NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JULY 19, 1995
The Annual Meeting of Shareholders of ACC CORP. (the "Company") will
be held at the Strong Museum, One Manhattan Square, Rochester, New York on
Wednesday, July 19, 1995, at 10:00 A.M., for the following purposes:
1. To elect Directors of the Company to serve until the next Annual
Meeting of Shareholders and until the election and qualification
of their successors.
2. To act on a proposal to ratify the selection of Arthur Andersen
LLP as auditors of the books and financial records of the Company
for its fiscal year ending December 31, 1995.
3. To act on a proposal to amend the Company's Employee Stock Option
Plan.
4. To act on a proposal to amend the Company's Certificate of
Incorporation to authorize the creation of 2,000,000 shares of
Preferred Stock and 25,000,000 shares of Class B non-voting
Common Stock.
5. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on June 1, 1995
as the record date for the determination of shareholders entitled to notice
of and to vote at the Meeting.
By Order of the Board of Directors
Francis D. R. Coleman, Secretary
Rochester, New York
June 12, 1995
YOUR VOTE IS IMPORTANT. PLEASE SIGN AND DATE THE ENCLOSED PROXY
CARD AND RETURN IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE,
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING.
YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON
SHOULD YOU DECIDE TO ATTEND THE MEETING.
<PAGE>
PROXY STATEMENT
1995 ANNUAL MEETING OF
SHAREHOLDERS OF ACC CORP.
GENERAL
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of ACC Corp. (the "Company") for use
at the Annual Meeting of Shareholders of the Company to be held at the
Strong Museum, One Manhattan Square, Rochester, New York on Wednesday, July
19, 1995, at 10:00 A.M., or at any adjournments thereof.
Any proxy properly given and received prior to the commencement of the
Meeting will be voted with respect to all shares represented by it and will
be voted in accordance with the instructions, if any, given therein. If no
contrary instructions are given, the proxy will be voted (1) FOR the
election as Directors of the nominees named herein, (2) FOR the
ratification of the selection of Arthur Andersen LLP to serve as the
Company's auditors for its fiscal year ending December 31, 1995, (3) FOR
the proposal to amend the Company's Employee Stock Option Plan; (4) FOR the
proposal to amend the Company's Certificate of Incorporation to authorize
the creation of 2,000,000 shares of Preferred Stock and 25,000,000 shares
of Class B non-voting Common Stock; and (5) in accordance with the
proxyholders' best judgment on any other matters which may properly come
before the Meeting. A shareholder giving a proxy has the right to revoke
it by a duly executed proxy bearing a later date, by attending the Meeting
and voting in person, or by otherwise notifying the Company in writing
prior to the Meeting.
Under Delaware law, the total votes received, including abstentions
and votes by brokers holding shares in "street name" or other fiduciary
capacity on "routine" matters, are counted in determining the presence of a
quorum at the Meeting. With respect to the election of Directors, votes
may be cast for or withheld from voting with respect to any or all of the
Directors. Votes that are withheld will have no effect on the election of
Directors. Abstentions may be specified on all Proposals other than the
election of Directors and will be counted as present for purposes of the
matter with respect to which the abstention is noted. Under the Company's
Certificate of Incorporation and Bylaws, Directors are elected by a
plurality of the votes cast, the approval of Proposals 2 and 3 will each
require the affirmative vote of a majority of the shares present, in person
or by proxy, and entitled to vote, and the approval of Proposal 4 will
require the affirmative vote of a majority of all outstanding shares.
Therefore, under the Company's Certificate of Incorporation and Bylaws and
under Delaware law, assuming the presence of a quorum at the Meeting, non-
votes by brokers will have no effect on the election of Directors, Proposal
2 or Proposal 3. However, non-votes by brokers would have the effect of
"no" votes with respect to Proposal 4, and abstentions would have the
effect of "no" votes with respect to Proposals 2, 3 and 4.
The close of business on June 1, 1995 has been fixed as the record
date for the determination of the shareholders entitled to notice of, and
to vote at, the Annual Meeting. On that date, there were 7,756,584 shares
of Common Stock outstanding and entitled to vote at the Annual Meeting.
Each share of Common Stock is entitled to one vote. For a description of
the principal holders of the Company's Common Stock, see the discussion
under "PRINCIPAL HOLDERS OF COMMON STOCK."
The principal executive offices of the Company are located at 400 West
Avenue, Rochester, New York 14611.
This Proxy Statement and the enclosed proxy card are being furnished
to shareholders on or about June 12, 1995.
Additional copies may be obtained from the Secretary, ACC Corp., 400
West Avenue, Rochester, New York 14611, telephone (716) 987-3000.
PROPOSAL 1
ELECTION OF DIRECTORS
Eight Directors, making up the entire membership of the Board of
Directors of the Company as designated by the Board, are to be elected at
the Annual Meeting to hold office until the next Annual Meeting of
Shareholders and until the election and qualification of their successors.
The Board of Directors intends to nominate the eight persons named below
for election to the Board. All of the nominees are currently Directors of
the Company. Unless authority is withheld with respect to any individual
nominee or all of the nominees, the shares represented by the proxies
received as a result of this solicitation will be voted in favor of the
nominees listed below. In the event any nominee declines or is unable to
serve, proxies will be voted for the election of the others so named and
may be voted for such substitute nominees as the Board may recommend, or
the Board may reduce the number of Directors to eliminate the vacancy. The
Board of Directors, however, does not anticipate that any nominee will
decline or be unable to serve.
The Board conducts its business through the meetings and activities of
the full Board and its committees. The Board of Directors held seven
meetings during 1994. Currently, the committees of the Board are the Audit
Committee, the Executive Compensation Committee and the Executive
Committee.
The Audit Committee periodically reviews the Company's auditing and
accounting policies and procedures and recommends to the Board the
selection of the Company's independent auditors. Its members are: Daniel
D. Tessoni, Chairman, Hugh F. Bennett, Willard Z. Estey, David K. Laniak
and Robert F. Sykes. This Committee met three times during 1994.
The Executive Compensation Committee sets and reviews the compensation
and benefits paid to the Company's executives. Its members are: Hugh F.
Bennett, Chairman, David K. Laniak, Robert F. Sykes, Daniel D. Tessoni and
Robert M. Van Degna. This Committee met five times during 1994.
The Executive Committee was formed for the purpose of acting on behalf
of the Board of Directors between meetings of the full Board should the
need arise, in accordance with the Company's Bylaws. Its members are:
Richard T. Aab, Chairman, David K. Laniak, Daniel D. Tessoni and Robert M.
Van Degna, with Hugh F. Bennett serving as an alternate member. This
Committee took action by written consent during the year but did not meet
during 1994.
During 1993, the Board established a Special Committee, consisting of
David K. Laniak, Chairman, Hugh F. Bennett, now Director Emeritus Martin F.
Birmingham, Robert F. Sykes and Daniel D. Tessoni, to review and make any
determinations necessary with respect to several proposed transactions
involving the Company that involved potential conflicts-of-interest for
Richard T. Aab, the Company's Chairman and Chief Executive Officer. This
Committee met twice during 1994.
Except for Mr. Van Degna, who was elected to the Board in May, 1995,
each of the Directors attended at least 75% of the meetings held during
1994 by the Board and by each Committee of which he is a member.
The following sets forth information concerning the principal
occupations and business experience of the nominees for election as
Directors of the Company:
RICHARD T. AAB, 46, is a co-founder of the Company who has served as
Chairman of the Board since March, 1983, as Chief Executive Officer since
August, 1983, and as a Director since October, 1982. Mr. Aab also served
as Chairman of the Board of the Company's ACC TelEnterprises Ltd.
subsidiary from April, 1993 through February, 1994.
HUGH F. BENNETT, 38, has been a Director of the Company since June,
1988. Since March, 1990, Mr. Bennett has been a Vice President, Director
and Secretary-Treasurer of the Boston, Massachusetts investment banking
firm of Gagan, Bennett & Co., Inc.
ARUNAS A. CHESONIS, 32, was elected the Company's President and Chief
Operating Officer in October, 1994. He previously served as President of
the Company and of its Domestic Group from February, 1994 through October,
1994, and as President of its ACC Long Distance Corp. subsidiary from
January, 1989 through February, 1994. From August, 1990 through March,
1991, Mr. Chesonis also served as President of the Company's ACC
TelEnterprises Ltd. subsidiary. Mr. Chesonis was elected a Director of the
Company in October, 1994.
THE HON. WILLARD Z. ESTEY, C.C., Q.C., 74, is Counsel to the Toronto,
Ontario law firm of McCarthy, Tetrault. After serving as Chief Justice of
Ontario, Mr. Estey was a Justice of the Supreme Court of Canada from 1977
through 1988. From 1988 through 1990, Mr. Estey was Deputy Chairman of
Central Capital Corporation, Toronto, Ontario. Mr. Estey has also served
as a Director of the Company's ACC TelEnterprises Ltd. subsidiary since
May, 1993. Mr. Estey was elected a Director of the Company in October,
1994.
DAVID K. LANIAK, 59, has been a Director of the Company since
February, 1989. Mr. Laniak is Executive Vice President and Chief Operating
Officer of Rochester Gas and Electric Corporation, Rochester, New York.
Mr. Laniak has worked in a variety of positions for Rochester Gas and
Electric Corporation for more than 30 years. Mr. Laniak is a Director of
Rochester Gas and Electric Corporation, and served as a Director of the
Company's ACC TelEnterprises Ltd. subsidiary from May, 1993 through July,
1994.
ROBERT F. SYKES, 71, has been a Director of the Company since August,
1988. Mr. Sykes is a general partner of Sykes Associates, an investment
partnership, and is the retired Chairman and Chief Executive Officer of
Sykes Datatronics, Inc., a manufacturer and marketer of computerized
telephone cost management systems. Mr. Sykes served as a Director of the
Company's ACC TelEnterprises Ltd. subsidiary from June, 1993 through
November, 1994, and currently serves as a Director of Everflow Management
Corp., an oil and gas production company.
DANIEL D. TESSONI, 47, has been a Director of the Company since May,
1987. Mr. Tessoni is an Associate Professor of Accounting at the College
of Business of the Rochester Institute of Technology, where he has taught
since 1977. He holds a Ph.D. degree, is a Certified Public Accountant, and
is Treasurer of several privately-held business concerns.
ROBERT M. VAN DEGNA, 50, was elected a Director of the Company in May,
1995, pursuant to the terms of the investment in the Company led by Fleet
Equity Partners. Mr. Van Degna is Managing Partner of Fleet Equity
Partners, Providence, Rhode Island, a venture capital firm and affiliate of
Fleet Financial Group, Inc., which he organized in 1982. He also currently
serves on the Boards of Directors of several privately-held companies. For
more information with respect to the material terms of the Fleet Equity
Partners investment transaction, reference is made to the discussion of
this matter in Proposal 4 hereof.
SECURITIES OWNED BY COMPANY MANAGEMENT
The following table sets forth, as of June 1, 1995, the number and
percentage of outstanding shares of Common Stock beneficially owned by each
Director or nominee for Director of the Company, by each of the four Named
Executives (in addition to Mr. Aab) named in the compensation tables that
appear hereafter in this Proxy Statement, and by all Directors, nominees
for Director and executive officers of the Company as a group. The Company
believes that each individual in this group has sole investment and voting
power with respect to his or her shares except as otherwise noted:
Name of Nominee for Director Shares Beneficially Owned
OR EXECUTIVE OFFICER NUMBER PERCENTAGE
Richard T. Aab 971,743 (1) 12.5
Hugh F. Bennett 3,000 (2) *
Arunas A. Chesonis 59,267 (3) *
Willard Z. Estey -0- *
David K. Laniak 2,700 *
Robert F. Sykes 85,144 (4) 1.1
Daniel D. Tessoni 22,500 (5) *
Robert M. Van Degna -0-(6) *
Richard E. Sayers 74,093 (7) *
Michael R. Daley 22,503 (8) *
Christopher Bantoft 5,100 (9) *
All Directors, Nominees for Director
and Executive Officers as a Group
(16 persons, including those named
above) 1,275,808 (1) (2) 16.1
(3) (4)
(5) (6)
(7) (8)
(9) (10)
__________________________________
* Indicates less than 1% of the Company's issued and outstanding shares.
(1) This number includes options to purchase 6,161 shares that will become
exercisable by Mr. Aab within the next 60 days and excludes 15,000
shares directly owned by Mr. Aab's wife and 1,500 shares that she
controls as Custodian for their minor children, as to all of which
shares Mr. Aab disclaims beneficial ownership.
(2) Mr. Bennett shares investment and voting power with his wife with
respect to 1,500 of these shares.
(3) Includes 177 shares owned by Mr. Chesonis's spouse, options to
purchase 57,575 shares that are currently or will become exercisable
by Mr. Chesonis within the next 60 days and options to purchase 6,650
shares that are currently exercisable by Mr. Chesonis's spouse.
(4) Of these shares, 81,144 shares are owned by Sykes Associates, a
partnership of which Mr. Sykes is a general partner, and 4,000 shares
are owned by Ontario, Inc., a privately-held company of which Sykes
Associates is a shareholder and Mr. Sykes is a Director.
(5) Mr. Tessoni and his wife share investment and voting power with
respect to all shares which he beneficially owns.
(6) As discussed further in Proposal 4 below, in May, 1995, an investment
group composed of Fleet Venture Resources, Inc., Fleet Equity Partners
VI, L.P., and Chisholm Partners II, L.P. (collectively the "Fleet
Investors") made a $10,000,000 investment in the Company by purchasing
$10,000,000 in principal amount of the Company's 12% subordinated
convertible notes (the "Notes") and certain warrants to acquire shares
of the Company's Common Stock. Pursuant to the terms of the Purchase
Agreement under which the Notes were purchased, if the shareholders
approve the part of Proposal 4 that would authorize the creation of
2,000,000 shares of Preferred Stock, the Notes will automatically be
converted into 10,000 shares of Series A Preferred Stock upon the
Company's filing with the Delaware Secretary of State of a Certificate
of Designation authorizing the issuance of this series of Preferred
Stock. If, however, the shareholders do not authorize the creation of
Preferred Stock, the Fleet Investors have the right, at any time
through May, 2002, to convert the $10,000,000 in principal amount of
the Notes into shares of the Company's Common Stock at a conversion
price currently of $16.00 per share, subject to adjustment, or 625,000
shares of Common Stock at present. Additionally, at the closing of
this transaction, the Company issued the Fleet Investors warrants to
purchase a total of 100,000 shares of the Company's Common Stock at a
current exercise price of $16.00 per share, subject to adjustment, all
of which warrants are presently exercisable. At present, none of
these Notes or warrants have been converted into shares of the
Company's Common Stock. While Mr. Van Degna is an affiliate of the
Fleet Investors, he disclaims beneficial ownership of the shares owned
by the Fleet Investors; consequently these shares are not reflected in
this table.
(7) Includes options to purchase 70,000 shares that are currently
exercisable by Mr. Sayers.
(8) Includes options to purchase 20,200 shares that are currently or will
become exercisable by Mr. Daley within the next 60 days.
(9) Includes options to purchase 5,100 shares that are currently or will
become exercisable by Mr. Bantoft within the next 60 days.
(10) Includes options to purchase a total of 25,450 shares that are
currently or will become exercisable by five executive officers of the
Company, in addition to those named above, within the next 60 days.
COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, Directors and other persons who own more than
ten percent of the Company's Common Stock (collectively, "reporting
persons") to file reports of their ownership of and changes in ownership in
their Company shareholdings with both the Securities and Exchange
Commission ("SEC") and the National Association of Securities Dealers, Inc.
("NASD") and to furnish the Company with copies of all such forms (known as
Forms 3, 4 and 5) filed.
Based solely on its review of the copies of such forms it received or
on written representations received from certain reporting persons that
they were not required to file a Form 5 report with respect to 1994, the
Company believes that with respect to transactions occurring in 1994, all
Form 3, 4 and 5 filing requirements applicable to its reporting persons
were complied with, except that Mr. Sykes was late in filing one Form 4
with respect to one transaction involving the Company's shares, and
Felicity Guest, Anthony M. Marion, S. Patrick Martin, George H. Murray, Jr.
and Daniel J. Venuti took longer than the ten days allowed under SEC rules
to file their respective Form 3 Reports following their being named
officers of the Company for Section 16 purposes in November, 1994.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
In compliance with the SEC's executive compensation disclosure rules,
what follows below is a Report of the Company's Executive Compensation
Committee, a series of tables detailing certain cash compensation and
stock option information, and a five-year stock price performance chart,
all of which are intended by the SEC to standardize the reporting of such
information by public companies to their shareholders.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
COMPENSATION OF THE COMPANY'S EXECUTIVE OFFICERS. Under the Company's
Bylaws, this Committee is charged with reviewing and setting the
compensation and benefits payable to the Company's senior executives. The
Committee has established two basic components to the compensation awarded
to the Company's senior executives: annual cash compensation and long-term
incentive compensation. In general, the annual cash compensation of the
Company's five highest paid executives consists of a base salary set at the
beginning of the year and a bonus awarded at the end of the year related to
the Company's overall performance for that year -- both financial and
otherwise. The long-term component of the compensation paid to these
executives consists of stock options granted under the Company's Employee
Stock Option Plan, which are awarded at the direction of this Committee
with two goals in mind: to aid in retaining the executive and to ensure
that the executive's financial interest in increasing the value of the
Company is closely aligned with that of the shareholders. Other forms of
compensation such as one-time stock bonuses may occasionally be awarded
depending upon unusual or unique circumstances that the Committee believes
should be recognized.
With respect to annual cash compensation, in setting salary levels for
the Company's senior management, the basic objective is to pay competitive
rates to attract and retain competent executives. The Committee determines
competitive pay levels based upon independent industry surveys, proxy
disclosures, salaries paid to attract new managers and its own judgments
based upon past experience.
Annual bonus payments are made at the discretion of this Committee to
the officers and other key employees of the Company and its subsidiaries
based upon the Company's financial performance during the year and the
performance of the individual employee in question, as well as information
provided by independent industry surveys, proxy disclosures and its own
judgments based upon past experience.
Individual bonus awards generally relate to meeting the Company's
budget and forecasted performance which are reviewed and approved by the
Board at the beginning of each year. At the beginning of each year, the
Committee establishes a bonus schedule relating individual bonuses to
specific ranges of operating results tied to budgeted goals.
With respect to long-term incentive compensation, in determining the
timing and the size of stock option grants to its senior executives, the
Committee reviews competitive compensation data from selected peer
companies and available compensation survey information in making these
decisions. It also reviews with the Chief Executive Officer proposed
individual awards, taking into account the individual's scope of
accountability, strategic and operational goals and responsibilities, and
anticipated performance requirements and contributions to the Company's
overall success. Under the Stock Option Plan, this Committee is
responsible for granting stock options to the Company's executives and key
employees. In determining the timing and size of these grants to the
Chief Executive Officer, in addition to this same evaluation process, the
Committee also makes its own independent determination as to its perception
of his past and expected future contributions to the Company's achievement
of its long-term performance goals.
At the Company's 1994 Annual Meeting, the shareholders approved an
amendment to the Company's Employee Stock Option Plan that added the
language necessary to enable that Plan to comply with the tax deductibility
requirements for executive compensation that exceeds $1 million per year
imposed by the Revenue Reconciliation Act of 1993. However, because the
Company's executive compensation levels generally do not approach the $1
million per year range for any of its most highly paid executives, the
Committee does not believe that at the present time it is necessary to take
any additional measures to comply with such requirements. The Committee
will continue to monitor this issue and will take further action as
developments warrant.
In November, 1994, this Committee approved a new Executive
Compensation Plan to begin in 1995 that includes both short-term and long-
term performance based incentive plans. The 1995 Annual Incentive Plan is
a cash-based, multiple criteria bonus plan measuring the attainment of
certain targeted goals for sales revenue, gross margin, operating expense
and operating income that were established by this Committee in late 1994
based upon the Company's 1995 business plan and budget. The purpose of
this bonus plan is to emphasize achieving the goals set for these four key
financial measures in the 1995 operating plan. This Committee has also
adopted performance "gateways" for the Company's Stock Option Plan that,
beginning in 1995, will require the attainment of certain performance goals
prior to the award of future stock options under this Plan. This
arrangement balances the 1995 operating objectives of the Annual Incentive
Plan with the Company's longer term shareholder value building objectives.
Also in November, 1994, this Committee adopted a set of Executive
Stock Ownership Guidelines applicable to the Company's executives. This
plan establishes a stock ownership requirement for Company executives from
the Vice President level up equal to certain multiples of salary depending
on the individual's position within the Company, which must be met within
five years. The salary multiples range from one times annual salary for
Vice Presidents up to four times annual salary for the Chief Executive
Officer. The purpose of this plan is to further motivate increasing
shareholder value by aligning a portion of the financial assets of each
Company executive with shareholder interests.
COMPENSATION OF RICHARD T. AAB, THE COMPANY'S CHAIRMAN AND CHIEF
EXECUTIVE OFFICER. For 1994, the Committee determined that it was
appropriate to increase Mr. Aab's base salary approximately 4% after
reviewing industry salary surveys with respect to CEO compensation and to
reflect the performance, as measured by sales and earnings, relative both
to prior years and to 1994's budget.
For 1994, the determination of the bonus to be awarded to Mr. Aab was
linked to the Company's overall performance, as measured by the Company's
overall performance relative to the budget approved by the Board at the
beginning of 1994. Despite reporting consolidated losses, the Company's
long distance businesses met their budgeted targets to the satisfaction of
this Committee for 1994. Significant costs were incurred in expanding the
Company's Canadian operations and in the continuing startup of its
operations in the United Kingdom. But, with the exception of the impact of
a significant Canadian tax accrual reversal, the Company's results were
generally in line with expectations based on building its business.
In recognition of Mr. Aab's key role in achieving these results, the
Committee determined that he should receive recognition for these efforts
and approved a bonus of $62,000 for his services rendered to the Company in
1994.
This report was prepared by the members of this Committee in April,
1995: Hugh F. Bennett, Chairman, David K. Laniak, Robert F. Sykes and
Daniel D. Tessoni.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
and benefits paid by the Company for all services rendered during 1994,
1993 and 1992 to five individuals: Richard T. Aab, who is and was, at
December 31, 1994, serving as the Company's Chairman and Chief Executive
Officer, and Richard E. Sayers, Arunas A. Chesonis, Michael R. Daley and
Christopher Bantoft, who were, as of December 31, 1994, the other four most
highly compensated executive officers of the Company whose 1994 salary and
bonus exceeded $100,000 in amount (individually, a "Named Executive" and
collectively, the "Named Executives"):
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long
Term
Compens
ation
ANNUAL COMPENSATION
<S> <C> <C> <C> <C> <C> <C>
Awards
OTHER SECURITIES
Name ANNUAL UNDERLYING ALL OTHER
and COMPEN- OPTIONS COMPEN-
Principal SATION (#) SATION
POSITION YEAR SALARY ($) BONUS ($) ($) ($)
RICHARD T. AAB, 1994 $315,962 $62,000 -- (2) -0- $6,985(3)
CHAIRMAN AND CHIEF EXECUTIVE 1993 $304,241 $330,000(4) -- (2) -0- $9,305(3)
OFFICER (1) 1992 $253,290 $ -0- (5) $27,283(6) -0- $4,115(3)
RICHARD E. SAYERS, 1994 $166,539 $32,000 -- (2) 50,000(8) $183,679(9)
VICE CHAIRMAN (7) 1993 $184,471 $123,000(10) -- (2) -0- $268,048(11)
1992 $134,183 $ -0- (5) $14,425(12) -0- $ 2,277(13)
ARUNAS A. CHESONIS, 1994 $160,192 $32,000 -- (2) 50,000(14) $5,073(15)
PRESIDENT AND 1993 $134,250 $44,000 -- (2) 30,000(16) $4,283(15)
CHIEF OPERATING OFFICER(7) 1992 $128,815 $40,000 -- (2) -0- $ 983(15)
MICHAEL R. DALEY, 1994 $135,288 $27,000 -- (2) 50,000(17) $4,312(18)
EXECUTIVE VICE PRESIDENT 1993 $112,596 $65,000(19) -- (2) 10,000(20) $3,597(18)
AND CHIEF FINANCIAL OFFICER 1992 $ 87,750 -0- (5) -- (2) 7,500(21) $ 663(18)
(7)
CHRISTOPHER BANTOFT, 1994 $134,430 $20,400 -- (2) 50,000(22) $9,017(23)
MANAGING DIRECTOR 1993 NA NA NA NA NA
ACC LONG DISTANCE UK LTD. 1992 NA NA NA NA NA
</TABLE>
______________________________
NA Indicates Not Applicable, because the particular Named Executive was
not an executive officer of the Company during the year indicated.
(1) The Company has entered into a Severance Agreement with Mr. Aab that
provides that if he is ever terminated without cause or as the result
of a change in control of the Company as defined in the agreement,
then he shall be entitled to receive his then current salary and
benefits for two years following such termination. In addition,
should Mr. Aab ever be terminated without cause while he is disabled,
or in the event he dies during the term of the agreement, any
unexercised stock options that he may hold on the date of either such
event shall automatically become fully exercisable for one year
following such date, subject to the original term of the relevant
option grant(s). This agreement expires on February 8, 1999, at which
time it will automatically renew for successive five-year terms if not
terminated by the Company giving at least 24 months' advance notice of
its intent to terminate this agreement at the end of its current or
any renewal term.
(2) Under applicable SEC rules, the value of any perquisites or other
personal benefits provided by the Company to any of the Named
Executives need not be separately detailed and described if their
aggregate value does not exceed the lesser of $50,000 or 10% of that
executive's total salary and bonus for the year shown. For the year
indicated, the value of such personal benefits, if any, provided by
the Company to this Named Executive did not exceed such thresholds.
(3) The amounts shown represent the Company's contributions under its
401(k) Deferred Compensation and Retirement Savings Plan ("401(k)
Plan") in the amount of: $ 4,601 for 1994; $4,497 for 1993; and $973
for 1992; as well as taxable group term and single policy life
insurance premiums paid on Mr. Aab's behalf in the amount of: $2,384
in 1994; $4,808 in 1993; and $3,142 in 1992.
(4) Of this total, $155,000 represents Mr. Aab's bonus paid in 1994 for
services rendered in 1993, and $175,000 represents the one-time award
he was paid in connection with the sale of the Company's cellular
operations, as more fully described in Note (5) below.
(5) In early 1993, the Executive Compensation Committee of the Board of
Directors determined that certain Company executives, including this
Named Executive, were eligible to receive a special one-time award in
1993 contingent upon the execution of a definitive agreement to sell
the cellular assets of the Company's Danbury Cellular Telephone Co.
subsidiary. This award was paid in lieu of any bonus for services
rendered during 1992.
(6) Of this total: $12,671 represents country club dues and miscellaneous
business-related reimbursements paid to Mr. Aab; $3,946 represents
supplemental disability insurance premiums paid on Mr. Aab's behalf;
$5,630 represents reimbursements to Mr. Aab under the Company's legal,
medical and financial planning reimbursement plan for its senior
executives; and $5,036 represents the value of Mr. Aab's personal use
of his Company-provided car.
(7) The Company has entered into Employment Continuation Incentive
Agreements with Mr. Sayers, Mr. Chesonis, Mr. Daley and certain other
U.S. executive officers and key personnel, which agreements provide
that if such employee is ever terminated without cause or as the
result of a change in control of the Company as defined in the
agreement, then the employee shall be entitled to receive his/her then
current salary and benefits for up to one year following such
termination. In addition, should such employee be terminated without
cause while he/she is disabled, or in the event the employee dies
during the term of the agreement, any unexercised stock options that
he/she may hold on the date of either such event shall automatically
become fully exercisable for one year following such date, subject to
the original term of the relevant option grant(s). The current term
of these agreements expires on September 30, 1995, at which time they
will automatically renew for successive one-year terms if not
terminated by the Company giving at least twelve months' advance
notice of its intent to terminate these agreements at the end of their
current or any renewal term.
(8) On February 8, 1994, Mr. Sayers was awarded Incentive Stock Options
("ISOs") to purchase 50,000 shares of the Company's Common Stock at an
exercise price of $19.25 per share, exercisable over a ten-year term,
under the Company's Employee Stock Option Plan (the "Stock Option
Plan"). This award was cancelled and regranted on August 11, 1994 at
an option exercise price of $14.25 per share, as described further
under the heading "Report on the Repricing of Options by the Executive
Compensation Committee" below.
(9) This total is the sum of four items: (i) $5,088 represents the amount
of the Company's 1994 contribution to Mr. Sayers' 401(k) Plan account;
(ii) $3,226 represents the amount of taxable group term life insurance
premiums paid by the Company on Mr. Sayers' behalf in 1994; and (iii)
$175,365 represents the amount of incentive compensation vested for
Mr. Sayers' benefit and withdrawn by him during 1994 pursuant to the
Incentive Compensation Agreement between the Company and Mr. Sayers
with respect to the sale of the Company's cellular operations.
Pursuant to this Agreement, Mr. Sayers was entitled to receive as
incentive compensation an amount equal to 10% of the increase in value
of the Company's cellular telephone operations known as Kentucky Rural
Service Areas ("RSAs") #5 and #8 as measured by the "per POP" sale
price received on any such disposition allocable to Kentucky RSAs #5
and #8 less: the purchase price the Company paid to acquire these
RSAs; the cost of all capital investments made by the Company to
construct and bring these cellular telephone systems "on line"; and
any sales commissions and corporate taxes payable by the Company in
any such transaction. As previously disclosed, the Company sold its
cellular operations in 1993, and as a result determined that Mr.
Sayers was entitled to receive a total of $596,000 in compensation
pursuant to the terms of this Agreement. The Company placed this
amount in a trust account for Mr. Sayers' benefit. This compensation
was to vest on a pro-rata basis from the date this transaction closed
to July 1, 1996. Mr. Sayers was entitled to draw against the pro-rata
amount of principal and interest vested at any time, with all
remaining principal and accrued interest being payable in full on July
1, 1996, provided that he was still an employee of the Company on that
date. The Agreement also provided for earlier vesting and payment of
this compensation in the event of Mr. Sayers' death or termination
without cause prior to July 1, 1996. If he was terminated for cause
prior to July 1, 1996, he was to be paid the amount of such
compensation vested at such termination date. If he voluntarily left
the Company's employ prior to July 1, 1996, he was to have forfeited
all such compensation, whether or not vested. In January, 1995, the
Company and Mr. Sayers amended the terms of this Agreement to repay
the Company out of these escrowed funds the amount of $236,951.35,
which represented the outstanding principal amount of a $225,000 loan
that the Company advanced him in 1994, which is further described
under "Certain Transactions" below, plus all accrued interest on that
loan, and to remit the balance of these escrowed funds, totalling
approximately $196,452, to Mr. Sayers in full satisfaction of the
Company's obligations under this Agreement, which was thereby
terminated.
(10) Of this total, $63,000 represents Mr. Sayers' bonus paid in 1994 for
services rendered in 1993, and $60,000 represents the one-time award
he was paid in connection with the sale of the Company's cellular
operations, as more fully described in Note (5) above.
(11) This total is the sum of four items: (i) $4,497 represents the amount
of the Company's 1993 contribution to Mr. Sayers' 401(k) Plan account;
(ii) $2,530 represents the amount of taxable group term life insurance
premiums paid by the Company on Mr. Sayers' behalf in 1993; (iii)
$112,021 represents personal loans totalling $100,000 in principal
amount, together with all accrued interest, that were extended by the
Company to Mr. Sayers in 1991 and 1992 and forgiven in 1993; and (iv)
$149,000 represents the amount of the incentive compensation vested
for Mr. Sayers' benefit during 1993 pursuant to the Incentive
Compensation Agreement between the Company and Mr. Sayers with respect
to the sale of the Company's cellular operations, discussed in Note
(9) above.
(12) Of this total: $3,120 represents country club dues and miscellaneous
business-related expense reimbursements paid to Mr. Sayers; $1,975
represents supplemental disability insurance premiums paid on Mr.
Sayers' behalf; $3,830 represents reimbursements paid to Mr. Sayers
under the Company's legal, medical and financial planning
reimbursement plan for its senior executives; and $5,500 represents
the value of Mr. Sayers' personal use of his Company-provided car.
(13) The amounts shown represent taxable group term life insurance premiums
paid by the Company during 1992 on behalf of Mr. Sayers.
(14) On February 8, 1994, Mr. Chesonis was awarded ISOs to purchase 50,000
shares of the Company's Common Stock at an exercise price of $19.25
per share, exercisable over a ten-year term, under the Stock Option
Plan. This award was cancelled and regranted on August 11, 1994 at an
option exercise price of $14.25 per share, as described further under
the heading "Report on the Repricing of Options by the Executive
Compensation Committee" below.
(15) The amounts shown represent the Company's contributions under its
401(k) Plan in the amount of: $4,806 for 1994; $4,132 for 1993; and
$805 for 1992; as well as additional group term life insurance
premiums paid on Mr. Chesonis's behalf in the amount of: $267 in
1994; $151 in 1993; and $178 in 1992.
(16) On September 7, 1993, Mr. Chesonis was awarded ISOs to purchase 30,000
shares of the Company's Common Stock at an exercise price of $15.00
per share, exercisable over a ten-year term, under the Stock Option
Plan.
(17) On February 8, 1994, Mr. Daley was awarded ISOs to purchase 50,000
shares of the Company's Common Stock at an exercise price of $19.25
per share, exercisable over a ten-year term, under the Stock Option
Plan. This award was cancelled and regranted on August 11, 1994 at an
option exercise price of $14.25 per share, as described further under
the heading "Report on the Repricing of Options by the Executive
Compensation Committee" below.
(18) The amounts shown represent the Company's contributions under its
401(k) Plan in the amount of: $4,086 for 1994; $3,490 for 1993; and
$556 for 1992; as well as additional group term life insurance
premiums paid on Mr. Daley's behalf in the amount of: $226 in 1994;
$107 in 1993; and $107 in 1992.
(19) Of this total, $35,000 represents Mr. Daley's bonus paid in 1994 for
services rendered in 1993, and $30,000 represents the one-time award
he was paid in connection with the sale of the Company's cellular
operations, as more fully described in Note (5) above.
(20) On September 7, 1993, Mr. Daley was awarded ISOs to purchase 10,000
shares of the Company's Common Stock at an exercise price of $15.00
per share, exercisable over a ten-year term, under the Stock Option
Plan.
(21) On November 10, 1992, Mr. Daley was awarded ISOs to purchase 7,500
shares of the Company's Common Stock at an exercise price of $11.33
per share, exercisable over a ten-year term, under the Stock Option
Plan.
(22) On January 4, 1994, Mr. Bantoft was awarded ISOs to purchase 10,000
shares of the Company's Common Stock at an exercise price of $18.75
per share, on August 11, 1994, he was awarded ISOs to purchase 15,000
shares of the Company's Common Stock at an exercise price of $14.25
per share, and on November 15, 1994, he was awarded ISOs to purchase
25,000 shares of the Company's Common Stock at an exercise price of
$17.25 per share, each tranche exercisable over a ten-year term, under
the Stock Option Plan.
(23) This amount represents U.K. pension payments made on Mr. Bantoft's
behalf during 1994.
COMPENSATION PURSUANT TO PLANS
EMPLOYEE STOCK OPTION PLAN. The Company has an Employee Stock Option
Plan (the "Stock Option Plan" or "Plan"), which it instituted in February,
1982, to provide long-term incentive benefits to key Company employees as
determined by the Executive Compensation Committee of the Board of
Directors (the "Committee"). This Plan is administered by the Committee.
Options granted under this Plan are either intended to qualify as
"incentive stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, or are non-qualified stock
options ("NQSOs"). Options granted under this Plan represent rights to
purchase shares of the Company's Common Stock within a fixed period of time
and at a cash price per share ("exercise price") specified by the Committee
on the date of grant. The exercise price cannot be less than the fair
market value of a share of Common Stock on the date of award. Payment of
the exercise price may be made in cash or, with the Committee's approval,
with shares of the Company's Common Stock already owned by the optionee and
valued at their fair market value as of the exercise date. Options are
exercisable during the period fixed by the Committee, except that no ISO
may be exercised more than ten years from the date of grant, and no NQSO
may be exercised more than ten years and one day from the date of the
grant.
The following table shows information concerning options granted under
this Plan during 1994 to the five Named Executives:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (1)
<S> <C> <C> <C> <C> <C> <C> <C>
NUMBER OF
SECURITIES
UNDERLYING
OPTIONS % OF TOTAL
GRANTED OPTIONS
# GRANTED TO
EMPLOYEES EXERCISE
IN FISCAL PRICE EXPIRATION
NAME YEAR ($/SHARE) DATE 0% ($) 5% ($) 10% ($)
RICHARD T. AAB -0- --- $-0- --- $ -0- $-0- $-0-
RICHARD E. SAYERS 50,000(2) 11.6 $14.75 8/11/04 $ -0- $463,810 $1,175,385
ARUNAS A. 50,000(2) 11.6 $14.75 8/11/04 $ -0- $463,810 $1,175,385
CHESONIS
MICHAEL R. DALEY 50,000(2) 11.6 $14.75 8/11/04 $ -0- $463,810 $1,175,385
CHRISTOPHER 10,000(3) 2.3 $18.75 1/4/04 $ -0- $117,918 $298,827
BANTOFT
15,000(4) 3.5 $14.25 8/9/04 $ -0- $134,426 $340,662
25,000(5) 5.8 $17.25 11/15/04 $ -0- $271,211 $687,301
</TABLE>
_________________________________
(1) These calculations show the potential gain that would be realized if
the options shown were not exercised until the end of their full ten-
year term, assuming the compound annual rate of appreciation of the
exercise prices indicated (0%, 5%, and 10%) over the ten-year terms of
the ISOs shown, net of the exercise prices paid.
(2) These ISOs were granted on August 11, 1994, for a term of ten years,
25% of which first become exercisable on August 11, 1995, and an
additional 25% of which become exercisable on the second, third and
fourth anniversaries of the grant date. These ISOs are further
described below under the heading "Report on the Repricing of Options
by the Executive Compensation Committee."
(3) These ISOs were granted on January 4, 1994, for a term of ten years,
25% of which first become exercisable on January 4, 1995, and an
additional 25% of which become exercisable on the second, third and
fourth anniversaries of the grant date.
(4) These ISOs were granted on August 9, 1994, for a term of ten years,
25% of which first become exercisable on August 9, 1995, and an
additional 25% of which become exercisable on the second, third and
fourth anniversaries of the grant date.
(5) These ISOs were granted on November 15, 1994, for a term of ten years,
25% of which first become exercisable on November 15, 1995, and an
additional 25% of which become exercisable on the second, third and
fourth anniversaries of the grant date.
The following table reflects information concerning option exercises
under this Plan by the Named Executives during 1994, together with
information concerning the number and value of all unexercised options held
by each of the Named Executives at year end 1994 under this Plan:
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES
ACQUIRED NUMBER OF SECURITIES VALUE OF UNEXERCISED
ON VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
EXERCISE REALIZED OPTIONS AT FY-END (#) FY-END ($) (2)
NAME (#) ($) (1) EXERCISABLE/UNEXERCISABLE Exercisable/Unexercisable
<S> <C> <C> <C> <C>
RICHARD T. AAB 99,000 $1,628,550 -0-/-0- $-0-/$-0-
RICHARD E. SAYERS -0- $-0- 70,000/50,000 $618,100/$-0-
ARUNAS A. CHESONIS -0- $-0- 38,000/80,000 $294,035/$66,225(3)
MICHAEL R. DALEY -0- $-0- 14,875/63,125 $98,254/$29,381(4)
CHRISTOPHER BANTOFT -0- $-0- -0-/50,000 $-0-/$11,250(5)
</TABLE>
________________________________
(1) Value realized is determined by subtracting the per share option
exercise price from the closing price of the Company's Common Stock on
the date of exercise, then multiplying that figure by the number of
options exercised.
(2) For each Named Executive, these values are calculated by subtracting
the per share option exercise price for each block of options held on
December 31, 1994 from the closing price of the Company's Common Stock
on that date ($14.75 on December 30, 1994), then multiplying that
figure by the number of options in that block, then aggregating the
resulting subtotals.
(3) As of December 31, 1994, the ISOs to purchase 30,000 shares that were
granted to Mr. Chesonis on September 7, 1993 were not in-the-money, as
their exercise price per share ($15.00) exceeded the closing price for
the Company's Common Stock on December 30, 1994 ($14.75); consequently
these options are not included in these calculations.
(4) As of December 31, 1994, the ISOs to purchase 10,000 shares that were
granted to Mr. Daley on September 7, 1993 were not in-the-money, as
their exercise price per share ($15.00) exceeded the closing price for
the Company's Common Stock on December 30, 1994 ($14.75); consequently
these options are not included in these calculations.
(5) As of December 31, 1994, the ISOs to purchase 10,000 shares that were
granted to Mr. Bantoft on January 4, 1994 and the options to purchase
25,000 shares that were granted to him on November 15, 1994 were not
in-the-money, as their respective exercise prices per share ($18.75
and $17.25) exceeded the closing price for the Company's Common Stock
on December 30, 1994 ($14.75); consequently none of these options are
included in these calculations.
As of December 31, 1994, 302,302 shares of the Company's Common Stock
were available for grants under this Plan. As of that date, there were
785,250 options outstanding, with an average exercise price of $13.53 per
share. The expiration dates of these option grants range from May 22, 1999
through November 15, 2004.
REPORT ON THE REPRICING OF OPTIONS BY THE EXECUTIVE COMPENSATION
COMMITTEE. On February 8, 1994, at a regularly scheduled meeting to
discuss, among other matters, whether to award ISOs in 1994 to key Company
managers, this Committee awarded certain executive officers of the Company
ISOs to purchase shares at an exercise price of $19.25 per share.
Approximately six months later, on August 11, 1994, the Committee cancelled
those option grants and regranted the same number of ISOs to each such
executive officer but at the then-current exercise price of $14.75 per
share. After reviewing several matters, including the volatility in the
Company's stock price caused by its discussions with LDDS Communications,
Inc. with respect to a possible merger which commenced in earnest in mid-
March, 1994 and terminated in mid-May, 1994, but also the need to motivate
management, the Committee determined that these February, 1994 option
grants might remain "underwater" for some period of time, thus negating
much of the long-term incentive element of this form of compensation to the
executives who received these grants. As required by relevant SEC rules,
the specific information regarding these option repricing grants appears in
the following table:
<TABLE>
<CAPTION>
TEN YEAR OPTION REPRICINGS TABLE
Number of Market Length of
Securities Price of Exercise Original
Underlying Stock at Price at Option Term
Options Time of Time of New Remaining at
Repriced or Repricing or Repricing or Exercise Date of
Amended Amendment Amendment Price Repricing or
NAME DATE (#) ($) ($) ($) Amendment
<S> <C> <C> <C> <C> <C> <C>
R. Sayers 8/11/94 50,000 $14.75 $19.25 $14.75 9.5 years
A. Chesonis 8/11/94 50,000 $14.75 $19.25 $14.75 9.5 years
M. Daley 8/11/94 50,000 $14.75 $19.25 $14.75 9.5 years
F. Coleman 8/11/94 25,000 $14.75 $19.25 $14.75 9.5 years
T. Ganatra 8/11/94 25,000 $14.75 $19.25 $14.75 9.5 years
</TABLE>
This report was prepared by the members of this Committee in April,
1995: Hugh F. Bennett, Chairman, David K. Laniak, Robert F. Sykes and
Daniel D. Tessoni.
401(K) DEFERRED COMPENSATION AND RETIREMENT SAVINGS PLAN. The Company
has a 401(k) Deferred Compensation and Retirement Savings Plan in which
employees with a minimum of six months continuous service are eligible to
participate. Contributions to a participating employee's 401(k) account
are made in accordance with the regulations set forth under Section 401 of
the Internal Revenue Code of 1986, as amended. Under this Plan, the
Company may make matching contributions to the account of a participating
employee up to an annual maximum of 50% of the annual salary contributed in
that year by that employee, up to a maximum of 3% of that employee's
salary. The Company makes such contributions on a quarterly basis, based
upon its profitability for that quarter. The Company's contributions vest
at the rate of 20% per year after one year's participation in the Plan and
become fully vested after six years.
EMPLOYEE STOCK PURCHASE PLAN. The Company has an Employee Stock
Purchase Plan ("Stock Purchase Plan"), which the shareholders approved at
their 1994 Annual Meeting, in which all employees who work 20 or more hours
per week are eligible to participate. Under this Plan, employees electing
to participate can, through payroll deductions, purchase shares of the
Company's Common Stock at 85% of market value on the date on which the
annual offering period under this Plan begins or on the last business day
of each calendar quarter in which shares are automatically purchased for a
participant during an offering period, whichever is lower. Participants
cannot defer more than 15% of their base pay into this Plan, nor purchase
more than $25,000 per year of the Company's Common Stock through this Plan.
As of December 31, 1994, participants had purchased a total of 12,754
shares through this Plan during 1994, at an average price of $11.89 per
share, leaving a total of 487,246 shares available for future purchases
under the Plan.
OTHER COMPENSATION PLANS. The Company provides additional group term
life and supplemental disability insurance coverage to its officers. The
additional group term life insurance provides additional life insurance
protection to an officer in the amount of two and one-half times his/her
current salary. The supplemental disability insurance provides additional
disability insurance protection to an officer in an amount selected by the
executive, not to exceed, when combined with the coverage provided by the
Company's basic disability insurance provided to all of its employees, 70%
of his/her current annual salary.
The Company also has a legal, medical and financial planning
reimbursement plan for its senior executives pursuant to which it will
reimburse each of them generally up to $4,000 per year (up to $8,000 per
year for Mr. Aab) for legal, accounting, financial planning and uninsured
medical expenses incurred by the executive.
COMPENSATION OF DIRECTORS
Directors who are not also employees of the Company are paid an annual
retainer of $6,000, plus a fee of $500 for each Board meeting attended.
Additionally, outside Directors who serve on committees of the Board
receive $300 per committee meeting attended.
During 1994, in connection with the Company's merger discussions with
LDDS Communications, Inc., the Board retained the investment banking firm
of Gagan, Bennett & Co., Inc., in which Hugh F. Bennett, a Director of the
Company, is a principal, to act as the Company's advisor with respect to
this matter, for which services Gagan, Bennett & Co., Inc. was paid a
retainer of $25,000.
CERTAIN TRANSACTIONS
To accommodate its need for increased space, in June, 1994, the
Company moved its principal executive offices to an industrial complex
located at 400 West Avenue, Rochester, New York, which is owned by a real
estate partnership in which Richard T. Aab, the Company's Chairman and
Chief Executive Officer, is a general partner. For 1994, the Company paid
a total of approximately $200,000 in rent for this space to this
partnership, which the Company believes is comparable to or below the
market rate for similar office space in the Rochester area.
During 1994, the Board of Directors authorized the Company to enter
into a computer software development contract with AMBIX Systems Corp., in
which company Richard T. Aab, the Company's Chairman and Chief Executive
Officer, is the majority shareholder. Under this agreement, AMBIX is to
develop certain customized telecommunications software to be licensed to
the Company at a cost of approximately $328,000. Through December 31,
1994, the Company had paid approximately $100,000 of this total under this
agreement.
During 1994, the Company made a personal loan of $225,000 to Richard
E. Sayers, the Company's Vice Chairman, at a per annum interest rate of 1%
over the prime rate, with the loan payable on demand and no later than
December 31, 1994. As discussed in Note (9) to the Summary Compensation
Table above, in January, 1995, Mr. Sayers repaid this loan in full with all
accrued interest.
SHAREHOLDER RETURN PERFORMANCE INFORMATION
The SEC requires that the Company include in this Proxy Statement a
line-graph presentation comparing its cumulative, five-year shareholder
returns, on an indexed basis, with a broad equity market index and a
published industry or line-of-business index. The following graph compares
the cumulative total shareholder return on the Company's Common Stock
against the cumulative total return of the CENTER FOR RESEARCH IN SECURITY
PRICES TOTAL RETURN INDEX FOR THE NASDAQ STOCK MARKET (which includes all
U.S. and foreign common stocks and American Depositary Receipts traded on
the Nasdaq National Market and Nasdaq Small-Cap Market) and the NASDAQ
TELECOMMUNICATIONS TOTAL RETURN INDEX for the five-year period beginning
December 29, 1989 and ending December 30, 1994, assuming the reinvestment
of all dividends throughout the period shown, and assuming the value of the
investment in the Company and in each Index was $100 on December 29, 1989.
[NOTE: Per Regulation S-T, Rule 304(d), this EDGAR submission contains
the tabular numerical data produced by CRSP on which the performance graph
points are plotted in the printed version of this Proxy Statement, as
follows:
Comparison of Five-Year Cumulative Total Returns
Performance Report for
ACC CORP.
Prepared by the Center for Research in Security Prices
Produced on 02/01/95 including data to 12/30/94
Company Index: CUSIP Ticker Class SIC Exchange
00079410 ACCC 4810 NASDAQ
Fiscal Year-end is 12/31/94
Market Index: Nasdaq Stock Market (US & Foreign)
Peer Index: Nasdaq Telecommunications Stocks
SIC 4800-4899 US & Foreign
<TABLE>
Date Company Index Market Index Peer Index
<S> <C> <C> <C>
12/29/89 $100.000 $100.000 $100.000
01/31/90 104.348 91.755 83.778
02/28/90 102.899 93.977 83.876
03/30/90 104.348 96.636 84.150
04/30/90 107.723 93.387 79.670
05/31/90 157.217 102.432 93.429
06/29/90 157.679 103.247 91.010
07/31/90 134.319 98.313 84.179
08/31/90 87.599 85.993 71.610
09/28/90 70.460 78.003 63.643
10/31/90 63.120 74.893 61.971
11/30/90 73.395 81.539 64.384
12/31/90 106.235 85.017 67.411
01/31/91 100.333 94.069 73.810
02/28/91 103.284 103.077 77.747
03/28/91 118.511 110.001 80.334
04/30/91 118.511 110.683 84.886
05/31/91 130.362 115.790 87.841
06/28/91 114.541 109.017 78.943
07/31/91 127.929 115.420 84.426
08/30/91 119.004 120.925 85.746
09/30/91 140.332 121.524 89.097
10/31/91 164.218 125.543 89.091
11/29/91 162.725 121.363 83.854
12/31/91 155.261 135.708 92.974
01/31/92 164.705 143.840 95.690
02/28/92 182.673 147.044 100.344
03/31/92 201.119 140.239 95.143
04/30/92 177.105 134.246 95.167
05/29/92 174.103 135.969 94.989
06/30/92 195.596 130.631 94.530
07/31/92 198.605 134.991 95.207
09/30/92 199.110 135.572 97.058
10/30/92 208.160 140.648 94.983
11/30/92 262.463 151.664 108.186
12/31/92 244.707 157.359 114.192
01/29/93 299.086 162.043 118.160
02/26/93 287.757 156.228 121.103
03/31/93 304.162 160.944 126.898
04/30/93 226.986 154.503 123.438
05/28/93 236.066 163.799 139.257
06/30/93 241.161 164.852 145.748
07/30/93 259.362 165.143 152.301
08/31/93 263.912 173.764 169.501
09/30/93 346.435 178.590 171.672
10/29/93 360.110 181.693 189.465
11/30/93 350.993 175.973 170.046
12/31/93 354.038 181.153 175.978
01/31/94 375.140 186.922 175.701
02/28/94 370.450 184.940 167.241
03/31/94 415.555 173.591 151.724
04/29/94 394.425 171.316 146.584
05/31/94 319.296 171.541 152.021
06/30/94 258.254 164.794 145.711
07/29/94 258.823 168.690 153.269
08/31/94 352.940 178.944 159.022
09/30/94 348.792 178.701 158.982
10/31/94 315.798 181.781 160.009
11/30/94 311.084 175.456 153.388
12/30/94 278.091 175.253 145.788
The index level for all series was set to $100.00 on 12/29/89.
<PAGE>
PROPOSAL 2
RATIFICATION OF SELECTION OF AUDITORS
Arthur Andersen LLP, independent certified public accountants, has
been selected by the Board of Directors to serve as the auditors of the
Company's books and financial records for its current fiscal year. This
firm has no material financial interest in the Company, and its only
connection with the Company during the past fiscal year has been in its
role as the Company's independent auditors. Representatives of Arthur
Andersen LLP are expected to be present at the Annual Meeting of
Shareholders to make a statement if they wish, and to respond to
appropriate questions from shareholders.
The Board of Directors recommends that the shareholders vote FOR this
Proposal to ratify the selection of Arthur Andersen LLP to serve as the
Company's independent auditors for the Company's fiscal year ending
December 31, 1995. Proxies solicited by the Board of Directors will be
voted FOR this Proposal unless otherwise indicated.
PROPOSAL 3
AMENDMENT OF THE COMPANY'S
EMPLOYEE STOCK OPTION PLAN
In 1982, the shareholders of the Company approved the adoption of the
Company's Employee Stock Option Plan ("Stock Option Plan" or "Plan") for a
term of ten years, which they extended for an additional ten year term by
action at their 1992 Annual Meeting. The Stock Option Plan is designed to
provide long-term incentive benefits to key Company employees as determined
by the Executive Compensation Committee of the Board of Directors (the
"Committee"). The Board of Directors and the Committee have approved an
amendment to the Plan to increase the number of shares of the Company's
Common Stock authorized for issuance under this Plan by 500,000 shares, to
add the ability to grant stock incentive rights ("SIRs") to the Plan, to
require the mandatory withholding of income taxes against the issuance of
shares in respect of SIR awards by withholding a number of shares equal to
the amount of all required tax withholdings, and to change the name of the
Plan to the "Employee Long-Term Incentive Plan." This amendment is subject
to shareholder approval.
The Plan is administered by the Committee, whose duties include
selecting the employees who will receive grants and determining the amount
of the grants. In making its selections and determinations, the Committee
has substantial flexibility and makes its judgments based largely on the
functions and responsibilities of the particular employee, the employee's
past and potential contributions to the Company's profitability and growth,
and the value of the employee's services to the Company. The Committee
also interprets and implements the Stock Option Plan and the grants made
thereunder. Directors who are not employees of the Company are not
eligible for option grants under the Stock Option Plan.
Subject to the provisions of the Stock Option Plan, the individuals to
whom options are granted, the number of shares covered by each option, the
times when options may be exercised, the term of each option, the payment
terms and other provisions of each option grant are fixed by the Committee.
Under the current terms of this Plan, the Committee is permitted to
grant only ISOs or non-qualified stock options ("NQSOs"). Options granted
under this Plan represent rights to purchase shares of the Company's Common
Stock within a fixed period of time and at a cash price per share
("exercise price") specified by the Committee on the date of grant. The
exercise price cannot be less than the fair market value of a share of
Common Stock on the date of award. Payment of the exercise price may be
made in cash or, with the Committee's approval, with shares of the
Company's Common Stock already owned by the optionee and valued at their
fair market value as of the exercise date. Options are exercisable during
the period fixed by the Committee, except that no ISO may be exercised more
than ten years from the date of grant, and no NQSO may be exercised more
than ten years and one day from the date of the grant.
If the proposed amendment is approved, the Committee will also be
authorized to award SIRs to employees the Committee determines are eligible
to participate in the Plan. SIRs are rights to receive shares of the
Company's Common Stock without any cash payment to the Company, conditioned
only on continued employment with the Company throughout a specified
incentive period of at least three years following the date of award.
Subject to the Committee's discretion, earlier termination of employment,
except in the event of death, permanent disability or normal retirement,
would result in the automatic cancellation of the SIR. Should a recipient
die, become permanently disabled or retire during an SIR incentive period,
he/she, or his/her estate, as the case may be, would receive a pro-rated
number of the shares underlying the SIR award based upon the ratio that the
number of months since the SIR had been granted bore to the full SIR
incentive period set by the Committee at the time of award.
During the SIR incentive period, should the Company declare any cash
dividends on its Common Stock, the holder of an SIR would be entitled to
receive from the Company cash "dividend equivalent" payments equal to any
such cash dividends that the holder would have received had he/she owned
the shares of Common Stock underlying the SIR. However, the holder of an
SIR would not have any other rights with respect to the shares underlying
an SIR award, e.g., the right to vote or pledge such shares, until such
shares are actually issued to the holder.
An employee could be awarded both SIRs and options in any combinations
that the Committee would determine. In such an event, an exercise of an
option would not in any way affect or cancel any SIRs an employee may have
received.
Subject to the provisions of the Plan and if the proposed amendment is
approved, the individuals to whom grants of options and/or SIRs are
awarded, the number of shares covered by each award, the incentive period
applicable to each SIR award, the times when options may be exercised, the
term and other provisions of each option are fixed by the Committee. No
ISOs may be granted to a person who owns at the time of grant, or would own
after full exercise of all options and rights to acquire the Company's
shares, more than 10% of the Company's Common Stock unless, at the time of
grant, the exercise price of the option is at least 110% of the fair market
value of the shares subject to the option and the option is not exercisable
for more than five years from the date of grant.
Since its inception, options under the Stock Option Plan have been
granted to the Company's current executive officers and to approximately 80
other present and former key Company employees.
If approved by the shareholders, this proposed amendment to the Stock
Option Plan will be effective as of July 19, 1995.
The Committee may, without further approval of the shareholders,
suspend or terminate the Stock Option Plan or amend it in any manner,
except that the Stock Option Plan cannot be amended without prior
shareholder approval to increase the number of shares for which grants may
be awarded, to change the eligibility requirements for individuals entitled
to receive awards, or to materially increase the benefits accruing to
participants under the Stock Option Plan.
The recipient of an option grant has no rights as a shareholder until the
option is exercised and certificates for shares of Common Stock are issued
to him or her. Generally, subject to the discretion of the Committee, an
option for more than 2,250 shares becomes exercisable (or "vests") with
respect to 25% of the shares subject thereto on the first anniversary of
its date of grant, and vests with respect to an additional 25% of such
shares on each of the second, third and fourth anniversaries of its date of
grant. An option for 2,250 shares or less vests with respect to 50% of the
shares subject thereto on the first anniversary of its date of grant and
vests with respect to the additional 50% of such shares on the second
anniversary of its date of grant. No grant under the Stock Option Plan may
be transferred by the optionee except by will or by the laws of descent and
distribution. During the life of an optionee, an option may be exercised
only by the optionee or his/her guardian or legal representative. As a
general rule, an option otherwise exercisable will be canceled if not
exercised within 30 days following the optionee's retirement or other
termination of employment. However, if the optionee's employment
terminates by reason of permanent disability, the option will be canceled
if not exercised within one year following a termination of employment due
to disability. Additionally, in the case of NQSOs, the Committee has the
discretion to extend from 30 days to one year the period following
retirement or other termination of employment during which an optionee may
exercise his or her NQSOs. However, in no event will any option be
exercisable beyond the expiration of its term as established by the
Committee, nor, as applicable, beyond the ten-year maximum ISO exercise
period or the ten-year and one day maximum NQSO exercise period established
by the Plan. Upon the death of the holder of an option, the holder's
estate may exercise such option, but only to the extent the optionee was
entitled to exercise the option at the date of his/her death and only if it
is exercised prior to the expiration of its term.
With respect to ISOs granted under the Plan, the Company has been advised
by its counsel that an optionee will not be subject to federal income tax
upon either the grant of an ISO or its subsequent exercise. In addition,
the Company generally will not be allowed a business expense deduction with
respect to the grant or exercise of an ISO.
If the optionee holds the shares acquired upon the exercise of an ISO for
more than one year after the date of exercise and two years after the date
of grant, then the optionee's gain upon a subsequent sale or other taxable
disposition of the shares will be taxed as capital gain. "Gain" for this
purpose is measured by the difference between the exercise price and the
selling price of the shares. However, if these holding period rules are
not met, the gain that would have been realized at the time that the option
was exercised constitutes ordinary income to the optionee, rather than
capital gain, in the year of such a disposition (a "disqualifying
disposition"). "Gain" for this purpose is equal to the lesser of (1) the
amount (if any) by which the fair market value of the shares on the ISO
exercise date exceeds the exercise price, or (2) the amount realized (if
any) upon a disqualifying disposition less the adjusted basis of such
shares. Any gain in excess of the amount reported as ordinary income is
treated as capital gain. In the event of a disqualifying disposition, the
Company is entitled to a federal income tax deduction equal to the amount
of compensation realized by the optionee, provided that the Company timely
furnishes either a Form W-2 or W-2C to the optionee.
There may also be certain alternative minimum tax ("AMT") consequences
attendant to the exercise of ISOs and/or the disposition of shares so
acquired. In general, the spread between the option exercise price and the
fair market value of the option stock at exercise, which receives favorable
treatment under the regular tax system, is considered an "item of
adjustment" for AMT purposes and is included in AMT income. However, if an
optionee acquires shares pursuant to the exercise of an ISO and disposes of
such shares in a disqualifying disposition in the same taxable year, the
maximum amount that will be included as AMT income is the gain on the
disposition of such shares. If a disqualifying disposition occurs in a
year other than the year of exercise, the income on the disqualifying
disposition will not be considered income for AMT purposes. In addition, a
disqualifying disposition could have an impact upon the determination of
any corporate AMT to be paid by the Company. However, due to the AMT
credit-carryover provision, this may merely result in a "prepayment."
With respect to NQSOs, an optionee will not be subject to federal income
tax upon the grant of a NQSO. On the exercise of a NQSO, the difference
between the fair market value of the Company's Common Stock on the exercise
date and the exercise price will be treated as taxable income to the
optionee on that date. The optionee will thus have a tax basis for the
shares so acquired equal to the exercise price plus the amount of taxable
income realized upon exercise. Any subsequent sale or other disposition of
any such shares will be entitled to long-term capital gain or loss
treatment if held for more than one year at the time of such disposition,
or short-term capital gain or loss treatment if held for one year or less
at the time of such disposition. Subject to meeting applicable tax
reporting requirements, the Company is entitled to a federal income tax
deduction at the time a NQSO is exercised equal to the difference between
the fair market value of the Company's Common Stock on the exercise date
and the exercise price.
If the proposed amendment is approved, with respect to SIRs granted under
the Plan, the Company has been advised that a recipient of an SIR award
will not realize any income, nor will the Company be entitled to any tax
deduction, at the time of the grant of an SIR. However, upon the
expiration of an incentive period, the recipient of an SIR will recognize
ordinary income equal to the fair market value of the underlying shares
issued. Also, upon receipt of dividend equivalent payments during an
incentive period, the recipient of an SIR will recognize ordinary income in
an amount equal to the cash received. Upon the issuance of shares
underlying an SIR award, the Company will withhold a portion of such shares
to satisfy tax withholding obligations with respect to such issuance. Such
shares will be valued at their fair market value on the date of issuance
and the SIR holder will be taxed on the shares withheld as if he/she had
sold them. Provided that the Company timely furnishes either a Form W-2 or
W-2C to the holder, it will be entitled to a deduction for Federal income
tax purposes at the same time and in the same amounts as the holder of an
SIR is considered to have recognized ordinary income.
The basis of shares acquired under an SIR award is the fair market value
taxed to the SIR holder. When he/she disposes of such shares, any amount
received in excess of that basis will be treated as long-term or short-term
capital gain, depending upon the length of time the shares have been held.
If the amount received is less than the basis of the shares, the loss will
be treated as long-term or short-term capital loss, again depending upon
the length of time the shares have been held.
Shares issued under the Plan are authorized and unissued or treasury
shares of the Company's Common Stock. The number of shares authorized for
issuance under the Plan is reduced one-for-one by each share issued
pursuant to an SIR or the exercise of an option granted thereunder. As of
December 31, 1994, there were a total of 302,302 shares that remained
available for grants under the Plan. If this amendment is approved, the
number of shares available for grants will increase to 802,302.
Reference is made to the discussion under "Employee Stock Option Plan" in
Proposal 1 of this Proxy Statement for additional information concerning
option grants and related matters under the Plan. In view of the
comprehensive summary of this Plan presented above, the Company believes
that including the full text of the Plan as a part of this Proxy Statement
will not substantially further enhance the shareholders' understanding of
it and therefore has elected not to include it herein. Any shareholder who
wishes a copy of this Plan may request one by writing to the Office of the
Treasurer, ACC Corp., 400 West Avenue, Rochester, New York 14611.
On June 1, 1995, the Closing Price for the Company's Common Stock was
$13.88 per share, as quoted in THE WALL STREET JOURNAL.
The Board of Directors recommends a vote FOR approval of this amendment to
the Stock Option Plan. Proxies solicited by the Board of Directors will be
voted FOR the foregoing Proposal unless otherwise indicated. The
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock present, in person or by proxy, and entitled to vote at the
Annual Meeting is required for approval of this proposed amendment to the
Stock Option Plan.
PROPOSAL 4
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF
INCORPORATION TO CREATE 2,000,000 SHARES OF PREFERRED STOCK AND 25,000,000
SHARES OF NONVOTING CLASS B COMMON STOCK
The Board of Directors has unanimously adopted resolutions approving and
recommending that the shareholders consider and approve a Proposal to amend
the Company's Certificate of Incorporation that would: (1) authorize the
creation of 2,000,000 shares of Preferred Stock having a par value of $1.00
per share; and (2) authorize the creation of 25,000,000 shares of Class B
non-voting Common Stock having a par value of $.015 per share and
redesignate the shares of Common Stock, par value $.015 per share,
presently authorized for issuance as Class A Common Stock. The text of
this proposed amendment is attached to this Proxy Statement as Annex 1.
The Company's Certificate of Incorporation does not currently authorize
the issuance of Preferred Stock or Class B non-voting Common Stock. The
Board believes that it would be in the Company's best interests to have the
flexibility to issue different classes of stock in pursuit of its capital
raising transactions, as well as for use in possible acquisitions, joint
ventures and employee benefit plans.
PREFERRED STOCK
From time to time, the Company receives proposals from potential investors
in the Company that would provide the Company with sources of equity
financing to enable it to pursue its strategic plans and growth objectives.
However, such investors often desire to purchase shares of Preferred Stock,
often convertible into Common Stock at a negotiated price or ratio or upon
the occurrence of specified events, etc. Given its current capital
structure, with the exception of the recent investment discussed below, the
Company has not been able to successfully negotiate an equity investment
when approached with such proposals by such investors. By having the
ability to issue Preferred Stock, the Board's ability to seriously discuss
such investments when it receives such proposals would be significantly
enhanced.
The Preferred Stock authorized by this amendment is known as "blank check"
Preferred Stock, for the reason that, as is permitted under Delaware law,
the designations, preferences, conversion rights, cumulative, relative,
participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions thereof would be determined by
the Board of Directors. Therefore, if this Proposal is approved by the
shareholders, the Board of Directors will be entitled to authorize the
creation and issuance of up to 2,000,000 shares of Preferred Stock, par
value $1.00 per share, in one or more series, with such rights,
qualifications, limitations, and restrictions as may be determined in the
Board's sole discretion, with no further shareholder authorization
required.
In May, 1995, an investment group led by Fleet Venture Resources, Inc.
("Fleet") made a $10,000,000 investment in the Company by purchasing
$10,000,000 in principal amount of the Company's 12% subordinated
convertible notes (the "Notes") and certain warrants to acquire shares of
the Company's Common Stock (Class A Common Stock if this Proposal 4 is
approved in full). Pursuant to the terms of the Purchase Agreement under
which the Notes were purchased, if the shareholders approve this Proposal
to authorize the creation of 2,000,000 shares of Preferred Stock, the Notes
will automatically be converted into 10,000 shares of Series A Preferred
Stock upon the Company's filing with the Delaware Secretary of State of a
Certificate of Designation authorizing the issuance of this series of
Preferred Stock. The Series A Preferred Stock will have the following
rights and preferences:
(1) a liquidation value of $1,000 per share;
(2) convertible into shares of Common Stock (Class A Common Stock,
if this Proposal 4 is approved in full) at an initial conversion price of
$16.00 per share, subject to certain antidilution adjustments;
(3) dividends payable at the rate of 12% per annum, cumulative and
compounded quarterly and extinguished upon conversion into shares of
Common Stock;
(4) senior to all other classes and series of Preferred Stock and
Common Stock as to the payment of dividends and redemptions, and upon
liquidation at liquidation value, senior to all other classes of the
Company's capital stock;
(5) subject to mandatory redemption on the seventh anniversary of
the closing of the transaction at the greater of liquidation value (plus
all accrued but unpaid dividends) or the then-fair market value of the
underlying Common Stock into which the Series A Preferred Stock is
convertible, and subject to redemption at the greater of such amounts at
the request of the holders of the Series A Preferred Stock in the event
of a change in control of the Company;
(6) mandatory conversion of the Series A Preferred Stock into shares
of Common Stock upon the occurrence of certain events;
(7) the Series A Preferred Stock will vote on an as-converted basis
with the shares of Common Stock outstanding on all matters to be voted on
by the Company's shareholders, including the election of Directors, and
the holders of the Series A Preferred Stock, voting as a separate class,
shall be entitled to elect one Director so long as more than 33% of the
Series A Preferred shares issued in this transaction remain issued and
outstanding;
(8) so long as any shares of the Series A Preferred Stock remain
outstanding, the Company will not be able to take any of the following
actions without obtaining the prior written consent of the holders of a
majority of the Series A Preferred Stock: (a) declare dividends on any
class of capital stock other than the Series A Preferred Stock; (b)
redeem any capital stock other than Series A Preferred Stock; (c) make
any amendment to the Company's Certificate of Incorporation or Bylaws
that would include or make any changes to any anti-takeover provisions in
the Company's Certificate of Incorporation or Bylaws; (d) make any
amendment to the Company's Certificate of Incorporation or Bylaws that
would have an adverse effect on or impair the rights or relative priority
of the Series A Preferred Stock; (e) make any changes in the nature of
the Company's business beyond the telecommunications field; or (f) engage
in any transactions with affiliates (other than subsidiaries) (except for
compensation and benefit matters approved by the Executive Compensation
Committee of the Company's Board or other transactions approved by an
independent committee of the Board); and
(9) preemptive rights to purchase, on an as-converted basis, a pro-
rata portion of any issuance by the Company of any Common Stock or
securities containing options or rights to acquire shares of Common
Stock, except for issuances of Common Stock in connection with any of the
following matters, in which events such preemptive rights would not
apply: (a) option exercises under any stock option plans of the Company;
(b) conversion of the Notes or the Series A Preferred Stock into shares
of Common Stock; (c) exercise of the warrants issued in this transaction;
(d) an acquisition of another business or company; (e) a public offering
of securities registered under the Securities Act of 1933; (f) the
provision or extension of senior debt financing to the Company; or (g)
strategic investments by other entities in the telecommunications field.
If this Proposal to authorize the creation of Preferred Stock is not
approved, the Notes will remain outstanding and will have and be subject to
the Common Stock conversion rights, mandatory repayment provisions,
mandatory conversion provisions, rights to approve certain transactions and
preemptive rights which are the same as or substantially similar to those
applicable to the Series A Preferred Stock as described in paragraphs (2),
(5), (6), (8) and (9) above. In addition, so long as more than 33% of the
original principal amount of the Notes remains outstanding, the Noteholders
will have the right to designate a representative to be elected to the
Company's Board of Directors, whom the Board will nominate for election to
the Board and will solicit proxies from the Company's shareholders in favor
of such representative's election to the Board.
The Board of Directors is required to make any determination to issue
shares of Preferred Stock based on its judgment as to the best interests of
the Company and its shareholders. Although the Board has no present
intention of doing so, it could issue shares of Preferred Stock that could,
depending upon the terms of such series, make more difficult or discourage
an attempt to obtain control of the Company by means of a merger, tender
offer, proxy contest or other means. For example, such shares could be
used to create voting or other impediments or to discourage persons seeking
to gain control of the Company. Such shares could be sold to purchasers
that supported the Board in opposing such action. Additionally, the Board
could authorize holders of a series of Preferred Stock to vote either
separately as a class or with the holders of the Company's Common Stock on
any merger, sale or exchange of assets by the Company or any other
extraordinary corporate transaction. The existence of the authorized
shares of Preferred Stock could have the effect of discouraging unsolicited
takeover attempts. The issuance of new shares could also be used to dilute
the stock ownership of a person or entity seeking to obtain control of the
Company should the Board consider the actions of such person or entity not
to be in the best interests of the Company and its shareholders.
CLASS B NON-VOTING COMMON STOCK
The Company also receives proposals from time to time from foreign
investors with an interest in investing in the Company. However, there are
certain limitations imposed upon the Company under the Communications Act
of 1934, as amended, that limit the extent to which the Company may sell an
equity stake to a foreign purchaser. Such limitations may be waived by the
Federal Communications Commission upon an appropriate public interest
showing by the Company. Because a key issue affecting the grant of a
waiver is the potential ability of foreign investors to control wireless
communications facilities, if the Company has the ability to issue Class B
non-voting Common Stock that will not convey voting or control rights, it
may be able to obtain a waiver authorizing a higher level of foreign
ownership than would otherwise be permitted. This would enhance the
Company's ability to negotiate a substantial investment by or joint venture
with a foreign equity purchaser.
With respect to the authorization of the 25,000,000 shares of Class B non-
voting Common Stock, par value $.015 per share, sought as a part of this
amendment, the Board will likewise have the right to fix the preferences,
relative and participating, optional or other special rights, and
qualifications, limitations or restrictions applicable to all of the shares
to be issued as Class B non-voting Common Stock in the resolutions
providing for the first issuance of any such shares; EXCEPT THAT the shares
of Class B non-voting Common Stock shall not have the right to vote on any
matter brought before the shareholders of the Company, nor shall they be
entitled to vote as a class upon any proposed increase or decrease in the
aggregate number of shares of Class B non-voting Common Stock authorized
for issuance under the Company's Certificate of Incorporation.
Since the shares of Class B non-voting Common Stock sought as a part of
this amendment have no voting rights, the impact of their issuance as an
antitakeover measure is not as potentially significant as is the ability to
issue Preferred Stock in such a situation as discussed above, except to the
extent that the issuance of Class B non-voting Common Shares in this
context could increase the costs to an entity or person seeking to acquire
control of the Company and thereby make more difficult or discourage an
attempt to obtain control of the Company by means of a merger, tender offer
or other means and could therefore also have the effect of discouraging
unsolicited takeover attempts.
GENERAL
The Company's Common Stock has no cumulative voting, preemptive or
subscription rights, nor is it redeemable. Under Delaware law,
shareholders are not entitled to dissenters' rights of appraisal with
respect to the matters set forth in this Proposal. By voting in favor of
that part of this Proposal that would authorize the creation of a class of
Preferred Stock, the shareholders are only being asked to approve the
relevant amendment to the Company's Certificate of Incorporation. They are
not in any way being requested to ratify any aspect of the Fleet investment
discussed under the subheading "Preferred Stock" above.
The proposed amendment to the Company's Certificate of Incorporation is
set forth in Annex 1 attached hereto, and the foregoing description of the
amendment is qualified in its entirety by the text of the amendment itself,
which is incorporated by reference herein. Shareholders are urged to read
the amendment in its entirety.
While the Company may consider an equity offering of either a series of
Preferred Stock or Class B non-voting Common Stock in the future for
purposes of raising additional working capital or otherwise, except as
discussed above with respect to the Fleet investment, it currently has no
definitive agreements with any other third parties to effect any such
offering or issuance and no assurances are given that any such offering
will in fact be effected or undertaken. Therefore, except as discussed
above with respect to the Fleet investment, neither the terms of any series
of Preferred Stock nor the terms of the Class B non-voting Common Stock can
be stated or estimated with respect to any or all of the shares of such
classes authorized.
Financial statements are not included in this Proxy Statement with respect
to this Proposal as they are not deemed material for the exercise of
prudent judgment on this Proposal.
Under relevant SEC rules, the shareholders have the opportunity to vote
separately on both parts of this Proposal, as indicated on the enclosed
proxy card for this Meeting. The Board of Directors recommends a vote FOR
approval of both parts of this Proposal. Proxies solicited by the Board
will be voted FOR both parts of this Proposal unless otherwise indicated.
The affirmative vote of a majority of all outstanding shares entitled to
vote at the Meeting is required for approval of each part of this Proposal.
PRINCIPAL HOLDERS OF COMMON STOCK
The following table reflects the security ownership of those persons
who are known to the Company to have been the beneficial owners of more
than 5% (387,800 shares) of the Company's outstanding Common Stock as of
June 1, 1995:
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
Richard T. Aab 971,743 (1) 12.5
400 West Avenue
Rochester, New York 14611
Fleet Venture Resources, Inc. 522,000 (2) 6.1
111 Westminster Street
Providence, Rhode Island 02903
___________________________
(1) This number includes options to purchase 6,161 shares that will become
exercisable by Mr. Aab within the next 60 days and excludes 15,000
shares directly owned by Mr. Aab's wife and 1,500 shares that she
controls as Custodian for their minor children, as to all of which
shares Mr. Aab disclaims beneficial ownership.
(2) As discussed in Proposal 4 above and in a Schedule 13D filed with the
SEC with respect to this transaction, in May, 1995, an investment
group composed of Fleet Venture Resources, Inc., Fleet Equity Partners
VI, L.P., and Chisholm Partners II, L.P. (collectively the "Fleet
Investors") made a $10,000,000 investment in the Company by purchasing
$10,000,000 in principal amount of the Company's 12% subordinated
convertible notes (the "Notes") and certain warrants to acquire shares
of the Company's Common Stock. Pursuant to the terms of the Purchase
Agreement under which the Notes were purchased, if the shareholders
approve the part of Proposal 4 that would authorize the creation of
2,000,000 shares of Preferred Stock, the Notes will automatically be
converted into 10,000 shares of Series A Preferred Stock upon the
Company's filing with the Delaware Secretary of State of a Certificate
of Designation authorizing the issuance of this series of Preferred
Stock. If, however, the shareholders do not authorize the creation of
Preferred Stock, the Fleet Investors have the right, at any time
through May, 2002, to convert the $10,000,000 in principal amount of
the Notes into shares of the Company's Common Stock at a conversion
price currently of $16.00 per share, subject to adjustment, or 625,000
shares of Common Stock at present, of which total Fleet Venture
Resources, Inc. has the right to acquire 450,000 shares, Fleet Equity
Partners VI, L.P. has the right to acquire 112,500 shares, and
Chisholm Partners II, L.P. has the right to acquire 62,500 shares.
Additionally, at the closing of this transaction, the Company issued
the Fleet Investors warrants to purchase a total of 100,000 shares of
the Company's Common Stock at a current exercise price of $16.00 per
share, subject to adjustment, all of which warrants are presently
exercisable. Of this total, Fleet Venture Resources, Inc. holds
warrants to purchase 72,000 shares, Fleet Equity Partners VI, L.P.
holds warrants to acquire 18,000 shares, and Chisholm Partners II,
L.P. holds warrants to acquire 10,000 shares. Therefore, at present,
Fleet Venture Resources, Inc. has the right to acquire a total of
522,000 shares or 6.1% of the Company's currently outstanding Common
Stock, Fleet Equity Partners VI, L.P. has the right to acquire a total
of 130,500 shares or 1.5% of the Company's currently outstanding
Common Stock, and Chisholm Partners II, L.P. has the right to acquire
a total of 72,500 shares or 0.9% of the Company's currently
outstanding Common Stock. At present, none of these Notes or warrants
have been converted into shares of the Company's Common Stock. As
discussed above in note (6) to the "Securities Owned by Company
Management" table, while Robert M. Van Degna, a Director of the
Company, is an affiliate of the Fleet Investors, he disclaims
beneficial ownership of the shares owned by the Fleet Investors.
OTHER MATTERS
At present, the Board of Directors knows of no other matters which are
likely to come before the Annual Meeting. However, if any other matters are
presented, it is the intention of the persons named in the proxy to vote
such proxy in accordance with their best judgment on any such matters.
In accordance with relevant Securities and Exchange Commission rules,
any proposal which a shareholder wishes to be presented at the 1996 Annual
Meeting of Shareholders must be received by the Secretary of the Company at
its principal executive offices, 400 West Avenue, Rochester, New York
14611, no later than February 6, 1996.
The cost of solicitation of proxies will be borne by the Company. In
addition to this solicitation by mail, Directors, officers and employees of
the Company may solicit proxies by telephone, telegraph, mail or personal
interviews, and arrangements will be made with banks, brokerage firms and
others to forward proxy material to their principals. The Company will bear
the expense of any such additional solicitations. In addition, MacKenzie
Partners, Inc. has been retained to aid in the solicitation of proxies at
an estimated fee of $7,500, plus out-of-pocket expenses.
A copy of the Company's 1994 Annual Report containing financial
statements for the fiscal year ended December 31, 1994, is enclosed with
these proxy materials. Additional copies may be obtained from the
Treasurer, ACC Corp., 400 West Avenue, Rochester, New York 14611.
Shareholders are urged to mark, date, sign and return promptly the
enclosed proxy in the accompanying envelope, which requires no postage if
mailed in the United States.
By Order of the Board of Directors
Francis D. R. Coleman,
Secretary
June 12, 1995
<PAGE>
ANNEX 1
PROPOSED AMENDMENT TO ACC CORP. CERTIFICATE OF INCORPORATION
______________________
RESOLVED, that subject to obtaining the approval of the
shareholders of this Corporation, Article FOUR of this
Corporation's Certificate of Incorporation be amended to read in
its entirety as follows:
. . . . . . . . . .
ARTICLE FOUR
The total number of shares of stock which the Corporation shall have
authority to issue is 77,000,000 shares, divided into the following
classes: (1) 50,000,000 shares shall be Class A Common Stock having a par
value of $.015 per share; (2) 25,000,000 shares shall be Class B Common
Stock having a par value of $.015 per share; and (3) 2,000,000 shares shall
be Preferred Stock having a par value of $1.00 per share. The following is
a statement of the designations of the authorized classes of stock or any
series thereof, and the powers, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions thereof, or of the authority of the Board of Directors to fix
by resolution(s) such designations and other terms:
CLASS A COMMON STOCK
Subject to all of the preferences and rights of both the Preferred
Stock or a series thereof and of the Class B Common Stock, all of which may
be fixed by resolution(s) of the Board of Directors, (i) dividends may be
paid on the Class A Common Stock of the Corporation as and when declared by
the Board of Directors, out of funds of the Corporation legally available
for the payment of such dividends, and (ii) each share of Class A Common
Stock shall be entitled to one vote on all matters on which such stock is
entitled to vote. The 50,000,000 shares of Common Stock, par value $.015
per share, previously authorized for issuance hereunder are hereby
redesignated as 50,000,000 shares of Class A Common Stock, and all
references in this Certificate of Incorporation to Common Stock are hereby
changed to refer to Class A Common Stock.
CLASS B COMMON STOCK
Subject to all of the preferences and rights of the Preferred Stock or
a series thereof that may be fixed by resolution(s) of the Board of
Directors, the Class B Common Stock shall have such preferences and
relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as shall be
established in the resolution(s) providing for the issuance of such stock
adopted by the Board of Directors, EXCEPT THAT the shares of Class B Common
Stock shall not be entitled to vote on any matters brought before the
stockholders of the Corporation, nor shall the holders of the Class B
Common Stock be entitled to vote as a class upon any proposed increase or
decrease in the aggregate number of authorized shares of Class B Common
Stock.
PREFERRED STOCK
The shares of Preferred Stock may be issued from time to time in one
or more series. The Board of Directors is expressly authorized to fix by
resolution(s) the designation of each series of Preferred Stock and the
powers, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions thereof, including,
without limitation, such provisions as may be desired concerning the
dividend rights, the dividend rate, conversion rate, conversion rights,
voting rights, rights in terms of redemption (including sinking fund
provisions), the redemption price or prices, the liquidation preferences
and such other subjects or matters as may be fixed by resolution(s) of the
Board of Directors under the General Corporation Law of Delaware; and to
fix the number of shares constituting any such series, and to increase or
decrease the number of shares of any such series (but not below the number
of shares of any such series then outstanding). In the event that the
number of shares of any such series shall be so decreased, the shares
constituting such decrease shall resume the status that they had prior to
the adoption of the resolution(s) originally fixing the number of shares of
such series. All Preferred Stock of the same series shall be identical in
all respects, except for the dates from which dividends, if any, shall be
cumulative.
. . . . . . . . . .
<PAGE>
[FORM OF PROXY CARD]
THIS PROXY IS SOLICITED BY
THE BOARD OF DIRECTORS OF
ACC CORP.
Proxy for Annual Meeting of Shareholders - July 19, 1995
The undersigned hereby appoints Richard T. Aab, Arunas A. Chesonis and
Michael R. Daley, and each of them, attorneys and proxies, each with full
power of substitution, to represent the undersigned at the Annual Meeting
of Shareholders of the Company to be held on July 19, 1995, and at all
adjournments thereof, to vote as authorized below all of the shares of
Common Stock which the undersigned may be entitled to vote at said Meeting,
as designated below, and in accordance with their best judgment in
connection with such other business as may come before the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR Proposals 1, 2, 3 and 4.
To vote in accordance with the Board of Directors' recommendations, just
sign where indicated on the reverse side; no boxes need be checked. Unless
otherwise marked, this proxy will be voted in accordance with the Board of
Directors' recommendations.
1. Nominees for Directors:
Richard T. Aab David K. Laniak
Hugh F. Bennett Robert F. Sykes
Arunas A. Chesonis Daniel D. Tessoni
Willard Z. Estey Robert M. Van Degna
[ ] VOTE FOR ALL NOMINEES LISTED ABOVE.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE NAMED
ABOVE, DRAW A LINE THROUGH THAT NAME.
[ ] VOTE WITHHELD FROM ALL NOMINEES.
2. Proposal to ratify the selection of Arthur Andersen LLP as the
Company's independent auditors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Proposal to Amend the Company's Employee Stock Option Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Proposal to Amend the Company's Certificate of Incorporation:
(a) To authorize the creation of 2,000,000 shares of Preferred Stock:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(b) To authorize the creation of 25,000,000 shares of Class B non-
voting Common Stock and to redesignate the currently authorized
shares of Common Stock as Class A Common Stock:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
___________________________________________ Date:_____________, 1995
___________________________________________ Date:_____________, 1995
Signature(s)
Note: Please sign exactly as name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
</TABLE>
