Corporation Law of Delaware, and applicable federal law, and this opinion is
qualified accordingly. This opinion is for the benefit of the Lenders, their
successors, assigns and participants only, and may not be relied upon by any
other party without the express written consent of the undersigned. We assume
no obligation to supplement this opinion if any applicable laws change after
the date of this opinion or if we become aware of any facts that might change
any of our opinions as set forth above.
Very truly yours,
JAFFE, RAITT, HEUER & WEISS
Professional Corporation
121
EXHIBIT H
to
Credit Agreement dated as of January 20, 1995
by and among
Allnet Communication Services, Inc.,
ALC Communications Corporation,
the Lenders party thereto,
First Union National Bank of North Carolina,
as Managing Agent and Credit Agent
and
Bank One, Columbus, NA,
as Managing Agent and Administrative Agent
[Form of Communications Law Opinion]
January 20, 1995
To the Lenders party to the Credit
Agreement referred to below and
First Union National Bank of
North Carolina, as Managing
Agent, Credit Agent, and
Syndication Agent, and Bank One,
Columbus, NA, as Managing
Agent and Administrative Agent
Ladies and Gentlemen:
We have acted as special communications regulatory counsel to Allnet
Communications Services, Inc., a corporation organized under the laws of
Michigan (the "Borrower"), and ALC Communications Corporation, a corporation
organized under the laws of Delaware ("ALC", and collectively with the
Borrower, the "Credit Parties"), in connection with (i) the Credit Agreement
(the "Credit Agreement") by and among the Borrower, ALC, as Guarantor, the
Lenders referred to therein, First Union National Bank of North Carolina, as
Managing Agent, Credit Agent, and Syndication Agent, and Bank One, Columbus,
NA, as Managing Agent and Administrative Agent, providing for the extension of
credit facilities to be made by said Lenders to the Borrower in an aggregate
principal amount not exceeding the Aggregate Commitment and (ii) the various
other agreements and instruments referred to in the next following paragraph.
Capitalized terms defined in the Credit Agreement are used herein as defined
therein. This opinion is being delivered pursuant to Section 5.2(b)(iv) of the
Credit Agreement.
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January 20,1995
Page 2
As special communications counsel for the Credit Parties, we address only
matters within the jurisdiction of the Federal Communications Commission
("FCC") and each PUC which on the date of this opinion exercises jurisdiction
over the Credit Parties (each such PUC is hereinafter referred to as an
"Applicable PUC"). See Schedule I for the list of Applicable PUCs as of the
date of this opinion.
In rendering the opinions expressed herein, we have examined the Credit
Agreement and the Notes (collectively, the "Loan Documents"). We also have
assumed with your permission and without independent investigation (a) that the
signatures on all documents examined by us are genuine and that where any such
signature purports to have been made in a corporate, governmental, fiduciary,
or other capacity, the person who affixed such signature to such documents had
authority to do so, (b) the authenticity of documents submitted to us as
originals, and the conformity to authentic original documents of all documents
submitted to us as certified, conformed or photostatic copies and (c) the
correctness of public files, records and certificates of, or furnished by,
governmental or regulatory agencies or authorities. We have assumed the due
execution and delivery, pursuant to due authorization of each of the Loan
Documents by any parties thereto.
As to matters of fact relevant to the opinions expressed herein, we
have relied upon the Officer's Certificate of Roy Morris referenced below, and
examination of our own files and records, appropriate examination of public
records, files and certificates on file with the FCC and each Applicable PUC as
of the date of this opinion, and as to the Credit Parties' ownership and
operations, review of documents, records and instruments, provided by Credit
Parties and pertinent disclosures of appropriate representatives of the Credit
Parties. The following opinions are based upon and expressly limited to the
Communications Act of 1934, as amended, the rules, regulations and published
policies of the FCC (the "Act"), and all laws administered by, and all rules,
regulations and published policies of, each Applicable PUC (the "PUC Laws") in
effect on the date hereof. Subject to the limitations set forth herein, we
have reviewed such materials and law as we have deemed necessary for purposes
of this opinion.
Based upon the foregoing and subject to the qualifications, assumptions
and limitations set forth herein, we are of the opinion that:
1. No authorizations of the FCC or any Applicable PUC are necessary
for the execution or delivery by Credit Parties and their Subsidiaries of the
Loan Documents, or for the legality, validity or enforceability thereof except
with respect to performance as set forth below in this paragraph 1. All
authorizations of the FCC or
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January 20, 1995
Page 3
any Applicable PUC required in connection with the execution or delivery of the
Loan Documents have been duly granted and are in full force and effect without
conditions, other than such conditions as are generally applicable to such
authorizations. Similarly, no authorization of the FCC is required for the
performance by Credit Parties and their Subsidiaries of the Loan Documents. No
authorization of any Applicable PUC is required for the performance by the
Credit Parties and their Subsidiaries of the Loan Documents, except that such
authorization is required by the Applicable PUCs listed on Schedule II hereto.
The Credit Parties have filed applications for approval with each Applicable
PUC listed on Schedule II.
2. Schedule III hereto accurately and completely lists all FCC
Licenses issued to the Credit Parties and their Subsidiaries and all other
certificates or other licenses issued or granted by any Applicable PUC to the
Credit Parties and their Subsidiaries. Each Credit Party and each Subsidiary
thereof holds all FCC Licenses required by the FCC and all other certificates or
licenses required by any Applicable PUC for the construction and operation, in
accordance with the Act and the PUC Laws, of each of its Network Facilities.
All of the FCC Licenses listed on Schedule III and all of the other
certificates and licenses listed on Schedule III hereto are duly and validly
held by the applicable Credit Party, and all such FCC Licenses and other
certificates and licenses are in full force and effect without conditions,
other than such conditions that are generally applicable to such FCC Licenses
and other certificates and licenses.
3. On the date hereof, to the best of our knowledge based upon a
review of the public records of the FCC and on inquiries of responsible
officers of the Credit Parties, no petitions to deny or other challenges have
been filed against any pending application of any Credit Party or any
Subsidiary thereof at the FCC.
4. After the applications to Applicable PUCs referenced in Paragraph 1
above and Schedule II hereto are approved, the performance and compliance with
the terms and provisions by each Credit Party of the Loan Documents to which
such Credit Party is a party, (i) will not result in a violation of the Act or
any PUC Laws, (ii) will not cause any cancellation, termination, revocation,
forfeiture or material impairment of any FCC License listed on Schedule III
hereto or any other certificate or license listed on Schedule III hereto, and
(iii) do not and will not require notice to or the approval of the FCC or any
Applicable PUC.
5. To the best of our knowledge based upon inquiry to the Credit
Parties and review of records in our possession and the publicly available
files and records of the FCC and each Applicable PUC, the ownership and
operation by the Credit Parties
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January 20, 1995
Page 4
and their Subsidiaries of their Network Facilities and other business
operations, are in compliance in all material respects with the Act and the PUC
Laws (including, without limitation, all FCC filing, reporting, prior approval
and similar requirements).
6. To the best of our knowledge based upon inquiry to the Credit
Parties and review of records in our possession and the publicly available
files and records of the FCC and each Applicable PUC, there is (a) no
outstanding decree or order that has been issued by the FCC or any Applicable
PUC against any Credit Party or any Subsidiary thereof and no pending or
threatened litigation, proceedings, notice of violation, order to show cause,
complaint, inquiry or investigation before the FCC or any Applicable PUC
relating to any Credit Party or any Subsidiary thereof or relating to its
Network Facilities or business operations which might result in cancellation,
termination, revocation, forfeiture or any material impairment of any of their
FCC Licenses or applicable PUC Authorizations, or have any material adverse
effect upon, or cause material disruption to, any Credit Party or any
Subsidiary thereof or the ownership or operation of such Network Facilities or
business operations, (b) no event that has occurred (including any notice or
order issued by the FCC or any Applicable PUC), or agreement that has been
entered into by any Credit Party or any Subsidiary thereof which might now, or
after notice or lapse of time or both, result in a cancellation, termination,
revocation, forfeiture or any material impairment of any of their FCC Licenses,
or have any material adverse effect upon, or material disruption to, any Credit
Party or any Subsidiary thereof or the ownership or operation of their Network
Facilities or business operation.
With respect to the opinions expressed in the first two sentences of
paragraph 2, we have relied upon the Certificate of Roy Morris, an officer of
the Borrower, to the effect that he has provided us with physical access to
copies of all FCC Licenses and PUC authorizations issued to the Credit Parties
and their Subsidiaries and to the effect that he has delivered to us all other
certificates or other licenses issued or granted by any applicable PUC to the
Credit Parties and their Subsidiaries and the Credit Parties and their
Subsidiaries do not conduct any operations in any state other than those
listed in said Officer's Certificate, provided that no facts have come to our
attention that would lead us to reasonably conclude that reliance on such
Certificate is unwarranted.
The opinions expressed in this letter are subject in all respects to
the following qualifications: (1) no opinion is rendered as to matters not
specifically referred to herein or to events which have not yet occurred and
under no circumstances are you to infer from anything stated or not stated
herein any opinion with respect thereto; and (2) except as expressly provided
herein, all opinions expressed in this letter are limited solely to the effect
on the Loan Documents of the rules and regulations of the FCC and
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January 20, 1995
Page 5
Applicable PUCs, and we express no opinion as to the effect of any other
federal or state statute or equitable doctrine or of the regulations of any
other agencies or administrative body. We are admitted to the District of
Columbia Bar and, with respect to any matters concerning the law of the States
of Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Florida,
Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine,
Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana,
Nebraska, Nevada, New Jersey, New York, North Carolina, North Dakota, Ohio,
Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas,
Utah, Virginia, Washington, West Virginia and Wisconsin, we draw your attention
to the fact that the members of the firm involved in the preparation of this
opinion letter are not admitted to the Bars of those States and are not experts
in the laws of those jurisdictions, and that any such opinions concerning the
laws of such States are based upon our reasonable familiarity with the common
carrier telecommunications laws of such States as a result of our prior
involvement in matters concerning such laws as they pertain to compliance with
common carrier telecommunications regulatory requirements concerning the
approvals and notices required for borrowing by common carrier
telecommunications service providers. This opinion is given as of the date
hereof, and we assume no obligation to assess the likelihood of, or to update
or supplement this opinion to reflect, any facts or circumstances that may
hereafter occur or come to our attention, other than the denial by any
Applicable PUC of any of the applications listed on Schedule II attached
hereto.
At the request of our clients, this opinion letter is provided to you
by us in our capacity as special communications regulatory counsel to the
Credit Parties and may not be relied upon by any Person for any purpose other
than in connection with the transactions contemplated by the Credit Agreement
without, in each instance, our prior written consent except that it may be
relied upon as of the date hereof by any successor or permitted assignee or
participant of the Bank as provided in Section 12.14 of the Credit Agreement.
Very truly yours,
WILEY, REIN & FIELDING
By: /s/Danny E. Adams
-----------------
Danny E. Adams
Member of the Firm
126
Schedule I
----------
APPLICABLE PUCs
---------------
Alabama Public Service Commission Nebraska Public Service Commission
Arizona Corporation Commission Nevada Public Service Commission
Arkansas Public Utilities Commission New Jersey Board of Public Utilities
California Public Utilities Commission New York State Department of Public
Colorado Public Utilities Commission Service
Connecticut Department of Public North Carolina Utilities Commission
Utility Control North Dakota Public Service
Florida Public Service Commission Commission
Georgia Public Service Commission Ohio Public Utilities Commission
Idaho Public Utilities Commission Oklahoma Corporation Commission
Illinois Commerce Commission Oregon Public Utilities Commission
Indiana Utility Regulatory Commission Pennsylvania Public Utility Commission
Iowa Utilities Board South Carolina Public Service
Kansas State Corporation Commission Commission
Kentucky Public Service Commission South Dakota Public Utilities
Louisiana Public Service Commission Commission
Maine Public Utilities Commission Tennessee Public Service Commission
Maryland Public Service Commission Texas Public Utility Commission
Massachusetts Department of Public Utah Public Service Commission
Utilities Virginia State Corporation Commission
Michigan Public Service Commission Washington Utilities and Transportation
Minnesota Public Utilities Commission Commission
Mississippi Public Service Commission West Virginia Public Service
Missouri Public Service Commission Commission
Montana Public Service Commission Wisconsin Public Service Commission
127
SCHEDULE II
-----------
PUC APPLICATIONS
----------------
STATE DOCKET NO.
----- ----------
Georgia 5578
Kansas 191866-U
Kentucky 95-002
Maine 95003
Nebraska C-1144
New York C95-C-0013
North Carolina P-244-SUB 6
Pennsylvania S-00950481
West Virginia 95-0002-T-PC
128
SCHEDULE III
FCC AND PUC AUTHORIZATIONS
STATE AUTHORIZATIONS
STATE DOCKET NO. DATE GRANTED
ALABAMA 19029 07/11/84
ARIZONA U-2438-84-101 04/29/85
DECISION NO. 54505
ARKANSAS 92-263-U 10/29/92
ORDER NO. 2
CALIFORNIA DECISION NO. 84-06-113 06/13/84
CONNECTICUT 93-08-21 03/02/94
FLORIDA 830299-TP 09/28/83
ORDER NO. 12498
GEORGIA CERTIFICATE NO. R-028 01/06/87
IDAHO TARIFF FILING ONLY 06/01/92
ILLINOIS 84-0538 CONSOL. 84-0539 02/20/86
INDIANA 37555 07/10/85
37889 11/27/85
IOWA TF-90-225 07/11/90
KANSAS 142,552-U 11/02/84
KENTUCKY 9031 11/21/84
LOUISIANA TARIFF FILING ONLY 02/18/93
MAINE 93-043 11/09/93
MARYLAND ALLNET COMMUNICATIONS 02/22/84
SERVICES, INC.
MASSACHUSETTS D.P.U. 84-177 05/03/85
D.P.U. 85-268 07/08/86
MINNESOTA P437/M-83-363 09/06/83
MISSISSIPPI 92-UA-0454 01/27/93
129
STATE AUTHORIZATIONS
STATE DOCKET NO. DATE GRANTED
MISSOURI TO-84-222 08/26/86
TO-84-223
TC-85-126
TO-85-130
MONTANA N-93-23 05/18/93
NEBRASKA C-772 08/01/89
NEVADA 85-754 12/16/85
89-430 08/21/89
NEW YORK 28413 02/17/83
NORTH CAROLINA P-244 05/02/91
NORTH DAKOTA CERTIFICATE NO. 119 08/25/92
OHIO 83-1193-TP-ACE 12/14/83
83-1193-TP-ACE 03/06/84
OKLAHOMA 28821 08/02/85
ORDER NO. 283191
OREGON ORDER NO. 87-357 03/23/87
PENNSYLVANIA ORDER NO. A-310112 08/19/92
SOUTH CAROLINA DOCKET NO. 91-335-C 08/30/91
ORDER NO. 91-753
SOUTH DAKOTA TC 93-040 04/30/93
TENNESSEE U-84-7325 09/25/85
TEXAS REGISTRATION ONLY 07/27/92
WASHINGTON COMPETITIVE 03/24/86
CLASSIFICATION
U-85-75
WEST VIRGINIA 92-0564-T-CN 07/22/92
WISCONSIN 05-TI-106 04/28/87
130
MICROWAVE LICENSES
CALL SIGN EXPIRATION DATE
KVU 78 02/01/2001
WLB 352 02/01/2001
WLB 345 02/01/2001
WLC 732 02/01/2001
KTR 46 02/01/2001
KNL 31 02/01/2001
WLB 350 02/01/2001
WLB 346 02/01/2001
KNL 46 02/01/2001
WLB 348 02/01/2001
WLB 401 02/01/2001
WQR 44 02/01/2001
WLB 347 02/01/2001
WLB 351 02/01/2001
WLC 263 02/01/2001
WLB 400 02/01/2001
WLC 261 02/01/2001
WLB 402 02/01/2001
WHQ 655 02/01/2001
WLB 349 02/01/2001
WLV 243 02/01/2001
KNL 77 02/01/2001
WMQ 684 02/01/2001
131
FCC SECTION 214 LICENSES
FILE NO. DATE GRANTED
W-P-C-3677* 03/02/81
I-T-C-87-113 10/27/87
I-T-C-87-179 12/09/87
I-T-C-88-013 01/25/88
I-T-C-88-152 08/23/88
*Issued in name of Combined Network, Inc.
132
SCHEDULE 6.1(a)
ALC Communications Corporation is organized in the state of Delaware and is
qualified to do business in the State of Michigan.
Allnet Communication Services, Inc. is organized in the State of Michigan and
is qualified to do business in all of the United States as well as in the
District of Columbia.
Allnet Communications Limited is organized in the United Kingdom and is
qualified to do business in the United Kingdom.
Delaware Acquisition Corporation is organized in the State of Delaware.
Allnet Local Services, Inc. is organized in the State of Michigan and qualified
to do business in the State of New York.
Combined Network, Inc. is organized in the State of Illinois.
Allnet Communication Services of Nevada, Inc. is organized in the State of
Nevada.
133
SCHEDULE 6.1(b)
ALC COMMUNICATIONS CORPORATION:
CAPITALIZATION:
AS OF OCTOBER 31, 1994, ALC COMMUNICATIONS HAD 214,783,800
AUTHORIZED SHARES, CONSISTING OF 200 MILLION SHARES DESIGNATED "COMMON
STOCK," HAVING A PAR VALUE OF $0.01 PER SHARE AND 14,783,800 SHARES,
DESIGNATED "PREFERRED STOCK," HAVING A PAR VALUE OF $0.01 PER SHARE,
AND HAD 33,707,637 SHARES OF COMMON STOCK ISSUED AND OUTSTANDING.
ALLNET COMMUNICATION SERVICES, INC. IS A WHOLLY OWNED SUBSIDIARY OF ALC:
CAPITALIZATION:
AS OF OCTOBER 31, 1994, ALLNET HAD 1,000 AUTHORIZED, ISSUED AND
OUTSTANDING SHARES OF COMMON STOCK, WITH $0.01 STATED PAR VALUE. ALC
IS THE SOLE SHAREHOLDER OF ALLNET AND OWNS THE 1,000 ISSUED AND
OUTSTANDING SHARES THEREOF.
SUBSIDIARIES OF ALC
ALLNET COMMUNICATIONS LIMITED:
CAPITALIZATION:
AS OF OCTOBER 31, 1994, THE SHARE CAPITAL OF ALLNET LIMITED IS
100 POUNDS DIVIDED INTO 100 SHARES OF 1 POUND EACH. ALC IS THE SOLE
SHAREHOLDER OF THE UNITED KINGDOM RESIDENT SUBSIDIARY, HOLDING THE TWO
OUTSTANDING SHARES OF STOCK (JOHN M. ZRNO, PRESIDENT AND CEO OF ALC,
INITIALLY OWNS ONE SHARE OF ALLNET LIMITED AS BARE NOMINEE AND TRUSTEE
FOR ALC; ALC OWNS ONE ORDINARY SHARE OF ALLNET LIMITED).
DELAWARE ACQUISITION CORPORATION:
CAPITALIZATION:
DELAWARE ACQUISITION CORPORATION HAS 100 AUTHORIZED SHARES,
CONSISTING OF ONE CLASS OF COMMON STOCK, HAVING A PAR VALUE OF $0.01
PER SHARE, AND HAS 1,000 SHARES OF COMMON STOCK ISSUED AND OUTSTANDING
AND OWNED BY ALC.
134
ALLNET LOCAL SERVICES, INC.:
CAPITALIZATION:
ALLNET LOCAL SERVICES, INC. HAS 1,000 AUTHORIZED SHARES,
CONSISTING OF COMMON STOCK, HAVING NO PAR VALUE WITH A STATED PAR
VALUE OF $0.01 PER SHARE AND HAS 1,000 SHARES OF COMMON STOCK ISSUED
AND OUTSTANDING AND OWNED BY ALC.
SUBSIDIARIES OF ALLNET
COMBINED NETWORK, INC.:
CAPITALIZATION:
COMBINED NETWORK, INC. HAS 1,000 AUTHORIZED SHARES, CONSISTING
OF COMMON STOCK, HAVING A PAR VALUE OF $1.00 PER SHARE, AND HAS 1,000
SHARES OF COMMON STOCK ISSUED AND OUTSTANDING AND OWNED BY ALLNET.
ALLNET COMMUNICATION SERVICES OF NEVADA, INC.:
CAPITALIZATION:
ALLNET COMMUNICATION SERVICES OF NEVADA, INC. HAS 1,000
AUTHORIZED SHARES, CONSISTING OF ONE CLASS OF COMMON STOCK, ALL
WITHOUT PAR VALUE, AND HAS 1,000 SHARES OF COMMON STOCK ISSUED AND
OUTSTANDING AND OWNED BY ALLNET.
135
SCHEDULE 6.1(d)
PUC APPLICATIONS
STATE DOCKET NO.
Georgia 5578
Kansas 191866-U
Kentucky 95-002
Maine 95003
Nebraska C-1144
New York C95-C-0013
North Carolina P-244-SUB 6
Pennsylvania S-00950481
West Virginia 95-0002-T-PC
136
SCHEDULE 6.1(h)
ERISA PLANS
The Allnet Communication Services, Inc. 401(k) Plan
Allnet Communication Services, Inc. Employee Health Plan (medical, dental,
prescription drug, short term disability coverage)
Allnet Communication Services, Inc. Group Accidental Death and Dismemberment
Insurance Program
Allnet Communication Services, Inc., Long Term Disability Income Plan
Allnet Communication Services, Inc., Group Life Insurance
Allnet Communication Services, Inc., Section 125 Flexible Benefit Plan
Allnet Communication Services, Inc., Employee Assistance Plan
Allnet Communication Services, Inc., Severance Benefits
PRIOR PLANS:
Communications Transmissions, Inc. ("CTI") was an ERISA Affiliate from
1990-1992 when it owned more than 80% of the outstanding stock of ALC. CTI and
Allnet operated as qualified separate lines of business under the qualified
separate line of business rules in effect at the time. To the best of
Borrower's knowledge, CTI maintained two qualified retirement plans: a 6%
money purchase pension plan and a 401(k) plan. Borrower does not have any
information about ERISA welfare plans which may have been maintained by CTI
during that period.
137
SCHEDULE 6.1(1)
The information provided below is as of October 31, 1994.
1. ALC Amended and
Restated 1986 Option
Plan
May 12, 1994
2. ALC Amended and Restated
1990 Stock Option
Plan
May 12, 1994
3. AlC 1994 Non-Employee
Director Stock Option
Plan
May 12, 1994
4. Stock Option
Agreement for
Richard J. Uhl
September 3, 1991
5. Stock Option
Agreement for
Michael E. Faherty
June 23, 1992
6. Form of Amendment
to Stock Options of
Richard J. Uhl and
Michael E. Faherty
January 27, 1993
7. Stock Option
Grumman Hill
May 12, 1994
8. Amendment/Advisory
Agreement with Stock
Option
May 12, 1994
9. Termination/Advisory
Agreement with Stock
Option
May 2, 1994
10. Grumman Hill Stock
138
Option
May 12, 1994
11. Officer Perquisites
12. Short Term Incentive
Program
13. Form Severance
Agreement, amended,
restated Jan. 7, 1994
14. Form of Amended and Re
stated Employment Agree-
ments with ALC, Allnet
and John M. Zrno, Marvin
C. Moses, William
H. Oberlin, Jan. 7, 1994
15. Amendment to Amended
and Restated Employ-
ment Agrmt. ALC, Allnet
and John M. Zrno, Marvin
C. Moses, William H.
Oberlin
August 23, 1994
16. Amendment to Amended
and Restated Employ-
ment Agrmt. ALC, Allnet
and John M. Zrno, Marvin
C. Moses, William H.
Oberlin
October 1994
17. Form of Director
Indemnification Agr.
18. Master Lease Agreement
Meridian Leasing Corp.,
Allnet Dec. 19, 1985
19. Transmission Capacity
Lease: Times Mirror
Microwave Communications
Co., Lexitel Corp.,
October 8, 1985
20. Amended & Restated
Fiber Optic Lease
Agrmt. between MSM
and Allnet
August 1, 1994
CONFIDENTIAL TREAT-
MENT GRANTED
139
21. Digital Service
Agrmt. between MSM
and Allnet
August 5, 1994
CONFIDENTIAL
TREATMENT GRANTED
22. Master Service Agreement
Allnet, Western
Tele-Communications
Inc. May 5, 1992
CONFIDENTIAL
TREATMENT GRANTED
23. Digital Service
Agreement CTI,
Allnet, as amended
February 10, 1989
24. Digital Service
Agreement, ALC,
CTGI June 4, 1992
25. Revolving Credit and
Security Agreement
Bank One, Columbus, NA,
Star Bank, NA, Allnet,
ALC June 30, 1993(1)
CONFIDENTIAL
TREATMENT GRANTED
26. Real Estate Lease,
Allnet, Balcor
Equity Pension
Investors, Ltd.
March 26, 1987,
as amended
27. Real Estate Lease,
ALC, Kirco-Oak
Hollow-Limited
Partnership
Feb. 25, 1987,
as amended
---------------
(1) Will be paid off upon funding of Credit Agreement.
140
DEFINITIONS:
ALLNET: Allnet Communication Services, Inc.
ALC: ALC Communications Corporation
CTGI: Communications Transmission Group, Inc.
CTI Communications Transmission, Inc.
GRUMMAN HILL: Grumman Hill Associates, Inc.
MSM ASSOCIATES: MSM Associates, Limited Partnership
141
SCHEDULE 6.1(m)
None
142
SCHEDULE 6.1(t)
DEBT AND CONTINGENT OBLIGATIONS
BALANCE,
SEPTEMBER 30, 1994
------------------
(in thousands)
9% Senior Subordinated Notes $ 79,407
Current and long-term portions of capital
leases and long term debt 485
-----------
Deferred rent 2,990
-----------
$ 82,882
===========
143
SCHEDULE 6.1(u)
-------------------
None
144
SCHEDULE 6.1 (v)
FCC AND PUC AUTHORIZATIONS
STATE AUTHORIZATIONS
STATE DOCKET NO. DATE GRANTED
ALABAMA 19029 07/11/84
ARIZONA U-2438-84-101 04/29/85
DECISION NO. 54505
ARKANSAS 92-263-U 10/29/92
ORDER NO. 2
CALIFORNIA DECISION NO. 84-06-113 06/13/84
CONNECTICUT 93-08-21 03/02/94
FLORIDA 830299-TP 09/28/83
ORDER NO. 12498
GEORGIA CERTIFICATE NO. R-028 01/06/87
IDAHO TARIFF FILING ONLY 06/01/92
ILLINOIS 84-0538 CONSOL. 84-0539 02/20/86
INDIANA 37555 07/10/85
37889 11/27/85
IOWA TF-90-225 07/11/90
KANSAS 142,552-U 11/02/84
KENTUCKY 9031 11/21/84
LOUISIANA TARIFF FILING ONLY 02/18/93
MAINE 93-043 11/09/93
MARYLAND ALLNET COMMUNICATIONS 02/22/84
SERVICES, INC.
MASSACHUSETTS D.P.U. 84-177 05/03/85
D.P.U. 85-268 07/08/86
MINNESOTA P437/M-83-363 09/06/83
MISSISSIPPI 92-UA-0454 01/27/93
145
STATE AUTHORIZATIONS
STATE DOCKET NO. DATE GRANTED
MISSOURI TO-84-222 08/26/86
TO-84-223
TC-85-126
TO-85-130
MONTANA N-93-23 05/18/93
NEBRASKA C-772 08/01/89
NEVADA 85-754 12/16/85
89-430 08/21/89
NEW YORK 28413 02/17/83
NORTH CAROLINA P-244 05/02/91
NORTH DAKOTA CERTIFICATE NO. 119 08/25/92
OHIO 83-1193-TP-ACE 12/14/83
83-1193-TP-ACE 03/06/84
OKLAHOMA 28821 08/02/85
ORDER NO. 283191
OREGON ORDER NO. 87-357 03/23/87
PENNSYLVANIA ORDER NO. A-310112 08/19/92
SOUTH CAROLINA DOCKET NO. 91-335-C 08/30/91
ORDER NO. 91-753
SOUTH DAKOTA TC 93-040 04/30/93
TENNESSEE U-84-7325 09/25/85
TEXAS REGISTRATION ONLY 07/27/92
WASHINGTON COMPETITIVE 03/24/86
CLASSIFICATION
U-85-75
WEST VIRGINIA 92-0564-T-CN 07/22/92
WISCONSIN 05-TI-106 04/28/87
146
MICROWAVE LICENSES
CALL SIGN EXPIRATION DATE
KVU 78 02/01/2001
WLB 352 02/01/2001
WLB 345 02/01/2001
WLC 732 02/01/2001
KTR 46 02/01/2001
KNL 31 02/01/2001
WLB 350 02/01/2001
WLB 346 02/01/2001
KNL 46 02/01/2001
WLB 348 02/01/2001
WLB 401 02/01/2001
WQR 44 02/01/2001
WLB 347 02/01/2001
WLB 351 02/01/2001
WLC 263 02/01/2001
WLB 400 02/01/2001
WLC 261 02/01/2001
WLB 402 02/01/2001
WHQ 655 02/01/2001
WLB 349 02/01/2001
WLV 243 02/01/2001
KNL 77 02/01/2001
WMQ 684 02/01/2001
147
FCC SECTION 214 LICENSES
FILE NO. DATE GRANTED
W-P-C-3677* 03/02/81
I-T-C-87-113 10/27/87
I-T-C-87-179 12/09/87
I-T-C-88-013 01/25/88
I-T-C-88-152 08/23/88
*Issued in name of Combined Network, Inc.
148
FCC Microwave Licenses
(all licenses issued to Allnet Communication Services, Inc.
Expiration for all 2/1/2001)
BROADCAST KVU 78
CROCKER WLB 352
DEVIL'S PEAK WLB 345
FLOWER WLC 732
FRAZIER PEAK KTR 46
FREMONT KNL 31
GIBRALTAR WLB 350
MONUMENT WLB 346
MT. CHUAL KNL 46
MT. LOWE WLB 348
OAKLAND WLB 401
PALO ESCRITO WQR 44
PASO ROBLES WLB 347
RINCON WLB 351
SALINAS WLC 263
SAN JOSE WLB 400
SAN LUIS OBIS WLC 261
SAN FRAN WLB 402
SIMI VALLEY WHQ 655
TEPESQUET WLB 349
VERDUGO WLV 243
WILLIAMS HILL KNL 77
BRADLEY WMQ 684
149
SCHEDULE 10.3
1. Secured Party: Prudential Insurance Co. of America
Filing No.: 4940
Date of Filing: 6/5/90
Jurisdiction: Oakland County, Michigan
2. Secured Party: Bank One, Columbus, NA, as Agent for itself and others
Filing No. 0285444
Date of Filing: 7/13/93
Filing No.: 00280548
Date of Filing: 8/30/93
Jurisdiction: Ontario, Canada
3. Certain other liens relating to cancellec debt of Borrower.
150
SCHEDULE 10.4
EXISTING LOANS, ADVANCES AND INVESTMENTS
BALANCE,
SEPTEMBER 30,1994
-----------------
(in thousands)
Note Receivable - MS Holding $ 3,041
Note Receivable - MSM Associates 5,999
Investment in MS Holding (1)
-------------------
$ 9,040
===================
(1) Investment recorded at $150.00.
EX-11.1
5
EXHIBIT 11.1
1
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARY Exhibit 11.1
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
Year ended December 31,
----------------------------------------
1994 1993 1992
---- ---- ----
(in thousands except per share amounts)
EARNINGS PER SHARE
Income before extraordinary items and cumulative effect of accounting change $64,329 $39,676 $13,826
Accretion of discount on Class A Preferred Stock (364) (860)
Accrued dividends on Class A Preferred Stock (453) (3,254)
Accretion of payment to certain Class A Preferred Stockholders (268)
------- ------- ------
Income before extraordinary items and cumulative effect of accounting
change available for Common Stockholders $64,329 $38,859 $9,444
Extraordinary items:
Loss related to early retirement of debt (7,490)
Utilization of operating loss carryforward 7,000
Cumulative effect of change in method of accounting for income taxes 13,500
------- ------- ------
Net Income Available for Common Stockholders $64,329 $44,869 $16,444
======= ======= =======
Weighted average common shares outstanding during the period 33,471 28,864 18,603
======= ======= =======
Earnings per common and common equivalent share:
Income before extraordinary items and cumulative effect of accounting change $1.92 $1.35 $0.51
Extraordinary items:
Loss related to early retirement of debt (0.26)
Utilization of operating loss carryforward 0.37
Cumulative effect of change in method of accounting for income taxes 0.47
------- ------- ------
Net Income $1.92 $1.56 $0.88
======= ======= =======
PRIMARY EARNINGS PER SHARE
Income before extraordinary items and cumulative effect of accounting change $64,329 $39,676 $13,826
Accretion of discount on Class A Preferred Stock (364) (860)
Accrued dividends on Class A Preferred Stock (453) (3,254)
Accretion of payment to certain Class A Preferred Stockholders 0 (268)
------- ------- ------
Income before extraordinary items and cumulative effect of accounting
change available for Common Stockholders $64,329 $38,859 $9,444
Extraordinary items:
Loss related to early retirement of debt 0 (7,490)
Utilization of operating loss carryforward 7,000
Cumulative effect of change in method of accounting for income taxes 0 13,500
------- ------- ------
Net Income Available for Common Stockholders $64,329 $44,869 $16,444
======= ======= =======
Weighted average common shares outstanding during the period 33,471 28,864 18,603
Common Stock Equivalents:
Average amount of Class B and Class C Preferred prior
to conversion to Common Stock 875 3,538
------- ------- ------
Weighted Average Common and Common Equivalent Shares 33,471 29,739 22,141
======= ======= =======
Earnings per common and common equivalent share:
Income before extraordinary items and cumulative effect of accounting change $1.92 $1.31 $0.43
Extraordinary items:
Loss related to early retirement of debt (0.25)
Utilization of operating loss carryforward 0.31
Cumulative effect of change in method of accounting for income taxes 0.45
------- ------- ------
Net Income $1.92 $1.51 $0.74
======= ======= =======
2
Year ended December 31,
------------------------------------------
1994 1993 1992(1)
---- ---- -------
(in thousands except per share amounts)
PRIMARY EARNINGS PER SHARE -- MODIFIED TREASURY STOCK METHOD
Income before extraordinary items and cumulative effect of accounting change $64,329 $39,676 $13,826
Accretion of discount on Class A Preferred Stock (364) (860)
Accrued dividends on Class A Preferred Stock (453) (3,254)
Accretion of payment to certain Class A Preferred Stockholders (268)
Effect of Modified Treasury Stock Method:
Reduction in interest (net of tax) 4,404
Income before extraordinary items and cumulative effect of accounting ------- ------- -------
change available for Common Stockholders $64,329 $38,859 $13,848
Extraordinary items:
Loss related to early retirement of debt (7,490)
Utilization of operating loss carryforward 8,569
Cumulative effect of change in method of accounting for income taxes 13,500
------- ------- -------
Net Income Available for Common Stockholders $64,329 $44,869 $22,417
======= ======= =======
Weighted average common shares outstanding during the period 33,471 28,864 18,603
Common Stock Equivalents:
Average amount of Class B and Class C Preferred prior
to conversion to Common Stock 875 3,538
Effect of Modified Treasury Stock Method:
Assumed exercise of all option and warrants 8,228 10,581 10,162
Assumed repurchase of up to 20% of Common Stock outstanding (3,346) (3,972) (3,721)
------- ------- -------
Weighted Average Common and Common Equivalent Shares 38,353 36,348 28,582
======= ======= =======
Earnings per common and common eqivalent share:
Income before extraordinary items and cumulative effect of accounting change $1.68 $1.07 $0.48
Extraordinary items:
Loss related to early retirement of debt (0.21)
Utilization of operating loss carryforward 0.30
Cumulative effect of change in method of accounting for income taxes 0.37
------- ------- -------
Net Income $1.68 $1.23 $0.78
======= ======= =======
Year ended
December 31, 1993
-----------------
FULLY DILUTED EARNINGS PER SHARE (2)
Weighted average common shares outstanding during the period 28,864
Common Stock Equivalents:
Average amount of Class B and Class C Preferred prior
to conversion to Common Stock 875
Effect of Modified Treasury Stock Method:
Assumed exercise of all option and warrants 10,581
Assumed repurchase of up to 20% of Common Stock outstanding (2,878)
------
Weighted Average Common and Common Equivalent Shares 37,442
======
Income before extraordinary items and cumulative effect of accounting change $1.04
Extraordinary items:
Loss related to early retirement of debt (0.20)
Utilization of operating loss carryforward
Cumulative effect of change in method of accounting for income taxes 0.36
------
Net Income $1.20
======
(1) Modified Treasury Stock Method is not used because the net effect is
anti-dilutive.
(2) This calculation is submitted in accordance with regulation S-K item
601(b)(11). The fully diluted earnings per share for 1994 and 1992 does
not differ from the primary earnings per share.
EX-21.1
6
EXHIBIT 21.1
1
EXHIBIT 21.1
The following is the only significant subsidiary (as such term is defined in
Rule 1-02(v) of SEC Regulation S-X) of ALC Communications Corporation as of
December 31, 1994 and is wholly owned by ALC.
Allnet Communications Services, Inc. incorporated in Michigan
EX-23.1
7
EXHIBIT 23.1
1
EXHIBIT 23.1
[ERNST & YOUNG LLP LETTERHEAD]
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-8 No. 33-39649) pertaining to the 1990 Stock
Option Plan of ALC Communications Corporation and subsidiary and to the
incorporation by reference in that Registration Statement and in the
Registration Statements, (Form S-8 No. 33-13624) pertaining to the 1986 Option
Plan and (Form S-8 No. 33-25737) pertaining to the Amendment to the 1986 Option
Plan of ALC Communications Corporation and subsidiary and in the related
Prospectuses of our report dated January 25, 1995, with respect to the
consolidated financial statements and schedule of ALC Communications
Corporation and subsidiary included in the Annual Report (Form 10-K) for the
year ended December 31, 1994.
Detroit, Michigan
March 23, 1995
EX-27.1
8
EXHIBIT 27.1
5
1,000
12-MOS
DEC-31-1994
JAN-01-1994
DEC-31-1994
41,412
0
85,406
4,192
0
129,747
136,672
77,514
284,725
88,211
79,418
337
0
0
113,711
284,725
0
567,824
0
327,212
134,296
0
5,412
100,904
36,575
64,329
0
0
0
64,329
1.68
1.68