SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No.__ )*
ACC Corp.
(Name of Issuer)
Common Stock, par value $.015 per share
(Title of Class of Securities)
00079410
(CUSIP Number)
Robert M. Van Degna Copy to: Edward T. Swan
Fleet Equity Partners Kirkland & Ellis
111 Westminster Street 200 E. Randolph Drive
Providence, Rhode Island 02903 Chicago, Illinois 60601
(401) 278-6770 (312) 861-2465
_________________________________________________________________
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
May 22, 1995
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of
this Schedule 13D, and is filing this schedule because of
Rule 13d-1(b)(3) or (4), check the following box.
Check the following box if a fee is being paid with the
statement.
X
(A fee is not required only if the reporting person: (1) has a
previous statement on file reporting beneficial ownership of more
than five percent of the class of securities described in Item 1;
and (2) has filed no amendment subsequent thereto reporting
beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits,
should be filed with the Commission. See Rule 13d-1(a) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect to
the subject class of securities, and for any subsequent amendment
containing information which would alter disclosures provided in
a prior cover page.
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18
of the Securities Exchange Act of 1934 ("Act") or otherwise
subject to the liabilities of that section of the Act but shall
be subject to all other provisions of the Act (however, see the
Notes).
(Continued on following page(s))
Page 1 of 196 Pages
Exhibit Index on Page 19
<PAGE>
CUSIP No. 00079410 13D Page 2 of 196 Pages
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Fleet Financial Group, Inc.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a)
(b) X
3. SEC USE ONLY
4. SOURCE OF FUNDS*
Not Applicable
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(D) OR 2(E)
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Rhode Island
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
7. SOLE VOTING POWER
-0-
8. SHARED VOTING POWER
652,500
9. SOLE DISPOSITIVE POWER
-0-
10. SHARED DISPOSITIVE POWER
652,500
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
652,500 (See Item 4 and Item 5)
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.7% (See Item 4 and Item 5)
14. TYPE OF REPORTING PERSON*
CO
<PAGE>
CUSIP No. 00079410 13D Page 3 of 196 Pages
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Fleet Venture Resources, Inc.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a)
(b) X
3. SEC USE ONLY
4. SOURCE OF FUNDS*
WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(D) OR 2(E)
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Rhode Island
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
7. SOLE VOTING POWER
-0-
8. SHARED VOTING POWER
522,000
9. SOLE DISPOSITIVE POWER
-0-
10. SHARED DISPOSITIVE POWER
522,000
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
522,000 (See Item 4 and Item 5)
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.1% (See Item 4 and Item 5)
14. TYPE OF REPORTING PERSON*
CO
<PAGE>
CUSIP No. 00079410 13D Page 4 of 196 Pages
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Fleet Equity Partners VI, L.P.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a)
(b) X
3. SEC USE ONLY
4. SOURCE OF FUNDS*
WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(D) OR 2(E)
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
7. SOLE VOTING POWER
-0-
8. SHARED VOTING POWER
130,500
9. SOLE DISPOSITIVE POWER
-0-
10. SHARED DISPOSITIVE POWER
130,500
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
130,500 (See Item 4 and Item 5)
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.5% (See Item 4 and Item 5)
14. TYPE OF REPORTING PERSON*
PN
<PAGE>
CUSIP No. 00079410 13D Page 5 of 196 Pages
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Silverado IV Corp.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a)
(b) X
3. SEC USE ONLY
4. SOURCE OF FUNDS*
Not Applicable
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(D) OR 2(E)
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
7. SOLE VOTING POWER
-0-
8. SHARED VOTING POWER
130,500
9. SOLE DISPOSITIVE POWER
-0-
10. SHARED DISPOSITIVE POWER
130,500
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
130,500 (See Item 4 and Item 5)
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.5 (See Item 4 and Item 5)
14. TYPE OF REPORTING PERSON*
CO
<PAGE>
CUSIP No. 00079410 13D Page 6 of 196 Pages
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Fleet Growth Resources II, Inc.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a)
(b) X
3. SEC USE ONLY
4. SOURCE OF FUNDS*
Not Applicable
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(D) OR 2(E)
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
7. SOLE VOTING POWER
-0-
8. SHARED VOTING POWER
130,500
9. SOLE DISPOSITIVE POWER
-0-
10. SHARED DISPOSITIVE POWER
130,500
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
130,500 (See Item 4 and Item 5)
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.5% (See Item 4 and Item 5)
14. TYPE OF REPORTING PERSON*
CO
<PAGE>
CUSIP No. 00079410 13D Page 7 of 196 Pages
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Fleet Private Equity Co., Inc.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a)
(b) X
3. SEC USE ONLY
4. SOURCE OF FUNDS*
Not Applicable
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(D) OR 2(E)
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Rhode Island
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
7. SOLE VOTING POWER
-0-
8. SHARED VOTING POWER
652,500
9. SOLE DISPOSITIVE POWER
-0-
10. SHARED DISPOSITIVE POWER
652,500
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
652,500 (See Item 4 and Item 5)
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.7% (See Item 4 and Item 5)
14. TYPE OF REPORTING PERSON*
CO
<PAGE>
CUSIP No. 00079410 13D Page 8 of 196 Pages
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Fleet Growth Resources, Inc.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a)
(b) X
3. SEC USE ONLY
4. SOURCE OF FUNDS*
Not Applicable
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(D) OR 2(E)
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Rhode Island
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
7. SOLE VOTING POWER
-0-
8. SHARED VOTING POWER
130,500
9. SOLE DISPOSITIVE POWER
-0-
10. SHARED DISPOSITIVE POWER
130,500
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
130,500 (See Item 4 and Item 5)
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.5% (See Item 4 and Item 5)
14. TYPE OF REPORTING PERSON*
CO
<PAGE>
CUSIP No. 00079410 13D Page 9 of 196 Pages
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Chisolm Partners II, L.P.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a)
(b) X
3. SEC USE ONLY
4. SOURCE OF FUNDS*
WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(D) OR 2(E)
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
7. SOLE VOTING POWER
-0-
8. SHARED VOTING POWER
72,500
9. SOLE DISPOSITIVE POWER
-0-
10. SHARED DISPOSITIVE POWER
72,500
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
72,500 (See Item 4 and Item 5)
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.9% (See Item 4 and Item 5)
14. TYPE OF REPORTING PERSON*
PN
<PAGE>
CUSIP No. 00079410 13D Page 10 of 196 Pages
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Silverado II, L.P.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a)
(b) X
3. SEC USE ONLY
4. SOURCE OF FUNDS*
Not Applicable
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(D) OR 2(E)
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
7. SOLE VOTING POWER
-0-
8. SHARED VOTING POWER
72,500
9. SOLE DISPOSITIVE POWER
-0-
10. SHARED DISPOSITIVE POWER
72,500
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
72,500 (See Item 4 and Item 5)
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.9% (See Item 4 and Item 5)
14. TYPE OF REPORTING PERSON*
PN
<PAGE>
CUSIP No. 00079410 13D Page 11 of 196 Pages
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Silverado II, Corp.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a)
(b) X
3. SEC USE ONLY
4. SOURCE OF FUNDS*
Not Applicable
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(D) OR 2(E)
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
7. SOLE VOTING POWER
-0-
8. SHARED VOTING POWER
72,500
9. SOLE DISPOSITIVE POWER
-0-
10. SHARED DISPOSITIVE POWER
72,500
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
72,500 (See Item 4 and Item 5)
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.9% (See Item 4 and Item 5)
14. TYPE OF REPORTING PERSON*
CO
<PAGE>
SCHEDULE 13D
Item 1. Security and Issuer.
This Statement relates to shares of Common Stock, par
value $.015 per share (the "Common Stock"), of ACC Corp. Inc., a
Delaware corporation (the "Company"). The address of the Company's
principal executive office is 400 West Avenue, Rochester, New York
14611.
Item 2. Identity and Background.
(a) This statement is being filed jointly by the
following parties: (i) Fleet Venture Resources, Inc., a Rhode
Island corporation ("FVRI"), by virtue of its direct beneficial
ownership of Common Stock, (ii) Fleet Private Equity Co., Inc., a
Rhode Island corporation ("FPEC"), by virtue of its ownership of
all the outstanding common stock of each of FVRI and Fleet Growth
Resources, Inc., a Rhode Island corporation ("FGR"), (iii) Fleet
Financial Group, Inc., a Rhode Island corporation ("FFGI"), by
virtue of its ownership of all the outstanding common stock of
FPEC, (iv) Fleet Equity Partners VI, L.P., a limited partnership
organized under the laws of Delaware ("FEP"), by virtue of its
direct beneficial ownership of Common Stock, (v) Fleet Growth
Resources II, Inc., a Delaware corporation ("FGRII"), as a general
partner of FEP, (vi) FGR, by virtue of its ownership of all
outstanding common stock of FGRII, (vii) Silverado IV Corp., a
Delaware corporation ("SCIV"), as a general partner of FEP, (viii)
Chisholm Partners II, L.P., a limited partnership organized under
the laws of Delaware ("CP"), by virtue of its direct beneficial
ownership of Common Stock, (ix) Silverado II, L.P., a limited
partnership organized under the law of Delaware ("SLP"), as the
sole general partner of CP, and (x) Silverado II, Corp., a Delaware
corporation, ("SCII"), by virtue of its ownership of all common
stock of SLP. The foregoing entities are collectively referred to
herein as the "Reporting Persons."
Information with respect to each of the Reporting Persons
is given solely by such Reporting Person, and no Reporting Person
assumes responsibility for the accuracy or completeness of
information furnished by another Reporting Person. By their
signature on this Statement, each of the Reporting Persons agrees
that this Statement is filed on behalf of such Reporting Person.
Page 12 of 196 Pages
<PAGE>
Certain information required by this Item 2 concerning
the directors, executive officers and general partners of the
Reporting Persons is set forth on Schedule A attached hereto, which
is incorporated herein by reference.
(b) The principal business address of each of FPEC,
FVRI, FGR, FGRII, SCIV, CP, SLP and SCII is 111 Westminster Street,
Providence, Rhode Island 02903. The principal business address of
FFGI is 50 Kennedy Plaza, Providence, Rhode Island 02903.
(c) The principal business of each of FEP, SCIV, FGRII,
(a wholly owned subsidiary of FGR) and FGR is making and managing
private equity investments, and in the case of SCIV and FGRII,
acting as the general partners of FEP.
FPEC is a wholly-owned subsidiary of FFGI and is
principally engaged in the business of making and managing private
equity investments. FFGI is principally engaged in the business of
providing diversified financial services, including services
related to commercial banking, consumer banking, investment
services, asset collection and management services to its
subsidiaries, financial institutions and individuals.
The principal business of each of CP, SLP and SCII is
making and managing private equity investments and, in the case of
SLP serving as the sole general partner of CP, and, in the case of
SCII, serving as the sole general partner of SLP.
(d) During the past five years, none of the Reporting
Persons nor, to the best knowledge of such persons, any of the
persons named in Schedule A to this Statement, has been convicted
in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) During the past five years, none of the Reporting
Persons nor, to the best knowledge of such persons, any of the
persons named in Schedule A to this Statement, was a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction as a result of which such person was or is subject to
a judgment, decree or final order enjoining future violations of,
or prohibiting or mandating activity subject to, federal or state
securities laws or finding any violation with respect to such laws.
(f) Not applicable.
Item 3. Source and Amount of Funds or Other Consideration.
FVRI, FEP, CP and the Company are parties to a Note and
Warrant Purchase Agreement, dated as of May 22, 1995 (the "Purchase
Page 13 of 196 Pages
<PAGE>
Agreement"), pursuant to which, FVRI, FEP and CP (collectively, the
"Purchasers") purchased, and the Company sold, stock purchase
warrants (the "Closing Warrants") to purchase an aggregate of
100,000 shares of Common Stock, contingent warrants (the "Springing
Warrants and, together with the Closing Warrants, the "Warrants")
and Convertible Subordinated Promissory Notes in the aggregate
principal amount of $10,000,000 (the "Notes") for an aggregate cash
consideration of $10,000,000. The aggregate cost of the Closing
Warrants purchased by FVRI, FEP and CP pursuant to the Purchase
Agreement was $144,000, $36,000 and $20,000, respectively, the
source of which was general funds of such entities available for
investment. The aggregate cost of the Springing Warrants purchased
by FVRI, FEP and CP pursuant to the Purchase Agreement was $7,200,
$1,800 and $1,000, respectively, the source of which was general
funds of such entities available for investment.
The aggregate cost of the Notes purchased by FVRI, FEP
and CP pursuant to the Purchase Agreement was $7,048,800,
$1,762,200 and $979,000, respectively, the source of which was
general funds of such entities available for investment. The Notes
are convertible into shares of Common Stock, and, upon approval by
the Company's stockholders of an amendment to the Company's
Certificate of Incorporation approving the creation of a class of
blank check Preferred Stock, are automatically convertible into the
Company's Series A Preferred Stock which will be designated
pursuant to a Certificate of Designation in which the Company will
designate the Series A Preferred Stock, par value of $1.00 per
share. The terms of the Series A Preferred to be included in the
Certificate of Designation are attached hereto as Exhibit D to
Exhibit 1. The Notes and Series A Preferred are convertible into
Common Stock which will have the rights and preferences as set
forth in the Certificate of Incorporation of the Company which is
attached hereto as Exhibit C to Exhibit 1. Upon repayment of the
Notes or redemption of the Series A Preferred, the Springing
Warrants will become exercisable into the number of shares of
Common Stock into which the prepaid principal of such Notes or the
redeemed shares of such Series A Preferred would have been
convertible.
The Purchase Agreement is attached hereto as Exhibit 1
and is incorporated herein by this reference. Certain capitalized
terms used in this statement and not otherwise defined herein have
the meanings given to such terms in the Purchase Agreement. Forms
of the Notes and the Warrants are attached hereto as Exhibits A, B,
and H to Exhibit 1, respectively.
Items 4 and 6 are hereby incorporated in their entirety
by this reference.
Page 14 of 196 Pages
<PAGE>
Item 4. Purpose of Transaction.
The Purchasers purchased the Notes and Warrants pursuant
to the Purchase Agreement solely for investment purposes. As of
the date of this statement, the Purchasers are the indirect
beneficial owners (assuming conversion of the Notes and exercise of
the Closing Warrants into Common Stock) of 725,000 shares of Common
Stock, representing approximately 8.5% of the Company's Common
Stock (see Item 5). Depending on market conditions and other
factors (including evaluation of the Company's businesses and
prospects, availability of funds, alternative uses of funds and
general economic conditions), the Purchasers may from time to time
purchase additional securities of the Company or dispose of all or
a portion of their investment in the Company in the open market, in
privately negotiated transactions or otherwise.
Pursuant to the Purchase Agreement, so long as the Notes
are outstanding the Purchasers have the right to designate a person
to be elected to the Board and Robert V. Van Degna has been elected
to the Board as such representative. After the Notes are converted
into Series A Preferred Stock, the holders of the Series A
Preferred Stock, the holders of the Series A Preferred have the
right to elect one director to the Board.
In addition, pursuant to the Purchase Agreement, the
Purchasers have a right to purchase their pro rata share of certain
future sales of stock by the Company. The Purchasers have a right
to put the Series A Preferred back to the Company upon a Sale of
the Company or a change in control. The Notes have a scheduled
redemption on the Seventh anniversary of the date of their
issuance. The Company is prohibited from issuing any dividend or
shares of its Common Stock without obtaining the prior consent of
Purchasers. Each Purchaser has standard informational rights and
the right to receive financial information about the Company
provided such Purchaser maintains 2.5% of the principal of the
Notes or 2.5% of the shares of Series A Preferred Stock. The
Notes, Warrants and Series A Preferred Stock have standard
antidilution protection.
The Purchasers have been granted certain registration
rights with respect to the Common Stock issued by exercise of the
Warrants or conversion of the Notes or the Series A Preferred. The
Registration Agreement is attached hereto as Exhibit E to
Exhibit 1.
Item 5. Interest in Securities of the Issuer.
Number of Shares Percent of
Reporting Person Beneficially Owned(1)(6) Class (3)
FVRI 522,000 (2) 6.13
FPEC 652,500 (2)(4) 7.70
FFGI 652,500 (2)(4) 7.70
FEP 130,500 (2)(4) 1.54
FGRII 130,500 (2)(4) 1.54
FGR 130,500 (2)(4) 1.54
SCIV 130,500 (2)(4) 1.54
CP 72,500 (2)(5) .85
Page 15 of 196 Pages
<PAGE>
SLP 72,500 (2)(5) .85
SCII 72,500 (2)(5) .85
(1) The filing of this Statement shall not be construed as an
admission by any Reporting Person that, for the purposes of
13(d) or 13 (g) of the Act, such Reporting Person is the
beneficial owner of any securities covered by this Statement
other than securities owned of record by such Reporting
Person.
(2) These Shares of Common Stock are not presently outstanding.
However, they are issuable upon conversion of the Notes, the
Series A Preferred and exercise of the Warrants.
(3) Based on 8,476,012 shares of Common Stock deemed outstanding
(assuming full conversion of the Notes and the Warrants), as
reported in the Company's report on Form 10-C filed on April
13, 1995.
(4) By virtue of its ownership of all of the outstanding common
stock of FVRI and FGR, FPEC may be deemed to possess indirect
beneficial ownership of the shares of Common Stock deemed
beneficially held by FVRI and FGRI. By virtue of its
ownership of all of the outstanding common stock of FPEC, FFGI
may be deemed to possess indirect beneficial ownership of the
shares of Common Stock deemed beneficially held by FPEC. By
virtue of the relationships described in Item 2, FGRII and
SCIV may be deemed to possess indirect beneficial ownership of
the shares of Common Stock deemed beneficially held by FEP.
By virtue of its ownership of all the outstanding common
shares of FGRII, FGR may be deemed to possess indirect
beneficial ownership of the shares of Common Stock deemed
beneficially held by FGRII. The filing of this statement by
FFGI, FPEC, FGRII, SCIV, and FGR shall not be construed as an
admission that either FFGI, FPEC, FGR, FGRII or SCIV, is, for
the purposes of Section 13(d) or 13(g) of the Act, the
beneficial owner of any securities covered by this statement.
(5) By virtue of being the sole general partner of CP, SLP may be
deemed to possess indirect beneficial ownership of the shares
of Common Stock deemed beneficially held by CP. By virtue of
being the sole general partner of SLP, SCII may be deemed to
possess indirect beneficial ownership of the Shares of Common
Stock deemed beneficially held by SLP. The filing of this
statement by SLP and SCII shall not be construed as an
admission that either SLP or SCII is, for purposes of 13(d) or
13(g) of the Act, the beneficial owner of any securities
covered by this statement.
Page 16 of 25 Pages
<PAGE>
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of the Issuer.
In connection with the acquisition of the Notes and
Warrants from the Company, the Purchasers have entered into with or
received from the Company the following agreements and instruments:
(i) the Note and Warrant Purchase Agreement, (ii) the Convertible
Subordinated Promissory Notes, (iii) the Closing Stock Purchase
Warrants (ix) the Springing Stock Purchase Warrants, (iv) the
Amendment to the Company's Certificate of Incorporation (as amended
on May 22, 1995), (vi) the Participation Agreement and (v) the
Certificate of Designation, (vi) the Registration Agreement,
(viii) the Opinion of Company's counsel. The full terms of such
agreements and instruments are incorporated herein by reference to
Exhibit 1 and Exhibits A, B, C, D, E, F, G, and H to Exhibit 1 to
this statement.
Except as set forth above, none of the Reporting Persons
has any contract, arrangement, understanding or relationship (legal
or otherwise) with any person with respect to securities of the
Company, including, but not limited to, transfer or voting of any
of the Company securities, finder's fees, joint ventures, loan or
option arrangements, puts or calls, guarantees of profits, division
of profits or loss, or the giving or withholding of proxies.
Item 7. Materials to be Filed as Exhibits.
1. Note and Warrant Purchase Agreement, dated as of
May 22, 1995 by and among the Purchasers and the
Company and each of the following Exhibits to the
Purchase Agreement:
A. Form of Convertible Subordinated Promissory
Note.
B. Form of Closing Stock Purchase Warrant.
C. Form of Amendment to the Company's Certificate
of Incorporation.
D. Form of Certificate of Designation.
E. Registration Agreement
F. Participation Agreement.
G. Form of Option of Company's Counsel
H. Form of Springing Stock Purchase Warrant
2. Agreement re Joint Filing of Schedule 13D, dated as
of May 26, 1995, among the Reporting Persons.
Page 17 of 196 Pages)
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of our knowledge
and belief, the undersigned certify that the information set forth
in this statement is true, complete and correct.
May 31, 1995 FLEET VENTURE RESOURCES, INC.
/s/ Robert M. Van Degna
___________________________________
By Robert M. Van Degna
Its President
Page 18 of 196 Pages
<PAGE>
EXHIBIT INDEX
1. Note and Warrant Purchase Agreement, dated as of May 22, 1995
by and among the Purchasers and the Company and each of the
following Exhibits to the Purchase Agreement:
A. Form of Convertible Subordinated Promissory Note.
B. Form of Closing Stock Purchase Warrant.
C. Form of Amendment to the Company's Certificate of
Incorporation.
D. Form of Certificate of Designation.
E. Registration Agreement
F. Participation Agreement.
G. Form of Option of Company's Counsel
H. Form of Springing Stock Purchase Warrant
2. Agreement re Joint Filing of Schedule 13D, dated as of May 26,
1995, among the Reporting Persons.
Page 19 of 196 Pages
<PAGE>
SCHEDULE A
Set forth below are the names and present principal
occupations of each of the executive officers and directors of FEP,
SCIV, FGRII, FGR, FVRI, FPEC, FFGI, CP and SCII. Except as
otherwise set forth below, the principal business address of each
such person is 111 Westminster Street, Providence, Rhode Island
02903. All of the persons listed below are United States citizens.
I. Directors and Executive Officers of FPEC, FVRI, FGR, FGRII.
(A) Directors Principal Occupation
Robert M. Van Degna Chairman and President, FPEC
Habib Y. Gorgi Executive Vice President, FPEC
H. Jay Sarles Vice-Chairman, FFGI
Brian T. Moynihan Vice-President, FFGI
Douglas L. Jacobs Vice-President, FFGI
(B) Executive Officers Principal Occupation
Robert M. Van Degna Chairman and President, FPEC
Habib Y. Gorgi Executive Vice President, FPEC
Riordon B. Smith Vice President, FPEC
Michael A. Gorman Vice President, FPEC
Cynthia L. Balasco Vice President, Secretary,
Controller and CFO, FPEC
Paula M. Gianlorenzo Assistant Vice President, FPEC
Thadeus J. Mocarski Assistant Vice President, FPEC
Bernard V. Buonanno, III Investment Officer, FPEC
Brian T. Moynihan Assistant Secretary, FPEC
Kathleen A. Lawson Secretary, FPEC
Richard R. Pannone Treasurer, FPEC
II. Directors and Executive Officers of SCII.
(A) Directors Principal Occupation
Robert M. Van Degna President, Treasurer and
Director, SCII
Habib Y. Gorgi Vice President, Secretary
and Director, SCII
(B) Executive Officers Principal Occupation
Robert M. Van Degna President, Treasurer and
Director, SCII
Habib Y. Gorgi Vice President, Secretary
and Director, SCII
Page 20 of 196 Pages
<PAGE>
III. Directors and Executive Officers of SCIV.
(A) Directors Principal Occupation
Robert M. Van Degna President, Treasurer and
Director, SCIV
Habib Y. Gorgi Vice President, Secretary
and Director, SCIV
(B) Executive Officers Principal Occupation
Robert M. Van Degna President, Treasurer and
Director, SCIV
Habib Y. Gorgi Vice President, Secretary
and Director, SCIV
IV. Directors and Executive Officers of FFGI.
(A) Directors Principal Occupation/Address
William Barnet, III President
William Barnet & Son
P.O. Box 131
1300 Hayne Street
Arcadia, SC 29320
Bradford R. Boss Chairman
A.T. Cross Company
One Albion Road
Lincoln, RI 02865
Paul J. Choquette, Jr. President
Gilbane Building Company
Seven Jackson Walkway
Providence, RI 02940
James F. Hardymon Chairman & CEO
Textron Inc.
40 Westminster Street
Providence, RI 02903
Page 21 of 196 Pages
<PAGE>
Robert M. Kavner Creative Artists Agency
9830 Wilshire Boulevard
Beverly Hills, CA 90212-1825
Lafayette Keeney Consultant
41 Pettipaug Avenue
Old Saybrook, CT 06475
Raymond C. Kennedy Chairman
Kendell Holdings Inc.
745 Warren Street
Hudson, NY 12534
Ruth R. McMullin Management Fellow
York School of Management
274 Beacon Street
Boston, MA 02116
Arthur C. Milot Private Investor
P.O. Box 456
Jamestown, RI 02835
Terrence Murray Chairman, President and
Chief Executive Officer
Fleet Financial Group, Inc.
Fleet Financial Group, Inc.
50 Kennedy Plaza, 18th Fl.
Providence, RI 02903
Thomas D. O'Connor, Sr. Chairman and Chief Executive
Officer
Mohawk Paper Mills, Inc.
465 Saratoga Street
P.O. Box 497
Cohoes, NY 12047
Michael B. Picotte Managing General Partner
The Picotte Companies
20 Corporate Woods Blvd.
Suite 600
Albany, NY 12211
Page 22 of 196 Pages
<PAGE>
John A. Reeves President, Mid-Continent
Resources, Inc.
President
Pitkin Iron Corp.
P.O. Box 500
1058 County Road
Carbondale, CO 81623
John R. Riedman Chairman
Riedman Corporation
Riedman Tower
45 East Avenue
Rochester, NY 14604
John S. Scott Retired Chairman
Richardson-Vicks Inc.
1191 Smith Ridge Road
New Canaan, CT 06840
(B) Executive Officers<F1>1 Principal Occupation
Terrence Murray Chairman, President and Chief
Executive Officer, FFGI
Robert J. Higgins Vice Chairman, FFGI
H. Jay Sarles Vice Chairman, FFGI
Michael R. Zucchini Vice Chairman, FFGI
Eugene M. McQuade Executive Vice President and
Chief Financial Officer,
FFGI
John B. Robinson, Jr.<F2>2 Executive Vice President,
FFGI
Peter C. Fitts Senior Vice President, FFGI
William C. Mutterperl Senior Vice President,
Secretary and General Counsel,
FFGI
<F1>1 Business Address of each of the officers and directors
other than John B. Robinson, Jr.: Fleet Financial
Group, Inc., 50 Kennedy Plaza, Providence, RI 02903
<F2>2 Business Address of John B. Robinson, Jr. is Fleet
Financial Group, Inc., Peter D. Kiernan Plaza, New
York, New York 12207.
Page 23 of 196 Pages
<PAGE>
M. Anne Szostak Senior Vice President, FFGI
Anne M. Slattery Senior Vice President, FFGI
Brian T. Moynihan Vice President, FFGI
Page 24 of 196 Pages
NOTE AND WARRANT PURCHASE AGREEMENT
DATED MAY 22, 1995
BY AND AMONG ACC CORP.,
FLEET VENTURE RESOURCES, INC.,
FLEET EQUITY PARTNERS VI, L.P.,
AND
CHISHOLM PARTNERS II, L.P.
Page 25 of 196 Pages
<PAGE>
TABLE OF CONTENTS
Page
1. Authorization and Closing 1
1A. Authorization of the Notes and the
Warrants 1
1B. Purchase and Sale of the Notes and
the Warrants 1
1C. The Closing 2
2. Conditions of Each Purchaser's
Obligation at the Closing 2
2A. Representations and Warranties;
Covenants 2
2B. Amendment of Certificate of
Incorporation 2
2C. Certificate of Designation 3
2D. Registration Agreement 3
2E. Participation Agreement 3
2F. Securities Law Compliance 3
2G. Opinion of the Company's Counsel 3
2H. Closing Documents 3
2I. Proceedings 4
2J. Waiver 4
2K. Expenses 4
2L. Compliance with Applicable Laws 5
3. Covenants 5
3A. Financial Statements and Other
Information 5
3B. Inspection Rights 9
3C. Attendance at Board Meetings 9
3D. Designation of Director 10
3E. Amendment to Certificate 11
3F. Restrictive Covenants 11
3G. Affirmative Covenants 13
3H. Use of Proceeds 14
3I. Current Public Information 14
3J. First Offer Rights 15
3K. SBIC Regulatory Provisions 16
3L. Regulatory Compliance Cooperation 17
3M. Springing Warrants 18
3N. Consultant's Report 18
4. Transfer of Restricted Securities 19
4A. General Provisions 19
4B. Opinion Delivery 19
4C. Rule 144A 19
4D. Legend Removal 19
4E. Foreign Ownership Restrictions 20
5. Representations and Warranties of
the Company 20
5A. Organization, Corporate Power and
Licenses 20
5B. Capital Stock and Related Matters 20
5C. Material Subsidiaries;
Investments 21
5D. Authorization; No Breach 22
5E. Financial Statements 23
5F. Absence of Undisclosed
Liabilities 23
5G. No Material Adverse Change 24
5H. Absence of Certain Developments 24
5I. Assets 25
5J. Tax Matters 26
Page 26 of 196 Pages
<PAGE>
5K. Contracts and Commitments 28
5L. Intellectual Property Rights 30
5M. Litigation, etc. 31
5N. Brokerage 32
5O. Governmental Consent, etc. 32
5P. Insurance 33
5Q. Employees 33
5R. ERISA 33
5S. Compliance with Laws 35
5T. Small Business Matters 36
5U. Affiliated Transactions 36
5V. Investment Company 37
5W. Margin Securities 37
5X. Disclosure 37
5Y. Reports with the Securities and
Exchange Commission 37
5Z. Knowledge 38
Section 6. Representations and Warranties of
<PAGE>
the Purchasers 38
6A. Organization, Power and Licenses 38
6B. Authorization; No Breach 38
7. Definitions 39
7A. Definitions 39
8. Miscellaneous 44
8A. Expenses 44
8B. Remedies 44
8C. Purchaser's Investment
Representations 44
8D. Consent to Amendments 45
8E. Survival of Representations
and Warranties 46
8F. Successors and Assigns 46
8G. Capital and Surplus; Special
Reserves 46
8H. Severability 46
8I. Counterparts 47
8J. Descriptive Headings;
Interpretation 47
8K. Governing Law 47
8L. Notices 47
8M. Consideration for Warrants 48
8N. Understanding Among the
Purchasers 48
8O. No Strict Construction 48
8P. Indemnification 49
8Q. Payment Set Aside 49
8R. Subordination 50
Schedules and Exhibits
Schedule of Purchasers
List of Exhibits
List of Disclosure Schedules
Page 27 of 196 Pages
<PAGE>
ACC CORP.
NOTE AND WARRANT PURCHASE AGREEMENT
THIS AGREEMENT is made as of May 22, 1995, by and among ACC
Corp., a Delaware corporation (the "Company"), and the Persons
listed on the Schedule of Purchasers attached hereto
(collectively referred to herein as the "Purchasers" and
individually as a "Purchaser"). Except as otherwise indicated
herein, capitalized terms used herein are defined in Section 7
hereof.
The parties hereto agree as follows:
Section 1. Authorization and Closing.
1A. Authorization of the Notes and the Warrants. The
Company shall authorize the issuance and sale to the Purchasers
of (i) its 12% Subordinated Convertible Notes in an aggregate
principal amount of $10,000,000 and containing the terms and
conditions and in the form set forth in Exhibit A attached hereto
(the "Notes"), (ii) its Stock Purchase Warrants to acquire an
aggregate of 100,000 shares of the Company's Common Stock, par
value $.015 per share (the "Common Stock"), containing the terms
and conditions and in the form set forth in Exhibit B attached
hereto (the "Closing Warrants"), and (iii) the Warrants referred
to in paragraph 3M hereof (the "Springing Stock Purchase
Warrants" and, together with the Closing Warrants, the
"Warrants"). The Notes are convertible into shares Common Stock
at the Conversion Price (as defined in the Notes), and are also
automatically convertible into shares of the Company's Series A
Preferred Stock, par value $1.00 per share (the "Series A
Preferred"), upon authorization of such class by the Company's
stockholders.
1B. Purchase and Sale of the Notes and the Warrants.
At the Closing, the Company shall sell to each Purchaser and,
subject to the terms and conditions set forth herein, each
Purchaser shall purchase from the Company (i) a Note in the
aggregate principal amount set forth opposite such Purchaser's
name on the Schedule of Purchasers attached hereto at a price
equal to the price set forth opposite such Purchaser's name on
the Schedule of Purchasers and (ii) a Closing Warrant to purchase
the number of shares of Common Stock set forth opposite such
Purchaser's name on the Schedule of Purchasers at a price equal
to the price set forth opposite such
Page 28 of 196 Pages
<PAGE>
Purchaser's name on the Schedule of Purchasers. In addition, at
the Closing, each Purchaser shall pay the Company the amount set
forth opposite such Purchaser's name on the Schedule of
Purchasers in consideration for the issuance of the Springing
Warrants. The sale of the Notes and the Warrants to each
Purchaser shall constitute a separate sale hereunder.
1C. The Closing. The closing of the separate
purchases and sales of the Notes and the Warrants (the "Closing")
shall take place at the offices of Kirkland & Ellis in Chicago,
Illinois, at 10:00 a.m. on May 22, 1995, or at such other place
or on such other date as may be mutually agreeable to the Company
and each Purchaser. At the Closing, the Company shall deliver to
each Purchaser instruments evidencing the Note and the Warrants
to be purchased by such Purchaser, payable to the order of such
Purchaser or its nominee or registered in such Purchaser's or
its nominee's name, respectively, upon payment of the purchase
price thereof by a cashier's or certified check, or by wire
transfer of immediately available funds to the Company's account
at Marine Midland Bank, N.A., in the aggregate amount set forth
opposite such Purchaser's name on the Schedule of Purchasers.
Section 2. Conditions of Each Purchaser's
Obligation at the Closing. The obligation of each Purchaser to
purchase and pay for the Notes and the Warrants at the Closing is
subject to the satisfaction as of the Closing of the following
conditions:
2A. Representations and Warranties; Covenants. The
representations and warranties contained in Section 5 hereof
shall be true and correct in all material respects at and as of
the Closing as though then made, except to the extent of changes
caused by the transactions expressly contemplated herein, and the
Company shall have performed in all material respects all of the
covenants required to be performed by it hereunder at or prior to
the Closing.
2B. Amendment of Certificate of Incorporation. The
amendment to the Company's Certificate of Incorporation (the
"Certificate of Incorporation") set forth in Exhibit C attached
hereto (the "Amendment") shall have been authorized by the
Company's board of directors for submission to the Company's
stockholders at the Company's next annual meeting of
stockholders.
Page 29 of 196 Pages
<PAGE>
2C. Certificate of Designation. A certificate of
designation containing the terms set forth in Exhibit D attached
hereto (the "Certificate of Designation") shall have been
approved by the Company's board of directors to be effective upon
the filing of the Amendment with the Delaware Secretary of State.
2D. Registration Agreement. The Company and the
Purchasers shall have entered into a registration agreement in
form and substance as set forth in Exhibit E attached hereto (the
"Registration Agreement"), and the Registration Agreement shall
be in full force and effect as of the Closing.
2E. Participation Agreement. The Purchasers and
Richard T. Aab shall have entered into a participation agreement
in form and substance set forth in Exhibit F attached hereto (the
"Participation Agreement"), and the Participation Agreement shall
be in full force and effect as of the Closing.
2F. Securities Law Compliance. The Company shall have
made all filings under all applicable federal and state
securities laws necessary to consummate the issuance of the Notes
and the Warrants pursuant to this Agreement in compliance with
such laws.
2G. Opinion of the Company's Counsel. Each Purchaser
shall have received from Underberg & Kessler, counsel for the
Company, an opinion with respect to the matters set forth in
Exhibit G attached hereto, which shall be addressed to each
Purchaser, dated the date of the Closing and in form and
substance reasonably satisfactory to each Purchaser.
2H. Closing Documents. The Company shall have
delivered to each Purchaser all of the following documents:
(i) an Officer's Certificate, dated the date of
the Closing, stating that the conditions specified in Sec-
tion 1 and paragraphs 2A through 2F, inclusive, have been
fully satisfied;
(ii) certified copies of the resolutions duly
adopted by the Company's board of directors authorizing the
execution, delivery and performance of this Agreement, the
Registration Agreement and each of the other agreements
contemplated hereby, the Amendment, the issuance and sale of
the Notes, the issuance and sale of the Warrants, the
Page 30 of 196 Pages
<PAGE>
reservation for issuance upon conversion of the Notes or
(when authorized and issued) the Series A Preferred or the
exercise of the Springing Warrants and the exercise of the
Closing Warrants an aggregate of 725,000 shares of Common
Stock and the consummation of all other transactions
contemplated by this Agreement;
(iii) certified copies of the Company's Certificate
of Incorporation and bylaws, each as in effect at the
Closing;
(iv) copies of all third party and governmental
consents, approvals and filings required in connection with
the consummation of the transactions hereunder (including
all blue sky law filings and waivers of all preemptive
rights and rights of first refusal);
(v) for the Purchasers which are SBICs, duly
completed and executed SBA Forms 480, 652 and 1031 (Part A)
together with a 5-year business plan showing the Company's
financial projections and a written statement from the
Company regarding its intended use of proceeds; and
(vi) such other documents relating to the transac-
tions contemplated by this Agreement as any Purchaser or its
special counsel may reasonably request.
2I. Proceedings. All corporate and other proceedings
taken or required to be taken by the Company in connection with
the transactions contemplated hereby to be consummated at or
prior to the Closing and all documents incident thereto shall be
reasonably satisfactory in form and substance to each Purchaser
and its special counsel.
2J. Waiver. Any condition specified in this Section 2
may be waived if consented to by each Purchaser; provided that no
such waiver shall be effective against any Purchaser unless it is
set forth in a writing executed by such Purchaser.
2K. Expenses. At the Closing, the Company shall have
reimbursed the Purchasers for fees and expenses to the extent
provided in paragraph 8A hereof.
2L. Compliance with Applicable Laws. The purchase of
the Notes and the Warrants by each Purchaser hereunder shall not
be
Page 31 of 196 Pages
<PAGE>
prohibited by any applicable law or governmental rule or
regulation and shall not subject such Purchaser to any penalty,
liability or, in such Purchaser's sole judgment, other onerous
condition under or pursuant to any applicable law or governmental
rule or regulation, and the purchase of the Notes and the
Warrants by each Purchaser hereunder shall be permitted by laws,
rules and regulations of the jurisdictions and governmental
authorities and agencies to which such Purchaser is subject.
Section 3. Covenants.
3A. Financial Statements and Other Information. The
Company shall deliver to each Purchaser (so long as such
Purchaser holds at least 2.5% of the outstanding principal amount
of the Notes or at least 2.5% of the outstanding shares of
Series A Preferred) and to each holder of at least 10% of the
outstanding principal amount of the Notes and each holder of at
least 10% of the outstanding shares of Series A Preferred:
(i) as soon as available but in any event within
30 days after the end of each monthly accounting period in
each fiscal year, unaudited consolidated statements of
income and cash flows of the Company and its Subsidiaries
and of each of the U.S., Canadian and U.K. long distance
operations and its U.S. local service operations for such
monthly period and for the period from the beginning of the
fiscal year to the end of such month, and unaudited
consolidated balance sheets of the Company and its
Subsidiaries as of the end of such monthly period, setting
forth in each case comparisons to the Company's annual
budget and to the corresponding period in the preceding
fiscal year, and all such statements shall be prepared in
accordance with generally accepted accounting principles,
consistently applied, subject to the absence of footnote
disclosures and to normal year-end adjustments for recurring
accruals, and shall be certified by the Company's chief
financial officer; in addition to the foregoing, such
financial statements shall set forth total billable minutes,
revenue per minute and network cost per minute for such
period for the Company and each of its U.S., Canadian and
U.K. long distance operations;
(ii) as soon as available but in any event within
45 days after the end of each quarterly accounting period in
each fiscal year, unaudited consolidating and consolidated
state-
Page 32 of 196 Pages
<PAGE>
ments of income and cash flows of the Company and its
Subsidiaries and of each of the U.S., Canadian and U.K. long
distance operations and the U.S. local service operations
for such quarter and for the period from the beginning of
the fiscal year to the end of such quarter, and unaudited
consolidating and consolidated balance sheets of the Company
and its Subsidiaries as of the end of such quarter, setting
forth in each case comparisons to the Company's annual
budget and to the corresponding period in the preceding
fiscal year, and all such statements shall be prepared in
accordance with generally accepted accounting principles,
consistently applied, subject to the absence of footnote
disclosures and to normal year-end adjustments for recurring
accruals, and shall be certified by the Company's chief
financial officer;
(iii) accompanying the financial statements
referred to in subparagraph (i) an Officer's Certificate
stating that there is no Event of Default, Potential Event
of Default, Event of Noncompliance or Potential Event of
Noncompliance in existence and that neither the Company nor
any of its Subsidiaries is in default under any of its other
material agreements or, if any Event of Default, Potential
Event of Default, Event of Noncompliance or Potential Event
of Noncompliance or any such default exists, specifying the
nature and period of existence thereof and what actions the
Company and its Subsidiaries have taken and propose to take
with respect thereto;
(iv) within 90 days after the end of each fiscal
year, consolidating and consolidated statements of income
and cash flows of the Company and its Subsidiaries for such
fiscal year, and consolidating and consolidated balance
sheets of the Company and its Subsidiaries as of the end of
such fiscal year, setting forth in each case comparisons to
the Company's annual budget and to the preceding fiscal
year, all prepared in accordance with generally accepted
accounting principles, consistently applied, and accompanied
by (a) with respect to the consolidated portions of such
statements, an opinion containing no exceptions or
qualifications (except for qualifications regarding
specified contingent liabilities) of an independent
accounting firm of recognized national standing, and (b) a
certificate from such accounting firm, addressed to the
Company's board of directors, stating that in the course of
its examination in connection with its customary annual
Page 33 of 196 Pages
<PAGE>
audit nothing came to its attention that caused it to
believe that there was an Event of Default, Potential Event
of Default, Event of Noncompliance or Potential Event of
Noncompliance in existence or that there was any other
default by the Company or any Subsidiary in the fulfillment
of or compliance with any of the terms, covenants,
provisions or conditions of any other material agreement to
which the Company or any Subsidiary is a party or, if such
accountants have reason to believe any Event of Default,
Potential Event of Default, Event of Noncompliance or
Potential Event of Noncompliance or other default by the
Company or any Subsidiary exists, a certificate specifying
the nature and period of existence thereof;
(v) within 120 days after the end of each fiscal
year, a copy of the annual management letter from the
Company's independent accounting firm to the board of
directors;
(vi) promptly upon receipt thereof, any additional
reports, management letters or other detailed information
concerning significant aspects of the Company's operations
or financial affairs given to the Company by its independent
accountants (and not otherwise contained in other materials
provided hereunder);
(vii) at least 30 days but not more than 90 days
prior to the first fiscal year end following the Closing, a
budget prepared on a monthly basis for the Company and its
Subsidiaries for the next succeeding fiscal year and on an
annual basis for the second through the fifth succeeding
fiscal years (displaying in each case anticipated statements
of income and cash flows and balance sheets), and promptly
upon preparation thereof any other significant budgets
prepared by the Company and any revisions of such budget,
and within 30 days after any monthly period in which there
is a material adverse deviation from the annual budget, a
written explanation of such deviation;
(viii) promptly (but in any event within five
business days) after the discovery or receipt of notice of
any Event of Default, Potential Event of Default, Event of
Noncompliance or Potential Event of Noncompliance, any
default under any other material agreement to which it or
any of its Subsidiaries is
Page 34 of 196 Pages
<PAGE>
a party, any condition or event which has resulted in or is
reasonably likely to result in any material liability under any
federal, state or local statute or regulation relating to public
health and safety, worker health and safety or pollution or
protection of the environment or any other material adverse
change, event or circumstance affecting the Company or any
Subsidiary (including the filing of any material litigation
against the Company or any Subsidiary or the existence of any
dispute with any Person which involves a reasonable likelihood of
such litigation being commenced), an Officer's Certificate
specifying the nature and period of existence thereof and what
actions the Company and its Subsidiaries have taken and propose
to take with respect thereto;
(ix) within ten days after transmission thereof,
copies of all financial statements, proxy statements,
reports and any other general written communications which
the Company sends to its stockholders or to its
Subsidiaries' stockholders and copies of all registration
statements and all regular, special or periodic reports
which it or its Subsidiaries file, or any of its officers or
directors file with respect to the Company, with the Securi-
ties and Exchange Commission or with any securities exchange
on which any of its securities are then listed, and copies
of all press releases and other statements made available
generally by the Company to the public concerning material
developments in the Company's and its Subsidiaries'
businesses; and
(x) with reasonable promptness, such other infor-
mation and financial data concerning the Company and its
Subsidiaries as any Person entitled to receive information
under this paragraph 3A may reasonably request (including
separate financial statements for the U.S., Canadian and
U.K. operations of the Company and its Subsidiaries).
Each of the financial statements referred to in subparagraph (i)
and (iii) shall be true and correct in all material respects as
of the dates and for the periods stated therein, subject in the
case of the unaudited financial statements to changes resulting
from normal year-end adjustments for recurring accruals (none of
which would, alone or in the aggregate, be materially adverse to
the financial condition, operating results, assets, operations or
Page 35 of 196 Pages
<PAGE>
business prospects of the Company and its Subsidiaries taken as a
whole).
3B. Inspection Rights. The Company shall permit any
representatives designated by any Purchaser (so long as such
Purchaser holds at least 2.5% of the outstanding principal amount
of the Notes or at least 2.5% of the outstanding shares of Series
A Preferred) or any holder of at least 10% of the outstanding
principal amount of the Notes or at least 10% of the outstanding
shares of Series A Preferred, upon reasonable notice and during
normal business hours to (i) visit and inspect any of the
properties of the Company and its Subsidiaries, (ii) examine the
corporate and financial records of the Company and its
Subsidiaries and make copies thereof or extracts therefrom and
(iii) discuss the affairs, finances and accounts of any such
corporations with the directors, officers and key employees of
the Company and its Subsidiaries. Upon the reasonable request of
any such Purchaser or any such holder of Notes or shares of
Series A Preferred, the Company shall permit its independent
accountants to participate in discussions with such Persons
regarding the Company and its Subsidiaries. Each holder of
Notes, Series A Preferred or Underlying Common Stock which is a
"venture capital operating company" for purpose of Department of
Labor Regulation Section 2510.3-101 shall in addition to all
other rights granted under this Agreement have the right, at
reasonable times and upon reasonable notice, to consult with and
advise the officers of the Company with respect to the management
of the Company and its Subsidiaries.
3C. Attendance at Board Meetings. The Company shall
give each holder of at least $5,000,000 of the outstanding
principal amount of the Notes and each holder of at least 5,000
shares of Series A Preferred written notice of each meeting of
its or any of its non-wholly-owned Subsidiaries' board of
directors, and each committee thereof at the same time notice of
such meeting is given to directors and the Company shall permit a
representative of each such Person to attend as an observer all
meetings of its and its non-wholly-owned Subsidiaries' board of
directors and all committees thereof; provided that in the case
of telephonic meetings conducted in accordance with the Company's
or any such Subsidiaries' bylaws and applicable law, each such
Person's representative shall be given the opportunity to listen
to such telephonic meetings. Each representative shall be
entitled to receive all written materials and other information
(including copies of meeting minutes) given to directors in
connection with
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such meetings at the same time such materials and information are
given to the directors. If the Company or any of its non-wholly-
owned Subsidiaries proposes to take any action by written consent
in lieu of a meeting of its board of directors or of any
committee thereof, the Company shall give written notice thereof
to each such Person prior to the effective date of such consent
describing in reasonable detail the nature and substance of such
action. In the event that the director designated by the holders
of Notes or Series A Preferred pursuant to paragraph 3D hereof or
the director elected by the holder of the Series A Preferred
pursuant to the Certificate of Designation, as applicable, does
not attend any board or committee meeting, the Company shall pay
the reasonable out-of-pocket expenses of one representative of
such holders (to be determined by the holders a majority of the
outstanding principal amount of the Notes or a majority of the
outstanding shares of the Series A Preferred, as applicable)
incurred in connection with attending such board and committee
meetings.
3D. Designation of Director. So long as more than 33%
of the original principal amount of the Notes remains
outstanding, the holders of the Notes shall have the right to
select a representative to be elected to the Company's board of
directors, and the Company shall nominate such representative for
election to the board of directors and solicit proxies from the
Company's stockholders in favor of the election of such
representative. Such representative shall initially be Robert
Van Degna. The Company shall use its best efforts to cause such
representative to be elected to the board of directors (including
voting all unrestricted proxies in favor of such representation)
and shall not take any action which would diminish the prospects
of such representatives being elected to the board of directors.
The Company shall appoint such representative or, if applicable,
the director elected by the holders of the Series A Preferred
pursuant to the Certificate of Designation, to be a member of the
Executive Committee, the Compensation Committee and the
Independent Committee of the Company's board of directors and,
upon the request of such representative, to any other board
committee of the Company and shall vote its securities of any
non-wholly owned Subsidiary to elect such representative to the
board of directors (or any similar body) of any non-wholly owned
Subsidiary and any board committee of any non-wholly owned
Subsidiary. All out-of-pocket expenses of each board member
incurred in connection with attending regular and special board
meetings and any meeting of any board committee shall be paid by
the Company. The board representative designated
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hereunder or elected by the holders of the Series A Preferred
shall be entitled to fees and other compensation paid to board
members who are not employees of the Company or its Subsidiaries.
3E. Amendment to Certificate of Incorporation and
Filing of Certificate of Designation. The Company shall submit
the Amendment to the Company's stockholders for approval at the
Company's next annual meeting and shall solicit proxies from the
Company's stockholders in favor of the approval of the Amendment.
The Company shall use its best efforts to cause the Amendment to
be approved by the Company's stockholders (including recommending
approval and voting all unrestricted proxies in favor of the
Amendment) and shall not take any action which would diminish the
prospects of the Amendment being so approved. Upon such
approval, the Company shall cause the Amendment and the
Certificate of Designation to be filed with the Delaware
Secretary of State.
3F. Restrictive Covenants. So long as any of the
Notes or any shares of Series A Preferred remain outstanding, the
Company shall not, without the prior written consent of the
holders of a majority of the outstanding principal amount of the
Notes or the holders of a majority of the outstanding shares of
Series A Preferred:
(i) directly or indirectly declare or pay any
dividends or make any distributions upon any shares of its
capital stock or other equity securities, except for (a)
dividends on the Series A Preferred and (b) dividends
payable in shares of Common Stock issued upon the
outstanding shares of Common Stock, or permit any non-
wholly-owned Subsidiary to directly or indirectly declare or
pay any dividends or make any distributions upon any shares
of its capital stock or other equity securities;
(ii) directly or indirectly redeem, purchase or
otherwise acquire, or permit any Subsidiary to redeem,
purchase or otherwise acquire, any of the Company's or any
Subsidiary's capital stock or other equity securities
(including warrants, options and other rights to acquire
such capital stock or other equity securities) other than
the Series A Preferred or directly or indirectly redeem,
purchase or make any payments with respect to any stock
appreciation rights, phantom stock plans or similar rights
or plans;
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(iii) enter into, or permit any Subsidiary to enter
into, the ownership, active management or operation of any
business other than the businesses of providing
telecommunications services and plant and equipment related
thereto;
(iv) make any amendment to the Certificate of
Incorporation or the Company's bylaws, or file any
resolution of the board of directors with the Delaware
Secretary of State containing any provisions, which would
(a) adversely affect or otherwise impair the rights or
relative priority of the holders of the Series A Preferred
under this Agreement, the Certificate of Incorporation or
the Company's bylaws or (b) change or include anti-takeover
provisions in the Certificate of Incorporation or the
Company's bylaws;
(v) become subject to, or permit any of its
Subsidiaries to become subject to, (including by way of
amendment to or modification of) any agreement or instrument
which by its terms would (under any circumstances) restrict
(a) the right of any Subsidiary to make loans or advances or
pay dividends to, transfer property to, or repay any
Indebtedness owed to, the Company or another Subsidiary
(except with respect to any indebtedness or credit facility
which is senior in right of payment to the Notes and the
Series A Preferred) or (b) the Company's right to perform
the provisions of this Agreement, the Notes, the Amendment
or the Registration Agreement (including provisions relating
to the payment of principal and interest on the Notes and
the redemption of, and payment of dividends with respect to,
the Series A Preferred);
(vi) enter into, amend, modify or supplement, or
permit any Subsidiary to enter into, amend, modify or
supplement, any agreement, transaction, commitment or
arrangement with any of its or any Subsidiary's officers,
directors or Affiliates or with any individual related by
blood, marriage or adoption to any such individual or with
any entity in which any such Person or individual owns a
beneficial interest (other than any such agreements,
transactions, commitments or arrangements between the
Company and any Subsidiary), except for compensation,
options and benefit programs approved by the Compensation
Committee of the Company's board of directors or other
transactions approved by an independent committee of the
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Company's board of directors and except as otherwise
expressly contemplated by this Agreement.
3G. Affirmative Covenants. So long as any of the
Notes or any shares of Series A Preferred remain outstanding, the
Company shall, and shall cause each Subsidiary to, unless it has
received the prior written consent of the holders of a majority
of the outstanding principal amount of the Notes and the holders
of a majority of the outstanding shares of Series A Preferred:
(i) at all times cause to be done all things
necessary to maintain, preserve and renew its corporate
existence (except that a wholly-owned Subsidiary may be
merged or liquidated into the Company or another Subsidiary)
and all material licenses, authorizations and permits
necessary to the conduct of its businesses;
(ii) maintain and keep its material properties in
good repair, working order and condition, and from time to
time make all necessary or desirable repairs, renewals and
replacements to its properties so that its businesses may be
properly and advantageously conducted at all times in all
material respects;
(iii) pay and discharge when payable all material
taxes, assessments and governmental charges imposed upon its
properties or upon the income or profits therefrom (in each
case before the same becomes delinquent and before penalties
accrue thereon) and all material claims for labor, materials
or supplies which if unpaid would by law become a Lien upon
any of its property unless and to the extent that the same
are being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in
accordance with generally accepted accounting principles,
consistently applied) have been established on its books
with respect thereto;
(iv) comply with all other material obligations
which it incurs pursuant to any contract or agreement,
whether oral or written, express or implied, as such
obligations become due, unless and to the extent that the
same are being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in
accordance with generally
Page 40 of 196 Pages
<PAGE>
accepted accounting principles, consistently applied) have
been established on its books with respect thereto;
(v) comply with all applicable laws, rules and
regulations of all governmental authorities, the violation
of which would reasonably be expected to have a material
adverse effect upon the financial condition, operating
results, assets, operations or business prospects of the
Company and its Subsidiaries taken as a whole;
(vi) continue in force the insurance coverages
existing as of the date hereof, with such additional or
supplemental insurance as is customary for corporations of
similar size engaged in similar lines of business; and
(vii) maintain proper books of record and account
which present fairly in all material respects its financial
condition and results of operations and make provisions on
its financial statements for all such proper reserves as in
each case are required in accordance with generally accepted
accounting principles, consistently applied.
3H. Use of Proceeds. The Company shall not, nor shall
it permit any Subsidiary to, use any proceeds from the sale of
the Notes hereunder, directly or indirectly, for the purposes of
purchasing or carrying any "margin securities" within the meaning
of Regulation G or T promulgated by the Board of Governors of the
Federal Reserve Board or for the purpose of arranging for the
extension of credit secured, directly or indirectly, in whole or
in part by collateral that includes any "margin securities."
3I. Current Public Information. The Company shall
file all reports required to be filed by it under the Securities
Act and the Securities Exchange Act and the rules and regulations
adopted by the Securities and Exchange Commission thereunder and
shall take such further action as any holder or holders of
Restricted Securities may reasonably request, all to the extent
required to enable such holders to sell Restricted Securities
pursuant to (i) Rule 144 adopted by the Securities and Exchange
Commission under the Securities Act (as such rule may be amended
from time to time) or any similar rule or regulation hereafter
adopted by the Securities and Exchange Commission or (ii) a
registration statement on Form S-2 or S-3 or any similar
registration form hereafter adopted by the Securities and
Exchange Commission. Upon request,
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<PAGE>
the Company shall deliver to any holder of Restricted Securities
a written statement as to whether it has complied with such
requirements.
3J. First Offer Rights.
(i) Except for issuances of Common Stock
(a) pursuant to options for Common Stock granted to the employees
of the Company or any Subsidiary, (b) upon the conversion of the
Notes or the Series A Preferred or upon the exercise of the
Warrants, (c) in connection with the acquisition (however
effected) of another company or business, (d) pursuant to a
public offering registered under the Securities Act, (e) to the
Company's lenders in connection with the provision or extension
of senior debt financing to the Company or any Subsidiary or (f)
for strategic investment by any entity which directly or through
one or more subsidiaries is engaged in the business of providing
telecommunication services or other utility services as a
material portion of its business, if the Company proposes the
issuance or sale of any shares of Common Stock or any securities
containing options or rights to acquire any shares of Common
Stock (other than as a dividend on the outstanding Common Stock),
the Company shall first offer to sell to each holder of
Underlying Common Stock a portion of such stock or securities
equal to the quotient determined by dividing (1) the number of
shares of Underlying Common Stock held by such holder by (2) the
sum of the total number of shares of Underlying Common Stock and
the number of shares of Common Stock outstanding which are not
shares of Underlying Common Stock. Each holder of Underlying
Common Stock shall be entitled to purchase such stock or
securities at the most favorable price and on the most favorable
terms as such stock or securities are to be offered to any other
Persons; provided that if all Persons entitled to purchase or
receive such stock or securities are required to also purchase
other securities of the Company, the holders of Underlying Common
Stock exercising their rights pursuant to this paragraph shall
also be required to purchase the same strip of securities (on the
same terms and conditions) that such other Persons are required
to purchase. The purchase price for all stock and securities
offered to the holders of the Underlying Common Stock shall be
payable in cash or, to the extent otherwise required hereunder,
notes issued by such holders.
(ii) In order to exercise its purchase rights
hereunder, a holder of Underlying Common Stock must within 15
days
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<PAGE>
after receipt of written notice from the Company describing in
reasonable detail the stock or securities being offered, the
purchase price thereof, the payment terms and such holder's
percentage allotment deliver a written notice to the Company
describing its election hereunder. If all of the stock and
securities offered to the holders of Underlying Common Stock is
not fully subscribed by such holders, the remaining stock and
securities shall be reoffered by the Company to the holders
purchasing their full allotment upon the terms set forth in this
paragraph, except that such holders must exercise their purchase
rights within five days after receipt of such reoffer.
(iii) Upon the expiration of the offering periods
described above, the Company shall be entitled to sell such stock
or securities which the holders of Underlying Common Stock have
not elected to purchase during the 90 days following such
expiration at a price no less than 90% of the price at which such
stock or securities were offered to such holders and on other
terms and conditions no more favorable in any material respect to
the purchasers thereof than those offered to such holders. Any
stock or securities offered or sold by the Company after such
90-day period must be reoffered to the holders of Underlying
Common Stock pursuant to the terms of this paragraph.
3K. SBIC Regulatory Provisions.
(i) Within 75 days after the Closing and at the
end of each month thereafter until all of the proceeds from the
Financing hereunder have been used by the Company and its
Subsidiaries, the Company shall deliver to each SBIC Holder a
written statement certified by the Company's president or chief
financial officer describing in reasonable detail the use of the
proceeds of the Financing hereunder by the Company and its
Subsidiaries. In addition to any other rights granted hereunder,
the Company shall grant each SBIC Holder and the United States
Small Business Administration (the "SBA") access to the Company's
records for the purpose of verifying the use of such proceeds.
(ii) Upon the occurrence of a Regulatory Violation
or in the event that any SBIC Holder determines in its reasonable
good faith judgment that a Regulatory Violation has occurred, in
addition to any other rights and remedies to which it may be
entitled as a holder of Notes, Series A Preferred or Underlying
Common Stock (whether under this Agreement, the Certificate of
Page 43 of 196 Pages
<PAGE>
Incorporation or otherwise), each SBIC Holder shall have the
right to the extent required under the SBIC Regulations to demand
the immediate repurchase of all of the Notes, Series A Preferred
and Underlying Common Stock owned by such SBIC Holder at a price
equal to the aggregate unpaid principal amount of the Notes and
all accrued and unpaid interest thereon and the amount paid for
such stock hereunder, plus all accrued or declared and unpaid
dividends thereon, by delivering written notice of such demand to
the Company. The Company shall pay the purchase price for such
securities by a cashier's or certified check or by wire transfer
of immediately available funds to each SBIC Holder demanding
repurchase within 30 days after the Company's receipt of the
demand notice, and upon such payment, each such SBIC Holder shall
deliver the instruments and certificates evidencing the Notes,
Series A Preferred and Underlying Common Stock to be repurchased
duly endorsed for transfer or accompanied by duly executed forms
of assignment.
(iii) The Company shall use the proceeds of the
Financing hereunder to repay Indebtedness in the United States,
to acquire capital assets in the United States, to provide
working capital to its U.S. operations and for other purposes
complying with the SBA Regulations.
(iv) For purposes of this paragraph, "Regulatory
Violation" means, with respect to any SBIC Holder providing
Financing under this Agreement, (a) a diversion of the proceeds
of such Financing from the reported use thereof on the use of
proceeds statement delivered by the Company on SBA Form 1031
delivered at the Closing, if such diversion was effected without
obtaining the prior written consent of the SBIC Holders (which
may be withheld in their sole discretion) or (b) a change in the
principal business activity of the Company and its Subsidiaries
to an ineligible business activity (within the meaning of the
SBIC Regulations) if such change occurs within one year after the
date of the initial Financing hereunder; and the term "Financing"
shall have the meaning set forth in the SBIC Regulations.
3L. Regulatory Compliance Cooperation. In the event
that any SBIC Holder determines that it has a Regulatory Problem
(as defined below), the Company shall take all such actions as
are reasonably requested by such SBIC Holder in order to
effectuate and facilitate any transfer by such SBIC Holder of any
securities of the Company then held by such SBIC Holder to any
Person designated
Page 44 of 196 Pages
<PAGE>
by such SBIC Holder to alleviate such Regulatory Problem. For
purposes of this Agreement, a "Regulatory Problem" means any set
of facts or circumstances wherein it has been asserted by any
governmental regulatory agency (or such SBIC Holder believes that
there is a substantial risk of such assertion) that such SBIC
Holder and its Affiliates are not entitled to hold, or exercise
any significant right with respect to, the Series A Preferred or
the Common Stock.
3M. Springing Warrants.
(i) At the Closing, the Company shall issue to each
Purchaser of Notes a Springing Warrant substantially in the form
of Exhibit G hereto for the consideration set forth in paragraph
1B hereof. Each Springing Warrant shall provide that upon any
Optional Prepayment of the Notes or Optional Redemption of the
Series A Preferred, the holders of the Notes and the holders of
the Series A Preferred shall have the right to acquire initially
the same number of shares of Common Stock into which the portion
of such holder's Note or such holder's shares of Series A
Preferred, the case may be, being repaid (the "Repaid Amount") is
convertible as of the payment date. The initial exercise price
for each share of Common Stock under the Springing Warrant shall
be equal to the Conversion Price under the Notes or the Series A
Preferred as of the payment date, and the Springing Warrant shall
be exercisable at any time thereafter and shall expire (unless
previously exercised) on the seventh anniversary of the Closing,
but in no event shall the Springing Warrants be exercisable after
the sixth anniversary of the prepayment of all of the SBIC
Holder's Notes.
(ii) Terms used in this paragraph 3M and not otherwise
defined herein have the meanings set forth in the Notes or the
Amendment, as applicable.
3N. Consultant's Report. Within 30 days after the
Closing, the Company shall retain Somerville & Company, Inc. and
cause it to prepare and deliver an organizational study of the
Company's senior management team; provided that the cost of such
study is not reasonably projected to exceed the amount equal to
(i) $400,000 less (ii) the amount of expenses payable by the
Company pursuant to paragraph 8A(i) below.
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Section 4. Transfer of Restricted Securities.
4A. General Provisions. Restricted Securities are
transferable only pursuant to (i) public offerings registered
under the Securities Act, (ii) Rule 144 or Rule 144A of the
Securities and Exchange Commission (or any similar rule or rules
then in force) if such rule is available and (iii) subject to the
conditions specified in paragraph 4B below, any other legally
available means of transfer.
4B. Opinion Delivery. In connection with the transfer
of any Restricted Securities (other than a transfer described in
paragraph 4A(i) or (ii) above), the holder thereof shall deliver
written notice to the Company describing in reasonable detail the
transfer or proposed transfer, together with an opinion of
Kirkland & Ellis or other counsel which (to the Company's reason-
able satisfaction) is knowledgeable in securities law matters to
the effect that such transfer of Restricted Securities may be
effected without registration of such Restricted Securities under
the Securities Act. In addition, if the holder of the Restricted
Securities delivers to the Company an opinion of Kirkland & Ellis
or such other counsel that no subsequent transfer of such
Restricted Securities shall require registration under the
Securities Act, the Company shall promptly upon such contemplated
transfer deliver new certificates for such Restricted Securities
which do not bear the Securities Act legend set forth in
paragraph 8C. If the Company is not required to deliver new
certificates for such Restricted Securities not bearing such
legend, the holder thereof shall not transfer the same until the
prospective transferee has confirmed to the Company in writing
its agreement to be bound by the conditions contained in this
paragraph and paragraph 8C.
4C. Rule 144A. Upon the request of any Purchaser, the
Company shall promptly supply to such Purchaser or its
prospective transferees all information regarding the Company
required to be delivered in connection with a transfer pursuant
to Rule 144A of the Securities and Exchange Commission.
4D. Legend Removal. If any Restricted Securities
become eligible for sale pursuant to Rule 144(k), the Company
shall, upon the request of the holder of such Restricted
Securities, remove the legend set forth in paragraph 8C from the
certificates for such Restricted Securities.
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4E. Foreign Ownership Restrictions. Any holder of
Restricted Securities shall not transfer any Restricted
Securities if such transfer results in the violation by the
Company of the provisions of 42 U.S.C. Section 310(b)(4).
Section 5. Representations and Warranties of the
Company. As a material inducement to the Purchasers to enter
into this Agreement and purchase the Notes and the Warrants
hereunder, the Company hereby represents and warrants that:
5A. Organization, Corporate Power and Licenses. The
Company is a corporation duly organized, validly existing and in
good standing under the laws of Delaware and is qualified to do
business in every jurisdiction in which its ownership of property
or conduct of business requires it to qualify, except where the
failure to so qualify would not have a material adverse effect on
the Company. The Company possesses all requisite corporate power
and authority and all material licenses, permits and
authorizations necessary to own and operate its properties, to
carry on its businesses as now conducted and presently proposed
to be conducted and to carry out the transactions contemplated by
this Agreement. The copies of the Company's and each Material
Subsidiary's charter documents and bylaws which have been
furnished to the Purchasers' special counsel reflect all
amendments made thereto at any time prior to the date of this
Agreement and are correct and complete.
5B. Capital Stock and Related Matters.
(i) As of the Closing and immediately thereafter, the
authorized capital stock of the Company shall consist of
50,000,000 shares of Common Stock, of which 7,756,584 shares
shall be issued and outstanding and 725,000 shares shall be
reserved for issuance upon conversion of the Notes or the Series
A Preferred or exercise of the Warrants. As of the Closing,
neither the Company nor any Subsidiary shall have outstanding any
stock or securities convertible or exchangeable for any shares of
its capital stock or containing any profit participation
features, nor shall it have outstanding any rights or options to
subscribe for or to purchase its capital stock or any stock or
securities convertible into or exchangeable for its capital stock
or any stock appreciation rights or phantom stock plans, except
for the Notes and the Warrants and except as set forth on the
attached "Capitalization Schedule." The Capitalization Schedule
accurately sets forth the following information with respect to
all outstanding options and rights to
Page 47 of 196 Pages
<PAGE>
acquire the Company's capital stock: the holder, the number of
shares covered, the exercise price and the expiration date. As
of the Closing, neither the Company nor any Subsidiary shall be
subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of its capital stock or
any warrants, options or other rights to acquire its capital
stock, except for the Notes and except as set forth on the
Capitalization Schedule. As of the Closing, all of the
outstanding shares of the Company's capital stock shall be
validly issued, fully paid and nonassessable.
(ii) There are no statutory or, to the best of the
Company's knowledge, contractual stockholders preemptive rights
or rights of refusal with respect to the issuance of the Notes or
the Warrants hereunder, the issuance of the Series A Preferred
upon conversion of the Notes or the issuance of the Common Stock
upon conversion of the Notes or the Series A Preferred or upon
exercise of the Warrants. The Company has not violated any
applicable federal or state securities laws in connection with
the offer, sale or issuance of any of its capital stock, and the
offer, sale and issuance of the Notes or the Warrants hereunder
do not require registration or qualification under the Securities
Act or any applicable state securities laws. To the best of the
Company's knowledge, there are no agreements between the
Company's stockholders with respect to the voting or transfer of
the Company's capital stock or with respect to any other aspect
of the Company's affairs, except for the Participation Agreement.
5C. Material Subsidiaries; Investments. The attached
"Material Subsidiary Schedule" correctly sets forth the name of
each Material Subsidiary, the jurisdiction of its incorporation
and the Persons owning the outstanding capital stock of such
Material Subsidiary. Each Material Subsidiary is duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation, possesses all requisite
corporate power and authority and all material licenses, permits
and authorizations necessary to own its properties and to carry
on its businesses as now being conducted and as presently
proposed to be conducted and is qualified to do business in every
jurisdiction in which its ownership of property or the conduct of
business requires it to qualify, except where the failure to so
qualify would not have a material adverse effect on the Company
or such Material Subsidiary. Except as set forth on the Material
Subsidiary Schedule, all of the outstanding shares of capital
stock of each Material Subsidiary are
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<PAGE>
validly issued, fully paid and nonassessable, and all such shares
are owned by the Company or another Subsidiary free and clear of
any Lien and not subject to any option or right to purchase any
such shares. Except as set forth on the Material Subsidiary
Schedule, neither the Company nor any Material Subsidiary owns or
holds the right to acquire any shares of stock or any other
security or interest in any other Person.
5D. Authorization; No Breach. The execution, delivery
and performance of this Agreement, the Notes, the Registration
Agreement, the Warrants and all other agreements and instruments
contemplated hereby to which the Company is a party, have been
duly authorized by the Company. This Agreement, the Registration
Agreement, the Notes, the Warrants, the Certificate of
Incorporation and all other agreements and instruments
contemplated hereby to which the Company is a party each
constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms. Except as set forth on
the attached "Restrictions Schedule," the execution and delivery
by the Company of this Agreement, the Notes, the Registration
Agreement, the Warrants, and all other agreements and instruments
contemplated hereby to which the Company is a party, the
offering, sale and issuance of the Notes and the Warrants
hereunder, the issuance of the Series A Preferred upon conversion
of the Notes, the issuance of the Common Stock upon conversion of
the Notes or the Series A Preferred, the issuance of Common Stock
upon exercise of Warrants, the amendment of the Certificate of
Incorporation and the fulfillment of and compliance with the
respective terms hereof and thereof by the Company, do not and
shall not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under,
(iii) result in the creation of any lien, security interest,
charge or encumbrance upon the Company's or any Subsidiary's
capital stock or assets pursuant to, (iv) give any third party
the right to modify, terminate or accelerate any obligation
under, (v) result in a violation of, or (vi) require any
authorization, consent, approval, exemption or other action by or
notice or declaration to, or filing with, any court or
administrative or governmental body or agency pursuant to, the
charter or bylaws of the Company or any Material Subsidiary, or
any law, statute, rule or regulation to which the Company or any
Material Subsidiary is subject (including, without limitation,
any usury laws applicable to the Notes), or any material
agreement, instrument, order, judgment or decree to which the
Company or any Material Subsidiary is subject. Except as set
forth on the Restrictions Schedule, none
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of the Material Subsidiaries are subject to any restrictions upon
making loans or advances or paying dividends to, transferring
property to, or repaying any Indebtedness owed to, the Company or
another Subsidiary.
5E. Financial Statements. The Company has previously
furnished to each Purchaser true and complete copies of the
following financial statements:
(i) the audited consolidated balance sheets of
the Company and its Subsidiaries as of December 31, 1994
(the "Latest Balance Sheet"), December 31, 1993, and
December 31, 1992, and the related statements of income and
cash flows (or the equivalent) for the respective
twelve-month periods then ended; and
(ii) the unaudited consolidated balance sheet of
the Company and its Subsidiaries as of March 31, 1995, and
the related statements of income and cash flows (or the
equivalent) for the three-month period then ended.
Each of the foregoing financial statements (including in all
cases the notes thereto, if any) is accurate and complete in all
material respects, is consistent with the books and records of
the Company and its Subsidiaries (which, in turn, are accurate
and complete in all material respects) and has been prepared in
accordance with generally accepted accounting principles,
consistently applied, subject in the case of the unaudited
financial statements to the absence of footnote disclosure and
changes resulting from normal year-end adjustments for recurring
accruals (none of which would, alone or in the aggregate, be
materially adverse to the financial condition, operating results,
assets, operations or business prospects of the Company and its
Subsidiaries taken as a whole).
5F. Absence of Undisclosed Liabilities. Except as set
forth on the attached "Liabilities Schedule," the Company and its
Subsidiaries do not have any material obligation or liability
(whether accrued, absolute, contingent, unliquidated or
otherwise, whether or not known to the Company or any Subsidiary,
whether due or to become due and regardless of when asserted)
arising out of transactions entered into at or prior to the
Closing, or any action or inaction at or prior to the Closing, or
any state of facts existing at or prior to the Closing other
than: (i) liabilities set forth on the Latest Balance Sheet
(including any notes
Page 50 of 196 Pages
<PAGE>
thereto), (ii) liabilities and obligations which have arisen
after the date of the Latest Balance Sheet in the ordinary course
of business (none of which is a liability resulting from breach
of contract, breach of warranty, tort, infringement, claim or
lawsuit) and (iii) other liabilities and obligations expressly
disclosed in the other Schedules to this Agreement.
5G. No Material Adverse Change. Since the date of the
Latest Balance Sheet, there has been no material adverse change
in the financial condition, operating results, assets,
operations, employee relations or customer or supplier relations
of the Company and its Subsidiaries taken as a whole.
5H. Absence of Certain Developments.
(i) Except as expressly contemplated by this Agreement
or as set forth on the attached "Developments Schedule," since
the date of the Latest Balance Sheet, neither the Company nor any
Material Subsidiary have
(a) issued any notes, bonds or other debt securi-
ties or any capital stock or other equity securities or any
securities convertible, exchangeable or exercisable into any
capital stock or other equity securities;
(b) borrowed any amount or incurred or become
subject to any material liabilities, except current liabil-
ities incurred in the ordinary course of business and
liabilities under contracts entered into in the ordinary
course of business;
(c) discharged or satisfied any material Lien or
paid any material obligation or liability, other than cur-
rent liabilities paid in the ordinary course of business;
(d) declared or made any payment or distribution
of cash or other property to its stockholders with respect
to its capital stock or other equity securities or purchased
or redeemed any shares of its capital stock or other equity
securities (including any warrants, options or other rights
to acquire its capital stock or other equity securities);
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<PAGE>
(e) mortgaged or pledged any of its properties or
assets or subjected them to any material Lien, except Liens
for current property taxes not yet due and payable;
(f) sold, assigned or transferred any of its tan-
gible assets, except in the ordinary course of business, or
canceled any material debts or claims;
(g) sold, assigned or transferred any patents or
patent applications, trademarks, service marks, trade names,
corporate names, copyrights or copyright registrations,
trade secrets or other intangible assets, or disclosed any
material proprietary confidential information to any Person;
(h) suffered any material extraordinary losses or
waived any rights of material value, whether or not in the
ordinary course of business or consistent with past
practice;
(i) made capital expenditures or commitments
therefor that aggregate in excess of $250,000;
(j) made any loans or advances to, guarantees for
the benefit of, or any Investments in, any Persons in excess
of $50,000 in the aggregate;
(k) made any charitable contributions or pledges
in excess of $50,000 in the aggregate;
(l) suffered any damage, destruction or casualty
loss exceeding in the aggregate $50,000, whether or not
covered by insurance;
(m) made any Investment in or taken steps to
incorporate any Subsidiary; or
(n) entered into any other material transaction
other than in the ordinary course of business.
(ii) Neither the Company nor any Subsidiary has at any
time made any bribes, kickback payments or other illegal
payments.
5I. Assets. Except as set forth on the attached
"Assets Schedule," the Company and each Material Subsidiary have
good and marketable title to, or a valid leasehold interest in,
the material
Page 52 of 196 Pages
<PAGE>
properties and assets used by them, located on their premises or
shown on the Latest Balance Sheet or acquired thereafter, free
and clear of all Liens, except for properties and assets disposed
of in the ordinary course of business since the date of the
Latest Balance Sheet and except for Liens disclosed on the Latest
Balance Sheet (including any notes thereto) and Liens for current
property taxes not yet due and payable. Except as described on
the Assets Schedule, the Company's and each Material Subsidiary's
buildings, equipment and other tangible assets are in good
operating condition in all material respects and are fit for use
in the ordinary course of business. The Company and each
Material Subsidiary own, or have a valid leasehold interest in,
all material tangible assets necessary for the conduct of their
respective businesses as presently conducted and as presently
proposed to be conducted.
5J. Tax Matters.
(i) Except as set forth on the attached "Taxes Sched-
ule": the Company and each Subsidiary have filed all material Tax
Returns which they are required to file under applicable laws and
regulations; all such Tax Returns are complete and correct in all
material respects and have been prepared in compliance with all
applicable laws and regulations in all material respects; the
Company and each Subsidiary in all material respects have paid
all Taxes due and owing by them (whether or not such Taxes are
required to be shown on a Tax Return) and have withheld and paid
over to the appropriate taxing authority all Taxes which they are
required to withhold from amounts paid or owing to any employee,
stockholder, creditor or other third party; neither the Company
nor any Subsidiary has waived any statute of limitations with
respect to any material Taxes or agreed to any extension of time
with respect to any material Tax assessment or deficiency; the
accrual for Taxes on the Latest Balance Sheet would be adequate
to pay all Tax liabilities of the Company and its Subsidiaries if
their current tax year were treated as ending on the date of the
Latest Balance Sheet (excluding any amount recorded which is
attributable solely to timing differences between book and Tax
income); since the date of the Latest Balance Sheet, the Company
and its Subsidiaries have not incurred any material liability for
Taxes other than in the ordinary course of business; the
assessment of any additional Taxes for periods for which Tax
Returns have been filed by the Company and each Subsidiary shall
not exceed the recorded liability therefor on the Latest Balance
Sheet (excluding any amount recorded which is attributable solely
to timing differences between book and
Page 53 of 196 Pages
<PAGE>
Tax income); the federal income Tax Returns of the Company and
its Subsidiaries have been audited and closed for all tax years
through 1989; except as set forth on the Tax Audit Schedule, no
foreign, federal, state or local tax audits or administrative or
judicial proceedings are pending or being conducted with respect
to the Company, any Subsidiary nor information related to Tax
matters has been requested by any foreign, federal, state or
local taxing authority and no written notice indicating an intent
to open an audit or other review has been received by the Company
from any foreign, federal, state or local taxing authority; and
there are no material unresolved questions or claims concerning
the Company's, any Subsidiary's Tax liability.
(ii) Neither the Company nor any of its Subsidiaries
has made an election under Section 341(f) of the Internal Revenue
Code of 1986, as amended. Neither the Company nor any Subsidiary
has been or is currently a member of an Affiliated Group, except
for the Affiliated Group in which the Company is the parent.
Neither the Company nor any Subsidiary is liable for the Taxes of
another Person that is not a Subsidiary in a material amount
under (a) Treas. Reg. Section 1.1502-6 (or comparable provisions
of state, local or foreign law), (b) as a transferee or
successor, (c) by contract or indemnity or (d) otherwise.
Neither the Company nor any Subsidiary is a party to any tax
sharing agreement. The Company, each Subsidiary have disclosed
on their federal income Tax Returns any position taken for which
substantial authority (within the meaning of IRC Section
6662(d)(2)(B)(i)) did not exist at the time the return was filed.
Neither the Company nor any Subsidiary has made any payments, is
obligated to make payments or is a party to an agreement that
could obligate it to make any payments that would not be
deductible under IRC Section 280G.
(iii) "Tax" or "Taxes" means federal, state, county,
local, foreign or other income, gross receipts, ad valorem, fran-
chise, profits, sales or use, transfer, registration, excise,
utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other
withholding, employment, social security, severance, stamp,
occupation, alternative or add-on minimum, estimated and other
taxes of any kind whatsoever (including, without limitation,
deficiencies, penalties, additions to tax, and interest
attributable thereto) whether disputed or not. "Tax Return"
means any return, information report or filing with respect to
Taxes, including any schedules attached thereto and including any
amendment thereof. "Affiliated Group" means any
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<PAGE>
affiliated group as defined in IRC Section 1504 that has filed a
consolidated return for federal income tax purposes (or any
similar group under state, local or foreign law) for a period
during which any of the Company or any of its Subsidiaries was a
member.
5K. Contracts and Commitments.
(i) Except as expressly contemplated by this Agreement
or as set forth on the attached "Contracts Schedule" or the
attached "Employee Benefits Schedule," neither the Company nor
any Subsidiary is a party to or bound by any written or oral:
(a) pension, profit sharing, stock option,
employee stock purchase or other plan or arrangement
providing for deferred or other compensation to employees or
any other employee benefit plan or arrangement, or any
collective bargaining agreement or any other contract with
any labor union, or severance agreements, programs, policies
or arrangements;
(b) contract for the employment of any officer,
individual employee or other Person on a full-time, part-
time, consulting or other basis providing annual
compensation in excess of $50,000 or contract relating to
loans to officers, directors or Affiliates;
(c) contract under which the Company or
Subsidiary has advanced or loaned any other Person amounts
in the aggregate exceeding $50,000;
(d) agreement or indenture relating to borrowed
money or other Indebtedness or the mortgaging, pledging or
otherwise placing a Lien on any material asset or material
group of assets of the Company and its Subsidiaries;
(e) guarantee of any obligation in excess of
$50,000 (other than by the Company of a wholly-owned
Subsidiary's debts or a guarantee by a Subsidiary of the
Company's debts or another Subsidiary's debts);
(f) lease or agreement under which the Company or
any Subsidiary is lessee of or holds or operates any
property, real or personal, owned by any other party, except
for any
Page 55 of 196 Pages
<PAGE>
lease of real or personal property under which the aggregate
annual rental payments do not exceed $50,000;
(g) lease or agreement under which the Company or
any Subsidiary is lessor of or permits any third party to
hold or operate any property, real or personal, owned or
controlled by the Company or any Subsidiary;
(h) contract or group of related contracts with
the same party or group of affiliated parties the
performance of which involves consideration in excess of
$100,000;
(i) assignment, license, indemnification or
agreement with respect to any intangible property (including
any Intellectual Property);
(j) warranty agreement with respect to its
services rendered or its products sold or leased;
(k) agreement under which it has granted any
Person any registration rights (including demand and
piggyback registration rights);
(l) sales, distribution or franchise agreement;
(m) agreement with a term of more than six months
which is not terminable by the Company or any Subsidiary
upon 30 days' or less notice without material penalty;
(n) contract or agreement prohibiting it from
freely engaging in any business or competing anywhere in the
world; or
(o) any other agreement which is material to its
operations and business prospects or involves a
consideration in excess of $100,000 annually.
(ii) All of the contracts, agreements and instruments
set forth on the Contracts Schedule are valid, binding and
enforceable against the Company or the Subsidiary that is a party
thereto in accordance with their respective terms. The Company
and each Subsidiary have performed all material obligations
required to be performed by them under the contracts, agreements
and instruments listed on the Contracts Schedule and are not in
material default
Page 56 of 196 Pages
<PAGE>
under or in material breach of nor in receipt of any claim of
default or breach under any contract, agreement or instrument
listed on the Contracts Schedule; no event has occurred which
with the passage of time or the giving of notice or both would
result in a material default, breach or event of noncompliance by
the Company or any Subsidiary under any contract, agreement or
instrument listed on the Contracts Schedule; neither the Company
nor any Subsidiary has any present expectation or intention of
not fully performing all such material obligations; neither the
Company nor any Subsidiary has knowledge of any material breach
or anticipated material breach by the other parties to any
contract, agreement, instrument or commitment listed on the
Contracts Schedule.
(iii) The Purchasers' special counsel has been supplied
with a true and correct copy of each of the written instruments,
plans, contracts and agreements and an accurate description of
each of the oral arrangements, contracts and agreements which are
referred to on the Contracts Schedule, together with all amend-
ments, waivers or other changes thereto.
5L. Intellectual Property Rights.
(i) The attached "Intellectual Property Schedule" con-
tains a complete and accurate list of all (a) material patented
or registered Intellectual Property Rights owned or used by the
Company or any Subsidiary, (b) material pending patent applica-
tions and applications for registrations of other Intellectual
Property Rights filed by the Company or any Subsidiary, (c) mate-
rial unregistered trade names and corporate names owned or used
by the Company or any Subsidiary and (d) material unregistered
trademarks, service marks, copyrights, mask works and computer
software owned or used by the Company or any Subsidiary. The
Intellectual Property Schedule also contains a complete and
accurate list of all licenses and other rights granted by the
Company or any Subsidiary to any third party with respect to any
material Intellectual Property Rights and all licenses and other
rights granted by any third party to the Company or any
Subsidiary with respect to any material Intellectual Property
Rights, in each case identifying the subject Intellectual
Property Rights. Except as set forth on the Intellectual
Property Schedule, the Company or one of its Subsidiaries owns
all right, title and interest to, or has the right to use
pursuant to a valid license, all Intellectual Property Rights
necessary for the operation of the businesses of the Company and
its Subsidiaries as presently conducted and as presently
Page 57 of 196 Pages
<PAGE>
proposed to be conducted, free and clear of all Liens. Except as
set forth on the Intellectual Property Schedule, the loss or
expiration of any Intellectual Property Right or related group of
Intellectual Property Rights owned or used by the Company or any
Subsidiary has not had and would not reasonably be expected to
have a material adverse effect on the conduct of the Company's
and its Subsidiaries' respective businesses, and no such loss or
expiration is, to the best of the Company's knowledge, threat-
ened, pending or reasonably foreseeable. The Company and its
Subsidiaries have taken all reasonably necessary and desirable
actions to maintain and protect the material Intellectual
Property Rights which they own.
(ii) Except as set forth on the Intellectual Property
Schedule, (a) the Company and its Subsidiaries own all right,
title and interest in and to all of the Intellectual Property
Rights listed on such schedule, free and clear of all Liens,
(b) there have been no claims made against the Company or any
Subsidiary asserting the invalidity, misuse or unenforceability
of any of such Intellectual Property Rights, (c) neither the
Company nor any Subsidiary has received any notices of any
infringement or misappropriation by, or conflict with, any third
party with respect to such Intellectual Property Rights
(including, without limitation, any demand or request that the
Company or any Subsidiary license any rights from a third party),
(d) the conduct of the Company's and each Subsidiary's business
has not infringed, misappropriated or conflicted with and does
not infringe, misappropriate or conflict with any material
Intellectual Property Rights of other Persons, nor would any
future conduct as presently contemplated infringe, misappropriate
or conflict with any material Intellectual Property Rights of
other Persons and (e) to the best of the Company's knowledge, the
Intellectual Property Rights owned by or licensed to the Company
or any Subsidiary have not been materially infringed,
misappropriated or conflicted by other Persons in any material
respect. Except as set forth in the Intellectual Property
Schedule, the transactions contemplated by this Agreement will
have no material adverse effect on the Company's or any
Subsidiary's right, title and interest in and to the Intellectual
Property Rights listed on the Intellectual Property Schedule.
5M. Litigation, etc. Except as set forth on the
attached "Litigation Schedule," there are no actions, suits, pro-
ceedings, orders, investigations or claims pending or, to the
best
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<PAGE>
of the Company's knowledge, threatened against or affecting the
Company or any Material Subsidiary (or to the best of the
Company's knowledge, pending or threatened against or affecting
any of the officers, directors or employees of the Company and
its Material Subsidiaries with respect to their businesses or
proposed business activities), or pending or threatened by the
Company or any Material Subsidiary against any third party, at
law or in equity, or before or by any governmental department,
commission, board, bureau, agency or instrumentality (including
any actions, suit, proceedings or investigations with respect to
the transactions contemplated by this Agreement); there are no
other actions, suits, proceedings, orders, investigations or
claims pending or, to the Company's knowledge, threatened against
or affecting the Company or any Subsidiary which if adversely
determined would have a material adverse effect on the Company
and its Subsidiaries, taken as a whole; and neither the Company
nor any Material Subsidiary is subject to any arbitration
proceedings under collective bargaining agreements or otherwise
or, to the best of the Company's knowledge, any governmental
investigations or inquiries (including inquiries as to the
qualification to hold or receive any license or permit). Neither
the Company nor any Subsidiary is subject to any material
judgment, order or decree of any court or other governmental
agency.
5N. Brokerage. Except as set forth on the attached
"Brokerage Schedule," there are no claims for brokerage commis-
sions, finders' fees or similar compensation in connection with
the transactions contemplated by this Agreement based on any
arrangement or agreement binding upon the Company or any
Subsidiary. The Company shall pay, and hold each Purchaser
harmless against, any liability, loss or expense (including
reasonable attorneys' fees and out-of-pocket expenses) arising in
connection with any such claim.
5O. Governmental Consent, etc. No permit, consent,
approval or authorization of, or declaration to or filing by the
Company with, any governmental authority is required in
connection with the execution, delivery and performance by the
Company of this Agreement or the other agreements contemplated
hereby, or the consummation by the Company of any other
transactions contemplated hereby or thereby, except as set forth
on the attached "Consents Schedule" and except as expressly
contemplated herein or in the exhibits hereto.
Page 59 of 196 Pages
<PAGE>
5P. Insurance. The attached "Insurance Schedule"
contains a description of each insurance policy maintained by the
Company and its Material Subsidiaries with respect to its
properties, assets and businesses, and each such policy is in
full force and effect as of the Closing. Neither the Company nor
any Material Subsidiary is in material default with respect to
its obligations under any insurance policy maintained by it, and
neither the Company nor any Material Subsidiary has been denied
insurance coverage in the past five years. The insurance
coverage of the Company and its Material Subsidiaries is
customary for corporations of similar size engaged in similar
lines of business. Except as set forth on the Insurance
Schedule, the Company and its Material Subsidiaries do not have
any self-insurance or co-insurance programs, and the reserves set
forth on the Latest Balance Sheet are adequate to cover all
anticipated liabilities with respect to any such self-insurance
or co-insurance programs.
5Q. Employees. Except as set forth on the attached
"Employees Schedule," the Company is not aware that any executive
or key employee of the Company or any Material Subsidiary or any
group of employees of the Company or any Material Subsidiary has
any plans to terminate employment with the Company or any
Material Subsidiary. The Company and each Material Subsidiary
have complied in all material respects with all laws relating to
the employment of labor (including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining and the
payment of social security and other taxes), and the Company is
not aware that it or any Material Subsidiary has any material
labor relations problems (including any union organization
activities, threatened or actual strikes or work stoppages or
material grievances). Neither the Company, its Material
Subsidiaries nor, to the best of the Company's knowledge, any of
their employees is subject to any noncompete, nondisclosure,
confidentiality, employment, consulting or similar agreements
relating to, affecting or in conflict with the present or
proposed business activities of the Company and its Material
Subsidiaries, except for agreements between the Company and its
present and former employees.
5R. ERISA.
(i) Multiemployer Plans. The Company does not have
any obligation to contribute to (or any other liability,
including current or potential withdrawal liability, with respect
to) any
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<PAGE>
"multiemployer plan" (as defined in Section 3(37) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")).
(ii) Retiree Welfare Plans. The Company does not main-
tain or have any obligation to contribute to (or any other lia-
bility with respect to) any plan or arrangement whether or not
terminated, which provides medical, health, life insurance or
other welfare-type benefits for current or future retired or
terminated employees (except for limited continued medical
benefit coverage required to be provided under Section 4980B of
the IRC or as required under applicable state law).
(iii) Defined Benefit Plans. The Company does not main-
tain, contribute to or have any liability under (or with respect
to) any employee plan which is a tax-qualified "defined benefit
plan" (as defined in Section 3(35) of ERISA), whether or not
terminated.
(iv) Defined Contribution Plans. The Company does not
maintain, contribute to or have any liability under (or with
respect to) any employee plan which is a tax-qualified "defined
contribution plan" (as defined in Section 3(34) of ERISA),
whether or not terminated, other than the ACC Corp. Savings and
Retirement Plan (the "Profit Sharing Plan").
(v) Other Plans. Except as set forth in the "Employee
Benefits Schedule", the Company does not maintain, contribute to
or have any liability under (or with respect to) any plan or
arrangement providing benefits to current or former employees,
including any bonus plan, plan for deferred compensation,
employee health or other welfare benefit plan or other
arrangement, whether or not terminated. Such plans and other
arrangements are referred to as the "Other Plans."
(vi) The Company. For purposes of this paragraph 5R,
the term "Company" includes all organizations under common
control with the Company pursuant to Section 414(b) or (c) of the
IRC.
(vii) Payments and Accruals. With respect to the Profit
Sharing Plan and the Other Plans (the "Plans"), all required or
recommended (in accordance with historical practices) payments,
premiums, contributions, reimbursements or accruals for all
periods (or partial periods) ending prior to or as of the Closing
shall have been made or properly accrued on the Latest Balance
Sheet.
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<PAGE>
None of the Plans has any material unfunded liabilities which are
not reflected on the Latest Balance Sheet.
(viii) Compliance. The Plans and all related trusts,
insurance contracts and funds have been maintained, funded and
administered in compliance in all material respects with the
applicable provisions of ERISA, the IRC and other applicable
laws. Neither the Company nor any trustee or administrator of
any Plan has engaged in any transaction with respect to the Plans
which could subject the Company or any trustee or administrator
or the Plans, or any party dealing with any such Plan, nor do the
transactions contemplated by this Agreement constitute
transactions which could subject any such party, to either a
civil penalty assessed pursuant to Section 502(i) of ERISA or the
tax or penalty on prohibited transactions imposed by Section 4975
of the IRC. No actions, suits or claims with respect to the
assets of the Plans (other than routine claims for benefits) are
pending or threatened which could result in or subject the
Company to any liability, and there are no circumstances which
could give rise to or be expected to give rise to any such
actions, suits or claims.
(x) Tax Qualification. A favorable determination
letter from the IRS has been received by the Company with respect
to the Profit Sharing Plan as amended to comply with the IRS as
in effect up to the Tax Reform Act of 1986 stating that it is a
qualified plan under Section 401(a) of the IRC and there are no
circumstances which would cause the Profit Sharing Plan to lose
such qualified status.
(x) Correct Copies. The Company has provided the
Purchasers with true and complete copies of all documents
pursuant to which the Plans are maintained and administered and
the most recent annual reports (Form 5500 and attachments) for
the Plans.
5S. Compliance with Laws. Except as set forth on the
attached "Compliance Schedule," neither the Company nor any
Subsidiary has violated any law or any governmental regulation or
requirement which violation has had or would reasonably be
expected to have a material adverse effect upon the financial
condition, operating results, assets, operations or business
prospects of the Company and its Subsidiaries taken as a whole,
and neither the Company nor any Subsidiary has received notice of
any such violation. Except as set forth on the Compliance
Schedule, neither the Company nor any Subsidiary is subject to,
or has reason to believe
Page 62 of 196 Pages
<PAGE>
it may become subject to, any material liability (contingent or
otherwise) or corrective or remedial obligation arising under any
federal, state, local or foreign law, rule or regulation
(including the common law) relating to or regulating health,
safety, pollution or the protection of the environment
("Environmental Laws"). Without limiting the generality of the
foregoing, (i) the Company and each Subsidiary have obtained all
material permits, licenses and authorizations required under, and
have complied in all material respects with, all Environmental
Laws, (ii) no notice has been received by the Company or any
Subsidiary regarding any material violation of, or any material
claim, liability or corrective or remedial obligation under, any
Environmental Laws and (iii) to the Company's knowledge, no facts
or circumstances exist with respect to the past or present
operations or facilities of the Company or any Subsidiary which
would give rise to a material liability or corrective or remedial
obligation under any Environmental Laws.
5T. Small Business Matters. The Company, together
with its "affiliates" (as that term is defined in Title 13, Code
of Federal Regulations, Section 121.401), is a "small business
concern" within the meaning of the Small Business Investment Act
of 1958 and the regulations thereunder, including Title 13, Code
of Federal Regulations, Section 121.802. The information
regarding the Company and its affiliates set forth in the Small
Business Administration Form 480, Form 652 and Part A of Form
1031 delivered at the Closing is accurate and complete. Copies
of such forms shall have been completed and executed by the
Company and delivered to each SBIC Holder at the Closing together
with a written statement of the Company regarding its planned use
of the proceeds from the sale of the Notes and the Warrants.
Neither the Company nor any Subsidiary presently engages in, and
it shall not hereafter engage in, any activities, nor shall the
Company or any Subsidiary use directly or indirectly the proceeds
from the sale of the Notes and the Warrants hereunder for any
purpose, for which an SBIC is prohibited from providing funds by
the Small Business Investment Act of 1958 and the regulations
thereunder (including Title 13, Code of Federal Regulations,
Section 107.901).
5U. Affiliated Transactions. Except as set forth on
the attached "Affiliated Transactions Schedule," no officer,
director, employee, or Affiliate of the Company or any Subsidiary
or any individual related by blood, marriage or adoption to any
such individual or any entity in which any such Person or
individual
Page 63 of 196 Pages
<PAGE>
owns any beneficial interest, is a party to any agreement,
contract, commitment or transaction with the Company or any
Subsidiary or has any material interest in any material property
used by the Company or any Subsidiary.
5V. Investment Company. Neither the Company nor any
of its Subsidiaries is an "investment company" as defined under
the Investment Company Act of 1940.
5W. Margin Securities. Neither the Company nor any of
its Subsidiaries is engaged in the business of extending credit
for the purpose of buying or carrying "margin securities" within
the meaning of Regulations G, T, U or X promulgated by the Board
of Governors of the Federal Reserve Board, and no part of the
proceeds realized from the sale of the Note shall be used to buy
or carry any such margin securities or used in violation of
Regulations G, T, U or X.
5X. Disclosure. To the Company's knowledge, neither
this Agreement nor any of the exhibits, schedules, attachments or
certificates required to be delivered with respect to the
transactions contemplated hereby contain any untrue statement of
a material fact or omit a material fact necessary to make each
statement contained herein or therein not misleading; provided
that with respect to the financial projections furnished to the
Purchasers by the Company, the Company represents and warrants
only that such projections were based upon assumptions reasonably
believed by the Company to be reasonable and fair as of the date
the projections were prepared in the context of the Company's
history and current and reasonably foreseeable business condi-
tions. There is no fact (other than general economic conditions)
which the Company has not disclosed to the Purchasers in writing
and which, to the Company's knowledge, has had or would
reasonably be expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole.
5Y. Reports with the Securities and Exchange Commis-
sion. The Company has furnished the Purchasers with complete and
accurate copies of its annual report on Form 10-K for its three
most recent fiscal years, all other reports or documents required
to be filed by the Company pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act since the filing of the most recent
annual report on Form 10-K and its most recent annual report to
its stockholders. As of their respective filing dates, such
reports and filings did
Page 64 of 196 Pages
<PAGE>
not contain any material false statements or any misstatement of
any material fact and did not omit to state any fact necessary to
make the statements set forth therein not misleading. The
Company has made all filings with the Securities and Exchange
Commission which it is required to make, and the Company has not
received any request from the Securities and Exchange Commission
to file any amendment or supplement to any of the reports
described in this paragraph.
5Z. Knowledge. For purposes of this Agreement, the
"knowledge" of the Company means the actual knowledge, after
reasonable inquiry, of Richard T. Aab, Francis D.R. Coleman,
Michael R. Daley, Arunas A. Chesonis, Michael L. LaFrance, Steve
M. Dubnik and Christopher Bantoft.
Section 6. Representations and Warranties of the
Purchasers. The Purchasers hereby represent and warrant that:
6A. Organization, Power and Licenses. Each Purchaser
is duly organized, validly existing and in good standing under
the laws of its state of organization. Each Purchaser possesses
all requisite power and authority and all material licenses,
permits and authorizations necessary to carry out the
transactions contemplated by this Agreement.
6B. Authorization; No Breach. The execution, delivery
and performance of this Agreement, the Registration Agreement and
all other agreements and instruments contemplated hereby to which
the Purchasers are parties, have been duly authorized by each
such Purchaser. This Agreement, the Registration Agreement and
all other agreements and instruments contemplated hereby to which
the Purchasers are parties each constitutes a valid and binding
obligation of each such Purchaser, enforceable in accordance with
its terms. The execution and delivery by the Purchasers of this
Agreement, the Registration Agreement and all other agreements
and instruments contemplated hereby to which the Purchasers are
parties and the fulfillment of and compliance with the respective
terms hereof and thereof by the Purchasers, do not and shall not
conflict with or result in a breach of the terms, conditions or
provisions of any law, statute, rule or regulation to which any
Purchaser is subject, or any material order, judgment or decree
to which any Purchaser is subject.
Page 65 of 196 Pages
<PAGE>
Section 7. Definitions.
7A. Definitions. For the purposes of this Agreement,
the following terms have the meanings set forth below:
"Affiliate" of any particular Person means any other
Person controlling, controlled by or under common control with
such particular Person, where "control" means the possession,
directly or indirectly, of the power to direct the management and
policies of a Person whether through the ownership of voting
securities, contract or otherwise.
"Event of Default" has the meaning set forth in the
Notes.
"Event of Noncompliance" has the meaning set forth in
the Amendment.
"Indebtedness" means at a particular time, without
duplication, (i) any indebtedness for borrowed money or issued in
substitution for or exchange of indebtedness for borrowed money,
(ii) any indebtedness evidenced by any note, bond, debenture or
other debt security, (iii) any indebtedness for the deferred
purchase price of property or services with respect to which a
Person is liable, contingently or otherwise, as obligor or
otherwise (other than trade payables and other current
liabilities incurred in the ordinary course of business),
(iv) any commitment by which a Person assures a creditor against
loss (including contingent reimbursement obligations with respect
to letters of credit), (v) any indebtedness guaranteed in any
manner by a Person (including guarantees in the form of an
agreement to repurchase or reimburse), (vi) any obligations under
capitalized leases with respect to which a Person is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or
with respect to which obligations a Person assures a creditor
against loss, (vii) any indebtedness secured by a Lien on a
Person's assets and (viii) any unsatisfied obligation for "with-
drawal liability" to a "multiemployer plan" as such terms are
defined under ERISA.
"Intellectual Property Rights" means all (i) patents,
patent applications, patent disclosures and inventions,
(ii) trademarks, service marks, trade dress, trade names, logos
and corporate names and registrations and applications for
registration thereof
Page 66 of 196 Pages
<PAGE>
together with all of the goodwill associated therewith,
(iii) copyrights (registered or unregistered) and copyrightable
works and registrations and applications for registration
thereof, (iv) mask works and registrations and applications for
registration thereof, (v) computer software, data, data bases and
documentation thereof, (vi) trade secrets and other confidential
information (including, without limitation, ideas, formulas,
compositions, inventions (whether patentable or unpatentable and
whether or not reduced to practice), know-how, manufacturing and
production processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial and marketing
plans and customer and supplier lists and information),
(vii) other intellectual property rights and (viii) copies and
tangible embodiments thereof (in whatever form or medium).
"Investment" as applied to any Person means (i) any
direct or indirect purchase or other acquisition by such Person
of any notes, obligations, instruments, stock, securities or
ownership interest (including partnership interests and joint
venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
"IRC" means the Internal Revenue Code of 1986, as
amended, and any reference to any particular IRC section shall be
interpreted to include any revision of or successor to that
section regardless of how numbered or classified.
"IRS" means the United States Internal Revenue Service.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any
conditional sale or other title retention agreement or lease in
the nature thereof), any sale of receivables with recourse
against the Company, any Subsidiary or any Affiliate, any filing
or agreement to file a financing statement as debtor under the
Uniform Commercial Code or any similar statute other than to
reflect ownership by a third party of property leased to the
Company or any Subsidiaries under a lease which is not in the
nature of a conditional sale or title retention agreement, or any
subordination arrangement in favor of another Person (other than
any subordination arising in the ordinary course of business).
Page 67 of 196 Pages
<PAGE>
"Material Subsidiary" means each Subsidiary of the
Company set forth on the Material Subsidiary Schedule and any
other Subsidiary of the Company which at the time of
determination has more than $500,000 of stockholders equity (as
determined in accordance with generally accepted accounting
principles) or more than $500,000 of intercompany Indebtedness
owing to the Company or another Subsidiary.
"Officer's Certificate" means a certificate signed by
the Company's president or its chief financial officer, stating
that (i) the officer signing such certificate has made or has
caused to be made such investigations as are necessary in order
to permit him to verify the accuracy of the information set forth
in such certificate and (ii) to the best of such officer's knowl-
edge, such certificate does not misstate any material fact and
does not omit to state any fact necessary to make the certificate
not misleading.
"Person" means an individual, a partnership, a corpora-
tion, a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political
subdivision thereof.
"Potential Event of Default" means any event or
occurrence which with the passage of time or the giving of notice
or both would constitute an Event of Default.
"Potential Event of Noncompliance" means any event or
occurrence which with the passage of time or the giving of notice
or both would constitute an Event of Noncompliance.
"Restricted Securities" means (i) the Notes and the
Warrants issued hereunder, (ii) the Series A Preferred issued
upon conversion of the Notes, (iii) the Common Stock issued upon
conversion of Notes or the Series A Preferred or upon exercise of
the Warrants and (iv) any securities issued with respect to the
securities referred to in clauses (i), (ii) or (iii) above by way
of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or
other reorganization. As to any particular Restricted
Securities, such securities shall cease to be Restricted
Securities when they have (a) been effectively registered under
the Securities Act and disposed of in accordance with the
registration statement covering
Page 68 of 196 Pages
<PAGE>
them, (b) been distributed to the public through a broker, dealer
or market maker pursuant to Rule 144 (or any similar provision
then in force) under the Securities Act or become eligible for
sale pursuant to Rule 144(k) (or any similar provision then in
force) under the Securities Act or (c) been otherwise transferred
and new certificates for them not bearing the Securities Act
legend set forth in paragraph 8C have been delivered by the
Company in accordance with paragraph 4(ii). Whenever any
particular securities cease to be Restricted Securities, the
holder thereof shall be entitled to receive from the Company,
without expense, new securities of like tenor not bearing a
Securities Act legend of the character set forth in paragraph 8C.
"SBIC" means a small business investment company
licensed under the Small Business Investment Act of 1958, as
amended.
"SBIC Holder" means any holder of Notes, Series A
Preferred or Underlying Common Stock that is an SBIC.
"SBIC Regulations" means the Small Business Investment
Company Act of 1958, as amended, and the regulations issued by
the Small Business Administration thereunder, 13 CFR 107 and 121,
as amended.
"Securities Act" means the Securities Act of 1933, as
amended, or any similar federal law then in force.
"Securities and Exchange Commission" includes any
governmental body or agency succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange
Act of 1934, as amended, or any similar federal law then in
force.
"Subordination Agreement" means the Subordination
Agreement, dated as of May 22, 1995, by and among each of the
Purchasers, the Company, Manufacturers and Traders Trust Company
and Marine Midland Bank.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, association
or other business entity of which (i) if a corporation, 50% or
more of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the
time owned or
Page 69 of 196 Pages
<PAGE>
controlled, directly or indirectly, by that Person or one or more
of the other Subsidiaries of that Person or a combination
thereof, or (ii) if a limited liability company, partnership,
association, joint venture or other business entity, 50% or more
of the partnership or other similar ownership interest thereof is
at the time owned or controlled, directly or indirectly, by any
Person or one or more Subsidiaries of that Person or a
combination thereof. For purposes hereof, a Person or Persons
shall be deemed to have a 50% or more ownership interest in a
limited liability company, partnership, association or other
business entity if such Person or Persons shall be allocated 50%
or more of limited liability company, partnership, association,
joint venture or other business entity gains or losses or shall
be or control any managing director or general partner of such
limited liability company, partnership, association or other
business entity.
"Underlying Common Stock" means (i) the Common Stock
issued or issuable upon conversion of the Notes or the Series A
Preferred or upon exercise of the Warrants and (ii) any Common
Stock issued or issuable with respect to the securities referred
to in clause (i) above by way of stock dividend or stock split or
in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. For purposes of
this Agreement, any Person who holds Notes, Series A Preferred or
Warrants shall be deemed to be the holder of the Underlying
Common Stock obtainable upon conversion of the Notes or Series A
Preferred or exercise of the Warrants in connection with the
transfer thereof or otherwise regardless of any restriction or
limitation on the conversion of the Notes or the Series A
Preferred or exercise of the Warrants, such Underlying Common
Stock shall be deemed to be in existence, and such Person shall
be entitled to exercise the rights of a holder of Underlying
Common Stock hereunder. As to any particular shares of
Underlying Common Stock, such shares shall cease to be Underlying
Common Stock when they have been (a) effectively registered under
the Securities Act and disposed of in accordance with the
registration statement covering them, (b) distributed to the
public through a broker, dealer or market maker pursuant to Rule
144 under the Securities Act (or any similar provision then in
force) or (c) repurchased by the Company or any Subsidiary.
Page 70 of 196 Pages
<PAGE>
Section 8. Miscellaneous.
8A. Expenses. The Company shall pay, and hold each
Purchaser and all holders of Notes, Warrants and Underlying
Common Stock harmless against liability for the payment of,
(i) all reasonable documented out-of-pocket expenses incurred by
the Purchasers in connection with the transactions contemplated
hereby (including the fees and expenses of their special counsel
arising in connection with the negotiation and execution of this
Agreement and the consummation of the transactions contemplated
by this Agreement and fees and expenses of their accountants and
consultants in connection therewith) which shall be payable at
the Closing or, if the Closing does not occur, payable upon
demand, it being understood that such reasonable documented out-
of-pocket expenses shall not exceed $400,000 in the aggregate,
(ii) the reasonable fees and expenses incurred with respect to
any amendments or waivers (whether or not the same become effec-
tive) under or in respect of this Agreement, the Notes, the
agreements and instruments contemplated hereby, the Certificate
of Incorporation (including in connection with any proposed
merger, sale or recapitalization of the Company), (iii) stamp and
other taxes which may be payable in respect of the execution and
delivery of this Agreement or the issuance, delivery or
acquisition of any Notes, any shares of Series A Preferred
issuance upon conversion of the Notes or any shares of Common
Stock issuable upon conversion of Notes or the Series A Preferred
or exercise of the Warrants and (iv) the reasonable fees and
expenses incurred with respect to the enforcement of the rights
granted under this Agreement, the Notes, the agreements or
instruments contemplated hereby, the Certificate of
Incorporation, or the Warrants.
8B. Remedies. Each holder of Notes, Series A
Preferred and Underlying Common Stock shall have all rights and
remedies set forth in this Agreement, the Notes and the Amendment
and all rights and remedies which such holders have been granted
at any time under any other agreement or contract and all of the
rights which such holders have under any law. Any Person having
any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a
bond or other security), to recover damages by reason of any
breach of any provision of this Agreement and to exercise all
other rights granted by law.
8C. Purchaser's Investment Representations. Each
Purchaser hereby represents that it is acquiring the Restricted
Page 71 of 196 Pages
<PAGE>
Securities purchased hereunder or acquired pursuant hereto for
its own account with the present intention of holding such
securities for purposes of investment, and that it has no
intention of selling such securities in a public distribution in
violation of the federal securities laws or any applicable state
securities laws; provided that nothing contained herein shall
prevent any Purchaser and subsequent holders of Restricted
Securities from transferring such securities in compliance with
the provisions of Section 4 hereof. Each certificate or
instrument representing Restricted Securities shall be imprinted
with a legend in substantially the following form:
"The securities represented by this certificate were
originally issued on May 22, 1995, and have not been
registered under the Securities Act of 1933, as
amended. The transfer of the securities represented by
this certificate is subject to the conditions specified
in the Note and Warrant Purchase Agreement, dated as of
May 22, 1995 and as amended and modified from time to
time, between the issuer (the "Company") and certain
investors, and the Company reserves the right to refuse
the transfer of such securities until such conditions
have been fulfilled with respect to such transfer. A
copy of such conditions shall be furnished by the
Company to the holder hereof upon written request and
without charge."
8D. Consent to Amendments. Except as otherwise
expressly provided herein, the provisions of this Agreement may
be amended and the Company may take any action herein prohibited,
or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the
holders of a majority of the outstanding principal amount of the
Notes and a majority of the outstanding shares of Series A
Preferred; provided that if there are no Notes or shares of
Series A Preferred outstanding, the provisions of this Agreement
may be amended and the Company may take any action herein
prohibited, only if the Company has obtained the written consent
of the holders of a majority of the Underlying Common Stock. No
other course of dealing between the Company and the holder of any
Notes, Series A Preferred, Warrants or Underlying Common Stock or
any delay in exercising any rights hereunder or under the Notes,
the Warrants or the Certificate of Incorporation shall operate
as a waiver of any rights of any such holders. For purposes of
this Agreement, Notes, Series A Preferred or Underlying Common
Stock held by the
Page 72 of 196 Pages
<PAGE>
Company or any Subsidiaries shall not be deemed to be
outstanding. If the Company pays any consideration to any holder
of Notes, Series A Preferred or Underlying Common Stock for such
holder's consent to any amendment, modification or waiver
hereunder, the Company shall also pay each other holder granting
its consent hereunder equivalent consideration computed on a pro
rata basis.
8E. Survival of Representations and Warranties. All
representations and warranties contained herein or made in
writing by any party in connection herewith shall survive the
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, regardless of the knowledge
of any Purchaser or any investigation made by any Purchaser or on
its behalf, and neither the knowledge of, nor any investigation
by, any Purchaser shall affect the occurrence or existence of a
breach of any representation or warranty contained herein as of
the Closing.
8F. Successors and Assigns. Except as otherwise
expressly provided herein, all covenants and agreements contained
in this Agreement by or on behalf of any of the parties hereto
shall bind and inure to the benefit of the respective successors
and assigns of the parties hereto whether so expressed or not.
In addition, and whether or not any express assignment has been
made, the provisions of this Agreement which are for any
Purchaser's benefit as a purchaser or holder of Notes, Series A
Preferred, Warrants or Underlying Common Stock are also for the
benefit of, and enforceable by, any subsequent holder of such
Notes, such Series A Preferred, such Warrants or such Underlying
Common Stock.
8G. Capital and Surplus; Special Reserves. The
Company agrees that the capital of the Company (as such term is
used in Section 154 of the General Corporation Law of Delaware)
in respect of the Series A Preferred issued upon conversion of
the Notes shall be equal to the aggregate par value of such
shares and that it shall not increase the capital of the Company
with respect to any shares of the Company's capital stock at any
time on or after the date of this Agreement. The Company also
agrees that it shall not create any special reserves under
Section 171 of the General Corporation Law of Delaware without
the prior written consent of the holders of a majority of the
outstanding Series A Preferred.
8H. Severability. Whenever possible, each provision
of this Agreement shall be interpreted in such manner as to be
effec-
Page 73 of 196 Pages
<PAGE>
tive and valid under applicable law, but if any provision of this
Agreement is held to be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the
remainder of this Agreement.
8I. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need
not contain the signatures of more than one party, but all such
counterparts taken together shall constitute one and the same
Agreement.
8J. Descriptive Headings; Interpretation. The
descriptive headings of this Agreement are inserted for
convenience only and do not constitute a substantive part of this
Agreement. The use of the word "including" in this Agreement
shall be by way of example rather than by limitation.
8K. Governing Law. The corporate law of the State of
Delaware shall govern all issues and questions concerning the
relative rights and obligations of the Company and its stock-
holders. All other issues and questions concerning the construc-
tion, validity, enforcement and interpretation of this Agreement
and the exhibits and schedules hereto shall be governed by, and
construed in accordance with, the laws of the State of New York,
without giving effect to any choice of law or conflict of law
rules or provisions (whether of the State of New York or any
other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of New York.
8L. Notices. All notices, demands or other communica-
tions to be given or delivered under or by reason of the
provisions of this Agreement shall be in writing and shall be
deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable overnight courier
service (charges prepaid) or five days after being mailed to the
recipient by certified or registered mail, return receipt
requested and postage prepaid. Such notices, demands and other
communications shall be sent to each Purchaser at the address
indicated on the Schedule of Purchasers and to the Company at the
address indicated below:
Page 74 of 196 Pages
<PAGE>
ACC Corp.
400 West Avenue
Rochester, NY 14611
Attention: Chief Executive Officer
or to such other address or to the attention of such other person
as the recipient party has specified by prior written notice to
the sending party.
8M. Consideration for Warrants. The Purchasers and
the Company acknowledge and agree that the fair market value of
the Notes issued hereunder is $9,790,000 and the fair market
value of the Closing Warrants issued hereunder is $200,000 and
that, for all purposes (including tax and accounting), the
consideration for the issuance of the Springing Warrants shall be
allocated as set forth in paragraph 1B hereof. Each Purchaser
and the Company shall file their respective federal, state and
local tax returns in a manner which is consistent with such
valuation and allocation and shall not take any contrary position
with any taxing authority.
8N. Understanding Among the Purchasers. The determi-
nation of each Purchaser to purchase the Notes and the Warrants
pursuant to this Agreement has been made by such Purchaser
independent of any other Purchaser and independent of any state-
ments or opinions as to the advisability of such purchase or as
to the properties, business, prospects or condition (financial or
otherwise) of the Company and its Subsidiaries which may have
been made or given by any other Purchaser or by any agent or
employee of any other Purchaser. In addition, it is acknowledged
by each of the other Purchasers that Fleet Equity Partners has
not acted as an agent of such Purchaser in connection with making
its investment hereunder and that Fleet Equity Partners shall not
be acting as an agent of such Purchaser in connection with
monitoring its investment hereunder.
8O. No Strict Construction. The parties hereto have
participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this
Agreement.
Page 75 of 196 Pages
<PAGE>
8P. Indemnification. In consideration of the
Purchaser's execution and delivery of this Agreement and
acquiring the Notes and Warrants hereunder and in addition to all
of the Company's other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless each
Purchaser and each other holder of Notes or Warrants and all of
their officers, directors, employees and agents (including,
without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of
action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the
action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by the Indemnitees or any of
them as a result of, or arising out of, or relating to (a) any
transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the
Notes and Warrants or (b) the execution, delivery, performance or
enforcement of this Agreement and any other instrument, document
or agreement executed pursuant hereto by any of the Indemnitees,
except for any such Indemnified Liabilities arising on account of
the particular Indemnitee's gross negligence or willful
misconduct. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall
make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under
applicable law.
8Q. Payment Set Aside. To the extent that the Company
makes a payment or payments to the Purchasers hereunder or under
the Notes or the Purchasers enforce or exercise their rights
hereunder or thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to
the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not
been made or such enforcement or setoff had not occurred.
Page 76 of 196 Pages
<PAGE>
8R. Subordination. The Purchasers and all other
holders of the Notes agree to enter into any new subordination
agreement in replacement of or substitution for the Subordination
Agreement in connection with the refunding or refinancing of the
Indebtedness owing the Senior Creditors (as defined in the
Subordination Agreement) so long as such new subordination
agreement is substantially similar to the Subordination
Agreement.
* * * * *
Page 77 of 196 Pages
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the date first written above.
ACC CORP.
By ___________________________
Its __________________________
FLEET VENTURE RESOURCES, INC.
By
Its President
FLEET EQUITY PARTNERS VI, L.P.
By Silverado IV Corp.
Its General Partner
By ___________________________
Its President
CHISHOLM PARTNERS II, L.P.
By Silverado II, L.P.
Its General Partner
By Silverado II, Corp.
Its General Partner
By ___________________________
Its President
Page 78 of 196 Pages
<PAGE>
<TABLE> SCHEDULE OF PURCHASERS
<CAPTION>
Number
Purchaseof SharesPurchasePurchase
Principal Price Under Price forPrice for Total
Names and Amount of for ClosingClosingSpringingPurchase
Address Notes Notes WarrantsWarrantsWarrants Price
<S> <C> <C> <C> <C> <C> <C>
Fleet Venture Resources, Inc.$ 7,200,000$7,048,800 72,000$144,000$ 7,200$7,200,000
c/o Fleet Equity Partners
Mail Stop: RI MO 227
111 Westminster Street
Providence, RI 02903
Attn: Robert Van Degna
Fleet Equity Partners VI, L.P.$ 1,800,000$1,762,200 18,000 36,000$ 1,800 1,800,000
c/o Fleet Equity Partners
Mail Stop: RI MO 227
111 Westminster Street
Providence, RI 02903
Attn: Robert Van Degna
Chisholm Partners, II, L.P.$ 1,000,000$ 979,000 10,000 20,000$ 1,000 1,000,000
c/o Fleet Equity Partners
Mail Stop: RI MO 227
111 Westminster Street
Providence, RI 02903
Attn: Robert Van Degna
TOTAL $10,000,000$9,790,000100,000$200,000$10,000$10,000,000
</TABLE> Page 79 of 196 Pages
<PAGE>
LIST OF EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Closing Warrant
Exhibit C - Form of Amendment to Certificate of Incorporation
Exhibit D - Form of Certificate of Designation
Exhibit E - Form of Registration Agreement
Exhibit F - Form of Participation Agreement
Exhibit G - Form of Opinion of Company's Counsel
Exhibit H - Form of Springing Warrant
Page 80 of 196 Pages
<PAGE>
LIST OF DISCLOSURE SCHEDULES
Capitalization Schedule
Material Subsidiary Schedule
Restrictions Schedule
Liabilities Schedule
Developments Schedule
Assets Schedule
Taxes Schedule
Tax Audit Schedule
Contracts Schedule
Intellectual Property Schedule
Litigation Schedule
Brokerage Schedule
Consents Schedule
Insurance Schedule
Employees Schedule
Employee Benefits Schedule
Compliance Schedule
Affiliated Transactions Schedule
Page 81 of 196 Pages
<PAGE>
EXHIBIT A
The security represented by this instrument was originally
issued on May 22, 1995, and has not been registered under
the Securities Act of 1933, as amended. The transfer of
such security is subject to the conditions specified in the
Note and Warrant Purchase Agreement, dated as of May 22,
1995, as amended and modified from time to time, between
the issuer (the "Company") and certain investors, and the
Company reserves the right to refuse the transfer of such
security until such conditions have been fulfilled with
respect to such transfer. Upon written request, a copy of
such conditions shall be furnished by the Company to the
holder hereof without charge.
Payment of this Note is subject to the terms and conditions
of a Subordination Agreement, dated May 22, 1995, by and
among the original Holder of this Note, Manufacturers and
Traders Trust Company, Marine Midland Bank and certain other
Investors, and any other subordination agreement referred to
in paragraph 4 hereof.
ACC CORP.
CONVERTIBLE SUBORDINATED
PROMISSORY NOTE
May 22, 1995 $____________
ACC Corp., a Delaware corporation (the "Company"),
hereby promises to pay to the order of ___________ the principal
amount of $_________ together with interest thereon calculated
from the date hereof in accordance with the provisions of this
Note.
This Note was issued pursuant to a Note and Warrant
Purchase Agreement, dated as of May 22, 1995 (as amended and
modified from time to time, the "Purchase Agreement"), between
the Company and certain investors, and this Note is one of the
"Notes"
Page 82 of 196 Pages
<PAGE>
referred to in the Purchase Agreement. The Purchase Agreement
contains terms governing the rights of the holder of this Note,
and all provisions of the Purchase Agreement are hereby
incorporated herein in full by reference. Except as defined in
paragraph 10 hereof or unless otherwise indicated herein,
capitalized terms used in this Note have the same meanings set
forth in the Purchase Agreement.
1. Payment of Interest. Except as otherwise
expressly provided in paragraph 5(b) hereof, interest shall
accrue at the rate of twelve percent (12%) per annum on the
unpaid principal amount of this Note outstanding from time to
time, or (if less) at the highest rate then permitted under
applicable law. The Company shall pay to the holder of this Note
all accrued interest on the last day of each March, June,
September and December, beginning June 30, 1995. Unless
prohibited under applicable law, any accrued interest which is
not paid on the date on which it is due and payable shall bear
interest at the same rate at which interest is then accruing on
the principal amount of this Note until such interest is paid.
Any accrued interest which for any reason has not theretofore
been paid shall be paid in full on the date on which the final
principal payment on this Note is made. Interest shall accrue on
any principal payment due under this Note and, to the extent
permitted by applicable law, on any interest which has not been
paid on the date on which it is due and payable until such time
as payment therefor is actually delivered to the holder of this
Note.
2. Payment of Principal on Note.
(a) Prepayments. The Company may, at any time and
from time to time without premium or penalty, prepay all or any
portion of the outstanding principal amount of the Notes, pro
rata among the holders of the Notes on the basis of the
outstanding principal amount of the Note held by each holder;
provided that (i) such prepayment is not prohibited by the
provisions of paragraph 4 hereof, (ii) the Company has paid all
interest on the Notes accrued through the immediately preceding
scheduled interest payment date and (iii) the minimum principal
amount so prepaid shall be the lesser of $100,000 or the amount
of principal outstanding on the Notes. In connection with each
prepayment of principal hereunder, the Company shall also pay all
accrued and unpaid interest on the principal amount of the Notes
being repaid.
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(b) Principal Repayment. On May 22, 2002 (the
"Scheduled Repayment Date"), the Company shall repay all
outstanding principal and interest on the Notes, or if such
amount is greater, the Market Price (on the date which is five
trading days prior to the Scheduled Repayment Date) of the Common
Stock into which such Notes are convertible on the Scheduled
Repayment Date (the "Alternative Amount"); provided that to the
extent that the Alternative Amount exceeds the amount of
principal and interest outstanding on the Notes on the Scheduled
Repayment Date, all or a portion of such excess may, at the
Company's option, be paid in the form of Common Stock (valued at
the Market Price of the Common Stock on the date which is five
trading days prior to the Scheduled Repayment Date) up to and not
exceeding a number of shares of Common Stock equal to 20
multiplied by the average daily trading volume of the Common
Stock in the public markets for a period of 45 consecutive
trading days ending five days prior to the Scheduled Repayment
Date and the remainder shall be paid in cash. Such shares of
Common Stock shall be applied first to the repayment of
principal, then to interest. Upon issuance, such shares of
Common Stock shall be validly issued, fully paid and
nonassessable.
(c) Special Principal Repayments.
(i) If a Change in Control has occurred or the
Company obtains knowledge that a Change in Control is proposed to
occur, the Company shall give prompt written notice of such
Change in Control describing in reasonable detail the material
terms and date of consummation thereof to the holder of this
Note, but in any event such notice shall not be given later than
five days after the occurrence of such Change in Control, and the
Company shall give the holder of this Note prompt written notice
of any material change in the terms or timing of such
transaction. The holder of this Note may require the Company to
repay all or any portion of the principal amount remaining on
this Note at an amount equal to the greater of (1) the principal
amount requested to be repaid plus all unpaid accrued interest
with respect to such principal amount, (2) the Market Price (as
of the date which is five trading days prior to the occurrence of
such Change in Control) of the Common Stock into which such
principal amount is convertible on such date or (3) the value of
the Common Stock into which such principal amount is convertible
as of the consummation of the Change in Control reflected by the
Change in Control transaction, by giving written notice to the
Company of such election prior to the later of (a) 21 days after
receipt of the Company's notice and (b) five
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days prior to the consummation of the Change in Control (the
"Expiration Date"). The Company shall give prompt written notice
of any such election to all other holders of Notes within five
days after the receipt thereof, and each such holder shall have
until the later of (a) the Expiration Date or (b) ten days after
receipt of such second notice to request repayment hereunder (by
giving written notice to the Company) of all or any portion of
the Notes owned by such holder.
(ii) Upon receipt of such election(s), the Company
shall be obligated to pay the amount set forth in subparagraph
(i) above with respect to the Change in Control. If any proposed
Change in Control does not occur, all requests for repayment in
connection therewith shall be automatically rescinded, or if
there has been a material change in the terms or the timing of
the transaction, any holder of Notes may rescind such holder's
request for repayment by giving written notice of such rescission
to the Company.
(iii) A "Change in Control" shall be deemed to have
occurred at such time as any of the following events shall occur:
(a) any sale, transfer or issuance or series of sales, transfers
and/or issuances of Common Stock by the Compnay or any holders
thereof which results in any Person or group of Persons (as the
term "group" is used under the Securities Exchange Act of 1934)
owning more than 40% of the Common Stock outstanding immediately
after such sale, transfer or issuance or series of sales,
transfers and/or issuances or (b) during any 12-month period,
individuals who at the beginning of such period constituted the
Company's Board of Directors (together with any new directors
whose election by such Board of Directors or whose nomination for
election by the stockholders of the Company was approved by a
majority vote of the directors who were either directors at the
beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to
constitute a majority of the Company's Board of Directors then in
office.
(iv) If a Fundamental Change is proposed to occur,
the Company shall give written notice of such Fundamental Change
describing in reasonable detail the material terms and date of
consummation thereof to the holder of this Note not more than 45
days nor less than 20 days prior to the consummation of such
Fundamental Change, and the Company shall give the holder of this
Note prompt written notice of any material change in the terms or
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timing of such transaction. The holder of this Note may require
the Company to repay all or any portion of this Note at an amount
equal to the greater of (1) the principal amount requested to be
prepaid plus all unpaid accrued interest with respect to such
principal amount, (2) the Market Price (as of the date which is
five trading days prior to the occurrence of such Fundamental
Change) of the Common Stock into which such principal amount is
convertible on such date or (3) the value of the Common Stock
into which such principal amount is convertible as of the
consummation of the Fundamental Change reflected by the
Fundamental Change transaction, by giving written notice to the
Company of such election prior to the later of (a) ten days prior
to the consummation of the Fundamental Change or (b) ten days
after receipt of notice from the Company. The Company shall give
prompt written notice of such election to all other holders of
Notes (but in any event within five days prior to the consumma-
tion of the Fundamental Change), and each such holder shall have
until two days after the receipt of such notice to request
redemption (by written notice given to the Company) of all or any
portion of the Notes owned by such holder.
(v) Upon receipt of such election(s), the Company
shall be obligated to repay the amount set forth in subparagraph
(iv) above upon the consummation of such Fundamental Change. If
any proposed Fundamental Change does not occur, all requests for
repayment in connection therewith shall be automatically re-
scinded, or if there has been a material change in the terms or
the timing of the transaction, any holder of Notes may rescind
such holder's request for redemption by delivering written notice
thereof to the Company prior to the consummation of the
transaction.
(vi) The term "Fundamental Change" means (a) any
sale or transfer of more than 50% of the assets of the Company
and its Subsidiaries on a consolidated basis (measured either by
book value in accordance with generally accepted accounting
principles consistently applied or by fair market value
determined in the reasonable good faith judgment of the Company's
board of directors) in any transaction or series of transactions
(other than sales in the ordinary course of business) and (b) any
merger or consolidation to which the Company is a party, except
for a merger in which the Company is the surviving corporation,
and after giving effect to such merger, no Person or group of
Persons (as the term "group" is used under the Securities Act of
1934) owns more than 40% of the Common Stock outstanding
immediately after such merger.
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(d) Conversion. Notwithstanding any provision
contained in this paragraph 2, the holder of this Note may
convert all or any portion of the outstanding principal amount of
this Note until such time as such amount has been deemed to have
been paid.
3. Pro Rata Payment. Except as otherwise expressly
provided in this Note, all payments to the holders of the Notes
(whether for principal, interest or otherwise) shall be made pro
rata among such holders based upon the aggregate unpaid principal
amount of the Notes held by each such holder. If any holder of a
Note obtains any payment (whether voluntary, involuntary or
otherwise) of principal, interest or other amount with respect to
any Note in excess of such holder's pro rata share of such
payments obtained by all holders of the Notes (other than as
expressly provided herein), by acceptance of a Note each such
holder agrees to purchase from the other holders of the Notes a
participation in the Notes held by them as is necessary to cause
such holders to share the excess payment ratably among each of
them as provided in this paragraph.
4. Subordination. This Note is subordinated to the
extent set forth in the Subordination Agreement, dated May 22,
1995, by and among the original Holder of this Note,
Manufacturers and Traders Trust Company, Marine Midland Bank and
the holders of the other Notes. This Note shall also be
subordinated to the extent set forth in any other subordination
agreement entered into by the holders of the Notes.
5. Events of Default.
(a) Definition. For purposes of this Note, an Event
of Default shall be deemed to have occurred if
(i) the Company fails to pay when due and payable
(whether at maturity or otherwise) the full amount of interest
then accrued on any Note or the full amount of any principal due
on any Note, and such failure to pay is not cured within five
days after the occurrence thereof;
(ii) the Company fails to perform or observe any
other material covenant or agreement in the Notes or in the
Purchase Agreement, and such failure is not cured within 30 days
Page 87 of 196 Pages
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after the earlier of (A) the receipt of notice thereof by the
holder of this Note or (B) the discovery thereof by the Company;
(iii) any representation, warranty or information
contained in the Purchase Agreement or required to be furnished
to any holder of the Notes pursuant to the Purchase Agreement, is
false or misleading in any material respect on the date made or
furnished and such false or misleading representation, warranty
or information relates to a material adverse effect on the
Company and its Subsidiaries, taken as a whole, or fails to
disclose a material adverse change on the Company and its
Subsidiaries, taken as a whole; provided that, notwithstanding
the foregoing, in the case of paragraph 5J of the Purchase
Agreement, any occurrence, event, transaction or claim which
results in any loss, damage or injury to the Company and its
Subsidiaries in excess of $4,000,000 shall conclusively be deemed
to have material adverse effect and be a material adverse change
hereunder;
(iv) the Company or any Material Subsidiary makes
an assignment for the benefit of creditors or admits in writing
its inability to pay its debts generally as they become due; or
an order, judgment or decree is entered adjudicating the Company
or any Material Subsidiary bankrupt or insolvent; or any order
for relief with respect to the Company or any Material Subsidiary
is entered under the Federal Bankruptcy Code; or the Company or
any Material Subsidiary petitions or applies to any tribunal for
the appointment of a custodian, trustee, receiver or liquidator
of the Company or any Material Subsidiary, or of any substantial
part of the assets of the Company or any Material Subsidiary, or
commences any proceeding (other than a proceeding for the
voluntary liquidation and dissolution of any Material Subsidiary)
relating to the Company or any Material Subsidiary under any
bankruptcy reorganization, arrangement, insolvency, readjustment
of debt, dissolution or liquidation law of any jurisdiction; or
any such petition or application is filed, or any such proceeding
is commenced, against the Company or any Material Subsidiary and
either (A) the Company or any such Material Subsidiary by any act
indicates its approval thereof, consent thereto or acquiescence
therein or (B) such petition, application or proceeding is not
dismissed within 60 days;
(v) a judgment in excess of $500,000 is rendered
against the Company or any Material Subsidiary and, within 60
days after entry thereof, such judgment is not discharged in full
or
Page 88 of 196 Pages
<PAGE>
execution thereof stayed pending appeal, or within 60 days after
the expiration of any such stay, such judgment is not discharged
in full; or
(vi) the Company or any Material Subsidiary
defaults in the performance of any obligation if the effect of
such default is to cause an amount exceeding $500,000 to become
due prior to its stated maturity or to permit the holder or
holders of such obligation to cause an amount exceeding $500,000
to become due prior to its stated maturity.
The foregoing shall constitute Events of Default
whatever the reason or cause for any such Event of Default and
whether it is voluntary or involuntary or is effected by
operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative
or governmental body.
(b) Consequences of Events of Default.
(i) If any Event of Default of the type described
in subparagraph 5(a)(i), 5(a)(ii) or 5(a)(iii) (with respect to
paragraphs 5J and 5X of the Purchase Agreement only) has occurred
and is continuing, the interest rate on the Notes shall increase
immediately to 15% or (if less) to the highest rate permitted by
law and any increase of the interest rate resulting from the
operation of this subparagraph shall terminate as of the close of
business on the date on which no Event of Default of the type
described in subparagraph 5(a)(i) or 5(a)(ii) exists (subject to
subsequent increases pursuant to this subparagraph).
(ii) If any Event of Default of the type described
in subparagraph 5(a)(i), 5(a)(ii) or 5(a)(iii) (with respect to
5J and 5X of the Purchase Agreement only) has occurred, the
Conversion Price on the Notes shall be reduced immediately by 1/3
of the Conversion Price in effect immediately prior to such
adjustment. In no event shall such Conversion Price adjustment
be rescinded, and in no event shall there be more than one
adjustment pursuant to this subparagraph.
(iii) If an Event of Default of the type described
in subparagraph 5(a)(iv) has occurred, the aggregate principal
amount of the Notes (together with all accrued interest thereon
and all other amounts due and payable with respect thereto) shall
become
Page 89 of 196 Pages
<PAGE>
immediately due and payable without any action on the part of the
holders of the Notes, and the Company shall immediately pay to
the holders of the Notes all amounts due and payable with respect
to the Notes.
(iv) If any Event of Default (other than an Event
of Default of the type described in subparagraph 5(a)(iv)) has
occurred and is continuing, the holder or holders of Notes
representing a majority of the aggregate principal amount of
Notes then outstanding may declare all or any portion of the
outstanding principal amount of the Notes (together with all
accrued interest thereon and all other amounts due and payable
with respect thereto) to be immediately due and payable and may
demand immediate payment of all or any portion of the outstanding
principal amount of the Notes (together with all such other
amounts then due and payable) owned by such holder or holders.
The Company shall give prompt written notice of any such demand
to the other holders of Notes, each of which may demand immediate
payment of all or any portion of such holder's Note. If any
holder or holders of the Notes demand immediate payment in
accordance with the terms hereof of all or any portion of the
Notes, the Company shall immediately pay to such holder or
holders all amounts due and payable with respect to such Notes.
The amount payable hereunder with respect to the Notes shall be
the greater of (1) all of the outstanding principal and accrued
interest on such Notes and (2) the Market Price (as of the date
which is five trading days prior to the date of payment);
provided that to the extent that the amount in clause (2) above
exceeds the amount in clause (1) above, all or a portion of such
excess may, at the Company's option, be paid in the form of
Common Stock (valued at the Market Price of the Common Stock on
such date) up to and not exceeding a number of shares of Common
Stock equal to 20 multiplied by the average daily trading volume
of the Common Stock in the public markets for a period of 45
consecutive trading days ending on such date and the remainder
shall be paid in cash. Such shares of Common Stock shall be
applied first to the repayment of principal, then to interest.
Upon issuance, such shares of Common Stock shall be validly
issued, fully paid and nonassessable.
(v) Each holder of the Notes shall also have any
other rights which such holder may have been afforded under any
contract or agreement at any time and any other rights which such
holder may have pursuant to applicable law.
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<PAGE>
(vi) The Company hereby waives diligence,
presentment, protest and demand and notice of protest and demand,
dishonor and nonpayment of this Note and expressly agrees that
this Note, or any payment hereunder, may be extended from time to
time and that the holder hereof may accept security for this Note
or release security for this Note, all without in any way
affecting the liability of the Company hereunder.
6. Conversion.
(a) Conversion Procedure.
(i) At any time and from time to time prior to the
payment in full of this Note the holder of this Note may convert
all or any portion of the outstanding principal amount of this
Note into a number of shares of Conversion Stock (excluding any
fractional share) determined by dividing the principal amount
designated by such holder to be converted by the Conversion Price
then in effect.
(ii) Except as otherwise provided herein, each
conversion of this Note shall be deemed to have been effected as
of the close of business on the date on which this Note has been
surrendered for conversion at the principal office of the
Company. At the time any such conversion has been effected, the
rights of the holder of this Note as such holder to the extent of
the conversion shall cease and the Person or Persons in whose
name or names any certificate or certificates for shares of
Conversion Stock are to be issued upon such conversion shall be
deemed to have become the holder or holders of record of the
shares of Conversion Stock represented thereby.
(iii) Notwithstanding any other provision hereof, if a
conversion of any portion of this Note is to be made in
connection with a Public Offering, a Change in Control, a
Fundamental Change or other transaction affecting the Company,
the conversion of any portion of this Note may, at the election
of the holder hereof, be conditioned upon the consummation of
such transaction, in which case such conversion shall not be
deemed to be effective until such transaction has been
consummated.
(iv) As soon as possible after a conversion has been
effected, the Company shall deliver to the converting holder:
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(1) a certificate or certificates representing
the number of shares of Conversion Stock issuable by reason
of such conversion in such name or names and such denomina-
tion or denominations as the converting holder has
specified;
(2) payment in an amount equal to the sum of all
accrued interest with respect to the principal amount
converted, which has not been paid prior thereto; and
(3) a new Note representing any portion of the
principal amount which was represented by the Note
surrendered to the Company in connection with such
conversion but which was not converted.
(v) The issuance of certificates for shares of Conver-
sion Stock upon conversion of this Note shall be made without
charge to the holder hereof for any issuance tax in respect
thereof or other cost incurred by the Company in connection with
such conversion and the related issuance of shares of Conversion
Stock. Upon conversion of this Note, the Company shall take all
such actions as are necessary in order to insure that the
Conversion Stock issuable with respect to such conversion shall
be validly issued, fully paid and nonassessable, free and clear
of all taxes, liens, charges and encumbrances with respect to the
issuance thereof.
(vi) The Company shall not close its books against the
transfer of Conversion Stock issued or issuable upon conversion
of this Note. The Company shall assist and cooperate with any
holder of this Note required to make any governmental filings or
obtain any governmental approval prior to or in connection with
the conversion of this Note (including making any filings
required to be made by the Company).
(vii) The Company shall at all times reserve and keep
available out of its authorized but unissued shares of
Conversion Stock, solely for the purpose of issuance upon the
conversion of the Notes, such number of shares of Conversion
Stock issuable upon the conversion of all outstanding Notes. All
shares of Conversion Stock which are so issuable shall, when
issued, be duly and validly issued, fully paid and nonassessable
and free from all taxes, liens and charges. The Company shall
take all such actions as may be necessary to assure that all such
shares of Conversion Stock may be so issued without violation of
any applicable law or governmental
Page 92 of 196 Pages
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regulation or any requirements of any domestic securities
exchange upon which shares of Conversion Stock may be listed
(except for official notice of issuance which shall be
immediately delivered by the Company upon each such issuance).
(viii) If any fractional interest in a share of
Conversion Stock would, except for the provisions of this
subparagraph, be delivered upon any conversion of this Note, the
Company, in lieu of delivering the fractional share therefor,
shall pay an amount to the holder thereof equal to the Market
Price of such fractional interest as of the date of conversion.
(b) Conversion Price.
(i) The initial Conversion Price shall be $16.00. In
order to prevent dilution of the conversion rights granted under
the Notes, the Conversion Price shall be subject to adjustment
from time to time pursuant to this paragraph (b).
(ii) If and whenever the Company issues or sells, or in
accordance with paragraph 6(c) is deemed to have issued or sold,
any share of Common Stock for a consideration per share less than
the Conversion Price in effect immediately prior to such time,
then immediately upon such issue or sale or deemed issue or sale
the Conversion Price shall be reduced to the lowest net price per
share (as determined pursuant to paragraph 6(c)(v) below) at
which any such share of Common Stock has been issued or sold or
is deemed to have been issued or sold.
(iii) Notwithstanding the foregoing, there shall be no
adjustment to the Conversion Price hereunder with respect to the
granting of stock options to employees or directors of the
Company and its Subsidiaries or the exercise thereof or the
granting of stock appreciation rights, phantom stock rights or
other similar rights to employees or directors of the Company for
(or rights relating to) an aggregate of 1,586,702 shares of
Common Stock (976,594 options being currently outstanding) (as
such number of shares is equitably adjusted for subsequent stock
splits, stock combinations, stock dividends and recapitalizations
and such number shall include all stock options outstanding as of
the date of the Purchase Agreement).
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(c) Effect on Conversion Price of Certain Events. For
purposes of determining the adjusted Conversion Price under
paragraph 6(b), the following shall be applicable:
(i) Issuance of Rights or Options. If the Company in
any manner grants or sells any Option and the lowest price per
share for which any one share of Common Stock is issuable upon
the exercise of any such Option, or upon conversion or exchange
of any Convertible Security issuable upon exercise of any such
Option, is less than the Conversion Price in effect immediately
prior to the time of the granting or sale of such Option, then
such share of Common Stock shall be deemed to be outstanding and
to have been issued and sold by the Company at the time of the
granting or sale of such Option for such price per share. For
purposes of this paragraph, the "lowest price per share for which
any one share of Common Stock is issuable" shall be equal to the
sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one share of Common
Stock upon the granting or sale of the Option, upon exercise of
the Option and upon conversion or exchange of any Convertible
Security issuable upon exercise of such Option. No further
adjustment of the Conversion Price shall be made upon the actual
issue of such Common Stock or such Convertible Security upon the
exercise of such Options or upon the actual issue of such Common
Stock upon conversion or exchange of such Convertible Security.
(ii) Issuance of Convertible Securities. If the
Company in any manner issues or sells any Convertible Security
and the lowest price per share for which any one share of Common
Stock is issuable upon conversion or exchange thereof is less
than the Conversion Price in effect immediately prior to the time
of such issue or sale, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the
Company at the time of the issuance or sale of such Convertible
Securities for such price per share. For the purposes of this
paragraph, the "lowest price per share for which any one share of
Common Stock is issuable" shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the
Company with respect to any one share of Common Stock upon the
issuance or sale of the Convertible Security and upon the
conversion or exchange of such Convertible Security. No further
adjustment of the Conversion Price shall be made upon the actual
issue of such Common Stock upon conversion or exchange of any
Convertible Security, and if any such issue or sale of such
Convertible Security is made upon exercise of
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any Options for which adjustments of the Conversion Price had
been or are to be made pursuant to other provisions of this
Section 6, no further adjustment of the Conversion Price shall be
made by reason of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Option, the additional
consideration (if any) payable upon the issue, conversion or
exchange of any Convertible Security or the rate at which any
Convertible Security is convertible into or exchangeable for
Common Stock changes at any time, the Conversion Price in effect
at the time of such change shall be adjusted immediately to the
Conversion Price which would have been in effect at such time had
such Option or Convertible Security originally provided for such
changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted, issued
or sold. For purposes of paragraph 6(c), if the terms of any
Option or Convertible Security which was outstanding as of the
date of issuance of this Note are changed in the manner described
in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such change; provided that no such
change shall at any time cause the Conversion Price hereunder to
be increased.
(iv) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the
termination of any right to convert or exchange any Convertible
Security without the exercise of any such Option or right, the
Conversion Price then in effect hereunder shall be adjusted
immediately to the Conversion Price which would have been in
effect at the time of such expiration or termination had such
Option or Convertible Security, to the extent outstanding
immediately prior to such expiration or termination, never been
issued; provided that if such expiration or termination would
result in an increase in the Conversion Price then in effect,
such increase shall not be effective until 30 days after written
notice thereof has been given to all holders of the Notes. For
purposes of paragraph 6(c), the expiration or termination of any
Option or Convertible Security which was outstanding as of the
date of issuance of the Notes shall not cause the Conversion
Price hereunder to be adjusted unless, and only to the extent
that, a change in the terms of such Option or Convertible
Security caused it to be deemed to have been issued after the
date of issuance of the Notes.
Page 95 of 196 Pages
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(v) Calculation of Consideration Received. If any
Common Stock, Option or Convertible Security is issued or sold or
deemed to have been issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by
the Company therefor (net of discounts, commissions and related
expenses). If any Common Stock, Option or Convertible Security
is issued or sold for a consideration other than cash, the amount
of the consideration other than cash received by the Company
shall be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of
consideration received by the Company shall be the Market Price
thereof as of the date of receipt. If any Common Stock, Option
or Convertible Security is issued to the owners of the
non-surviving entity in connection with any merger in which the
Company is the surviving corporation, the amount of consideration
therefor shall be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is
attributable to such Common Stock, Option or Convertible
Security, as the case may be. The fair value of any consider-
ation other than cash and securities shall be determined jointly
by the Company and the holders of a majority of the principal
amount of the Notes then outstanding. If such parties are unable
to reach agreement within a reasonable period of time, the fair
value of such consideration shall be determined by an independent
appraiser experienced in valuing such type of consideration
jointly selected by the Company and the holders of a majority of
the principal amount of the Notes then outstanding. The
determination of such appraiser shall be final and binding upon
the parties, and the fees and expenses of such appraiser shall be
borne by the Company.
(vi) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities
of the Company, together comprising one integrated transaction in
which no specific consideration is allocated to such Option by
the parties thereto, the Option shall be deemed to have been
issued for a consideration of $.01.
(vii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company or any
Subsidiary, and the disposition of any shares so owned or held
shall be considered an issue or sale of Common Stock.
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(viii) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (a) to
receive a dividend or other distribution payable in Common Stock,
Options or in Convertible Securities or (b) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then
such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or upon the making of
such other distribution or the date of the granting of such right
of subscription or purchase, as the case may be.
(d) Subdivision or Combination of Common Stock. If
the Company at any time subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more classes of
its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced, and if the Company
at any time combines (by reverse stock split or otherwise) one or
more classes of its outstanding shares of Common Stock into a
smaller number of shares, the Conversion Price in effect
immediately prior to such combination shall be proportionately
increased.
(e) Reorganization, Reclassification, Consolidation,
Merger or Sale. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or
substantially all of the Company's assets or other transaction,
in each case which is effected in such a manner that the holders
of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect
to or in exchange for Common Stock, is referred to herein as an
"Organic Change". Prior to the consummation of any Organic
Change, the Company shall make lawful and adequate provision (in
form and substance satisfactory to the holders of a majority of
the principal amount of the Notes then outstanding) to insure
that each of the holders of the Notes shall thereafter have the
right to acquire and receive, in lieu of or in addition to (as
the case may be) the shares of Conversion Stock immediately
theretofore acquirable and receivable upon the conversion of such
holder's Note, such shares of stock, securities or assets as such
holder would have received in connection with such Organic Change
if such holder had converted its Note immediately prior to such
Organic Change. In each such case, the Company shall also make
appropriate provisions (in form and substance satisfactory to the
holders of a majority of the principal amount of the Notes then
outstanding) to insure that the
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provisions of this Section 6 and Sections 7 and 8 hereof shall
thereafter be applicable to the Notes in relation to any shares
of stock, securities or assets thereafter deliverable upon
conversion of the Notes (including, in the case of any such
consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Company, an immediate
adjustment of the Conversion Price to the value for the Common
Stock reflected by the terms of such consolidation, merger or
sale, and a corresponding immediate adjustment in the number of
shares of Conversion Stock acquirable and receivable upon
conversion of Notes, if the value so reflected is less than the
Conversion Price in effect immediately prior to such
consolidation, merger or sale). The Company shall not effect any
such consolidation, merger or sale, unless prior to the
consummation thereof, the successor entity (if other than the
Company) resulting from consolidation or merger or the entity
purchasing such assets assumes by written instrument (in form and
substance satisfactory to the holders of a majority of the
principal amounts of the Notes then outstanding), the obligation
to deliver to each such holder such shares of stock, securities
or assets as, in accordance with the foregoing provisions, such
holder may be entitled to acquire.
(f) Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 6 but not
expressly provided for by such provisions (including the granting
of stock appreciation rights, phantom stock rights or other
rights with equity features), then the Company's board of
directors shall make an appropriate adjustment in the Conversion
Price so as to protect the rights of the holders of Notes;
provided that no such adjustment shall increase the Conversion
Price as otherwise determined pursuant to this Section 6 or
decrease the number of shares of Conversion Stock issuable upon
conversion of the Notes then outstanding.
(g) Notices.
(i) Immediately upon any adjustment of the Conversion
Price, the Company shall give written notice thereof to the
holder of this Note, setting forth in reasonable detail and
certifying the calculation of such adjustment.
(ii) The Company shall give written notice to the
holder of this Note at least 20 days prior to the date on which
the Company closes its books or takes a record (a) with respect
to any
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dividend or distribution upon Common Stock, (b) with respect to
any pro rata subscription offer to holders of Common Stock or
(c) for determining rights to vote with respect to any Organic
Change, dissolution or liquidation.
(iii) The Company shall also give written notice to the
holders of Series A Preferred at least 20 days prior to the date
on which any Organic Change shall take place.
(h) Mandatory Conversion. The outstanding principal
amount of this Note will be automatically converted to Common
Stock at the Conversion Price then in effect without any further
action on the part of the Company or the holder hereof if, at any
time after May 22, 1997, (i) the daily trading volume of the
Common Stock in the public markets exceeds 5% of the number of
shares of Common Stock issuable upon conversion of all
outstanding Notes for each of 45 consecutive trading days,
(ii) no holder of any Note is subject to any underwriters lockup
agreement restricting the transferability of the shares of
Conversion Stock issuable upon conversion of such Notes and
(iii) the Market Price of the Common Stock on any of the
anniversary dates of the issuance of the Notes set forth below
equals or exceeds the corresponding price set forth below
(subject to adjustment for stock splits, stock consolidations and
stock dividends):
2nd Anniversary $32.00
3rd Anniversary $32.00
4th Anniversary $39.06
5th Anniversary $39.81
6th Anniversary $47.78
7th Anniversary $57.33
In the event that any measurement of the market price
of the Common Stock is to occur on a date between two anniversary
dates, the share price amounts above shall be prorated (based
upon the number of days elapsed between such anniversary dates).
(i) Automatic Conversion to Series A Preferred.
(a) Upon filing of the Certificate of Designation
authorizing the Company's Series A Preferred Stock, par value
$1.00 (the "Series A Preferred") with the Secretary of State of
Delaware, the Notes shall automatically convert (without any
further action on the part of the Company or the holders of the
Notes) to the
Page 99 of 196 Pages
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number of shares of Series A Preferred determined by dividing the
principal amount then outstanding by $1,000. Any fraction
thereof shall be converted to a corresponding fractional share of
Series A Preferred. At the time of such conversion, the rights
of the holder of this Note shall cease and the Person or Persons
in whose name or names any certificate or certificates for shares
of Series A Preferred are to be issued upon such conversion shall
be deemed to have become the holder or holders of record of the
shares of Series A Preferred represented thereby.
(b) As soon as possible after such conversion has been
effected, the Company shall deliver to the converting holder in
exchange for such holder's Note:
(1) a certificate or certificates representing
the number of shares of Series A Preferred issuable by
reason of such conversion in such name or names and such
denomination or denominations as the holder has specified;
and
(2) payment in an amount equal to the sum of all
accrued interest with respect to the Note which has not been
paid prior thereto.
(c) The issuance of a certificate or certificates for
shares of Series A Preferred upon conversion of this Note shall
be made without charge to the holder hereof for any issuance tax
in respect thereof or other cost incurred by the Company in
connection with such conversion and the related issuance of
Series A Preferred. Upon conversion of this Note, the Company
shall take all such actions as are necessary in order to insure
that the Series A Preferred issuable with respect to such
conversion shall be validly issued, full, paid and nonassessable,
free and clear of all taxes, liens, changes and encumbrances with
respect to the issuance thereof.
(d) Upon conversion, the holder of this Note shall
promptly surrender this Note to the Company for cancellation.
(e) The Company shall assist and cooperate with any
holder of this Note required to make any governmental filings or
obtain any governmental approval prior to or in connection with
the conversion of this Note into Series A Preferred (including
making any filings required to be made by the Company).
Page 100 of 196 Pages
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7. Liquidating Dividends. If the Company declares a
dividend upon the Common Stock payable otherwise than in cash out
of earnings or earned surplus (determined in accordance with
generally accepted accounting principles, consistently applied)
except for a stock dividend payable in shares of Common Stock (a
"Liquidating Dividend"), then the Company shall pay to the holder
of this Note at the time of payment thereof the Liquidating
Dividend which would have been paid to the holder of this Note on
the Conversion Stock had this Note been fully converted
immediately prior to the date on which a record is taken for such
Liquidating Dividend or, if no record is taken, the date as of
which the record holders of Common Stock entitled to such
dividends are to be determined.
8. Purchase Rights. If at any time the Company
grants, issues or sells any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property
pro rata to the record holders of Common Stock (the "Purchase
Rights"), then each holder of the Notes shall be entitled to
acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired
if such holder had held the number of shares of Conversion Stock
acquirable upon conversion of such holder's Note immediately
before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights or, if no such record is
taken, the date as of which the record holders of Common Stock
are to be determined for the grant, issue or sale of such
Purchase Rights.
9. Amendment and Waiver. Except as otherwise
expressly provided herein, the provisions of the Notes may be
amended and the Company may take any action herein prohibited, or
omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the
holders of a majority of the outstanding principal amount of the
Notes; provided that no such action shall change (i) the rate at
which or the manner in which interest accrues on the Notes or the
times at which such interest becomes payable, (ii) any provision
relating to the scheduled payments or prepayments of principal on
the Notes or (iii) the Conversion Price of the Notes or the
number of shares or the class of stock into which the Notes are
convertible, without the written consent of the holders at least
66% of the outstanding principal amount of the Notes.
Page 101 of 196 Pages
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10. Definitions. For purposes of the Notes, the
following capitalized terms have the following meaning.
"Common Stock" means the Company's Common Stock, par
value $.015 per share, and any capital stock of any class of the
Company which is not limited to a fixed sum or percentage of par
or stated value in respect to the rights of the holders thereof
to participate in dividends or in the distribution of assets upon
any liquidation, dissolution or winding up of the Company.
"Convertible Securities" means any stock or securities
(other than Options) directly or indirectly convertible into or
exchangeable for Common Stock.
"Conversion Stock" means shares of the Company's
authorized but unissued Common Stock, par value $.015 per share;
provided that if there is a change such that the securities
issuable upon conversion of the Notes are issued by an entity
other than the Company or there is a change in the class of
securities so issuable, then the term "Conversion Stock" shall
mean one share of the security issuable upon conversion of this
Note if such security is issuable in shares, or shall mean the
smallest unit in which such security is issuable if such security
is not issuable in shares.
"Market Price" of any publicly traded security means
the average of the closing prices of such security's sales on all
securities exchanges on which such security may at the time be
listed, or, if there has been no sales on any such exchange on
any day, the average of the highest bid and lowest asked prices
on all such exchanges at the end of such day, or, if on any day
such security is not so listed, the average of the representative
bid and asked prices quoted in the NASDAQ System as of 4:00 P.M.,
New York time, or, if on any day such security is not quoted in
the NASDAQ System, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market
as reported by the National Quotation Bureau, Incorporated, or
any similar successor organization, in each such case averaged
over a period of 15 days consisting of the day as of which
"Market Price" is being determined and the 14 consecutive
business days prior to such day. "Market Price" of any security
which is not publicly traded means the fair value thereof
determined jointly by the Company and the holders of a majority
of the outstanding principal amount of the Notes; provided that
if such parties are unable to
Page 102 of 196 Pages
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reach agreement within a reasonable period of time, such fair
value shall be determined by an appraiser jointly selected by the
Company and the holders of a majority of the outstanding
principal amount of the Notes without application of any minority
or blockage discounts. The determination of such appraiser shall
be final and binding upon the parties, and the fees and expenses
of such appraiser shall be borne by the Company.
"Options" means any rights or options to subscribe for
or purchase Common Stock or Convertible Securities.
"Person" means an individual, a partnership, a corpora-
tion, a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political
subdivision thereof.
"Public Offering" means any offering by the Company of
its capital stock or equity securities to the public pursuant to
an effective registration statement under the Securities Act of
1933, as then in effect, or any comparable statement under any
similar federal statute then in force.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, association
or other business entity of which (i) if a corporation, a
majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the
time owned or controlled, directly or indirectly, by that Person
or one or more of the other Subsidiaries of that Person or a
combination thereof, or (ii) if a limited liability company,
partnership, association or other business entity, a majority of
the partnership or other similar ownership interest thereof is at
the time owned or controlled, directly or indirectly, by any
Person or one or more Subsidiaries of that Person or a
combination thereof. For purposes hereof, a Person or Persons
shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other
business entity if such Person or Persons shall be allocated a
majority of limited liability company, partnership, association
or other business entity gains or losses or shall be or control
any managing director or general partner of such limited
liability company, partnership, association or other business
entity.
Page 103 of 196 Pages
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11. Cancellation. After all principal and accrued
interest at any time owed on this Note has been paid in full,
this Note shall be surrendered to the Company for cancellation
and shall not be reissued.
12. Payments. Unless otherwise expressly provided
herein, all payments to be made to the holders of the Notes shall
be made in the lawful money of the United States of America in
immediately available funds.
13. Place of Payment. Payments of principal and
interest shall be delivered to ______ at the following address:
c/o Fleet Equity Partners
Mail Stop: RI MO 227
111 Westminster Street
Providence, RI 02903
Attention: Robert Van Degna
or to such other address or to the attention of such other person
as specified by prior written notice to the Company.
14. Business Days. If any payment is due, or any time
period for giving notice or taking action expires, on a day which
is a Saturday, Sunday or legal holiday in the State of New York
or the State of Rhode Island, the payment shall be due and
payable on, and the time period shall automatically be extended
to, the next business day immediately following such Saturday,
Sunday or legal holiday, and interest shall continue to accrue at
the required rate hereunder until any such payment is made.
15. Usury Laws. It is the intention of the Company
and the holder of this Note to conform strictly to all applicable
usury laws now or hereafter in force, and any interest payable
under this Note shall be subject to reduction to the amount not
in excess of the maximum legal amount allowed under the
applicable usury laws as now or hereafter construed by the courts
having jurisdiction over such matters. If the maturity of this
Note is accelerated by reason of an election by the holder hereof
resulting from an Event of Default, voluntary prepayment by the
Company or otherwise, then earned interest may never include more
than the maximum amount permitted by law, computed from the date
hereof until payment, and any interest in excess of the maximum
amount permitted by law shall be canceled automatically and, if
theretofore paid, shall at the
Page 104 of 196 Pages
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option of the holder hereof either be rebated to the Company or
credited on the principal amount of this Note, or if this Note
has been paid, then the excess shall be rebated to the Company.
The aggregate of all interest (whether designated as interest,
service charges, points or otherwise) contracted for, chargeable
or receivable under this Note shall under no circumstances exceed
the maximum legal rate upon the unpaid principal balance of this
Note remaining unpaid from time to time. If such interest does
exceed the maximum legal rate, it shall be deemed a mistake and
such excess shall be canceled automatically and, if theretofore
paid, rebated to the Company or credited on the principal amount
of this Note, or if this Note has been repaid, then such excess
shall be rebated to the Company.
16. Notices. All notices, demands or other
communications to be given or delivered under or by reason of the
provisions of this Note shall be given in accordance with
paragraph 7L of the Purchase Agreement.
* * * * *
Page 105 of 196 Pages
<PAGE>
IN WITNESS WHEREOF, the Company has executed and
delivered this Note on May 22, 1995.
ACC CORP.
Attest By _______________________
_________________________ Its ______________________
Page 106 of 196 Pages
<PAGE>
EXHIBIT B
This Warrant was originally issued on May 22, 1995, and such
issuance was not registered under the Securities Act of
1933, as amended. The transfer of this Warrant and the
securities obtainable upon exercise thereof is subject to
the conditions on transfer specified in the Purchase
Agreement, dated as of May 22, 1995 (as amended and modified
from time to time), between the issuer hereof (the
"Company") and the initial holder hereof, and the Company
reserves the right to refuse the transfer of such security
until such conditions have been fulfilled with respect to
such transfer. Upon written request, a copy of such
conditions shall be furnished by the Company to the holder
hereof without charge.
ACC CORP.
STOCK PURCHASE WARRANT
Date of Issuance: May 22, 1995 Certificate No. CW-_______
FOR VALUE RECEIVED, ACC Corp., a Delaware corporation
(the "Company"), hereby grants to _______________________ or its
registered assigns (the "Registered Holder") the right to
purchase from the Company _______ shares of the Company's Common
Stock at a price per share of $16.00 (as adjusted from time to
time hereunder, the "Exercise Price"). This Warrant is one of
several Closing Warrants (collectively referred to herein as the
"Warrants") issued by the Company to certain investors pursuant
to the Purchase Agreement, dated as of May 22, 1995 (the
"Purchase Agreement"). Certain capitalized terms used herein are
defined in Section 5 hereof. The amount and kind of securities
obtainable pursuant to the rights granted hereunder and the
purchase price for such securities are subject to adjustment
pursuant to the provisions contained in this Warrant.
Page 107 of 196 Pages
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This Warrant is subject to the following provisions:
Section 1. Exercise of Warrant.
1A. Exercise Period. The Registered Holder may
exercise, in whole or in part (but not as to a fractional share
of Common Stock), the purchase rights represented by this Warrant
at any time and from time to time after the Date of Issuance to
and including the earlier of (i) the seventh anniversary thereof
or (ii) the date which is six years after the first date upon
which no Notes or Series A Preferred remain outstanding (the
"Exercise Period"). The Company shall give the Registered Holder
written notice of the expiration of the rights hereunder at least
30 days but not more than 90 days prior to the end of the
Exercise Period.
1B. Exercise Procedure.
(i) This Warrant shall be deemed to have been
exercised when the Company has received all of the following
items (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in
paragraph 1C below, executed by the Person exercising all or
part of the purchase rights represented by this Warrant (the
"Purchaser");
(b) this Warrant;
(c) if this Warrant is not registered in the name of
the Purchaser, an Assignment or Assignments in the form set
forth in Exhibit II hereto evidencing the assignment of this
Warrant to the Purchaser, in which case the Registered
Holder shall have complied with the provisions set forth in
Section 8 hereof; and
(d) either (1) a check payable to the Company (in the
case of the original Holder of this Warrant only), a
certified check payable to the Company or a wire transfer of
immediately available funds to an account designated by the
Company in an amount equal to the product of the Exercise
Price multiplied by the number of shares of Common Stock
being purchased upon such exercise (the "Aggregate Exercise
Price"), (2) the surrender to the Company of debt or equity
securities of the Company having a Market Price equal to the
Aggregate Exercise Price of the Common Stock being purchased
upon such exercise
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(provided that for purposes of this subparagraph, the Market
Price of any note or other debt security or any preferred
stock shall be deemed to be equal to the aggregate
outstanding principal amount or liquidation value thereof
plus all accrued and unpaid interest thereon or accrued or
declared and unpaid dividends thereon) or (3) a written
notice to the Company that the Purchaser is exercising the
Warrant (or a portion thereof) by authorizing the Company to
withhold from issuance a number of shares of Common Stock
issuable upon such exercise of the Warrant which when
multiplied by the Market Price of the Common Stock is equal
to the Aggregate Exercise Price (and such withheld shares
shall no longer be issuable under this Warrant).
(ii) Certificates for shares of Common Stock purchased
upon exercise of this Warrant shall be delivered by the Company
to the Purchaser within five business days after the date of the
Exercise Time. Unless this Warrant has expired or all of the
purchase rights represented hereby have been exercised, the
Company shall prepare a new Warrant, substantially identical
hereto, representing the rights formerly represented by this
Warrant which have not expired or been exercised and shall within
such five-day period, deliver such new Warrant to the Person
designated for delivery in the Exercise Agreement.
(iii) The Common Stock issuable upon the exercise of
this Warrant shall be deemed to have been issued to the Purchaser
at the Exercise Time, and the Purchaser shall be deemed for all
purposes to have become the record holder of such Common Stock at
the Exercise Time.
(iv) The issuance of certificates for shares of Common
Stock upon exercise of this Warrant shall be made without charge
to the Registered Holder or the Purchaser for any issuance tax in
respect thereof or other cost incurred by the Company in
connection with such exercise and the related issuance of shares
of Common Stock. Each share of Common Stock issuable upon
exercise of this Warrant shall upon payment of the Exercise Price
therefor, be fully paid and nonassessable and free from all liens
and charges with respect to the issuance thereof.
(v) The Company shall not close its books against the
transfer of this Warrant or of any share of Common Stock issued
or issuable upon the exercise of this Warrant in any manner which
interferes with the timely exercise of this Warrant. The Company
Page 109 of 196 Pages
<PAGE>
shall from time to time take all such action as may be necessary
to assure that the par value per share of the unissued Common
Stock acquirable upon exercise of this Warrant is at all times
equal to or less than the Exercise Price then in effect.
(vi) The Company shall assist and cooperate with any
Registered Holder or Purchaser required to make any governmental
filings or obtain any governmental approvals prior to or in
connection with any exercise of this Warrant (including making
any filings required to be made by the Company).
(vii) Notwithstanding any other provision hereof, if an
exercise of any portion of this Warrant is to be made in
connection with a registered public offering or the sale of the
Company, the exercise of any portion of this Warrant may, at the
election of the holder hereof, be conditioned upon the
consummation of the public offering or sale of the Company in
which case such exercise shall not be deemed to be effective
until the consummation of such transaction.
(viii) The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common
Stock solely for the purpose of issuance upon the exercise of the
Warrants, such number of shares of Common Stock issuable upon the
exercise of all outstanding Warrants. All shares of Common Stock
which are so issuable shall, when issued, be duly and validly
issued, fully paid and nonassessable and free from all taxes,
liens and charges. The Company shall take all such actions as
may be necessary to assure that all such shares of Common Stock
may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic
securities exchange upon which shares of Common Stock may be
listed (except for official notice of issuance which shall be
immediately delivered by the Company upon each such issuance).
The Company shall not take any action which would cause the
number of authorized but unissued shares of Common Stock to be
less than the number of such shares required to be reserved
hereunder for issuance upon exercise of the Warrants.
1C. Exercise Agreement. Upon any exercise of this
Warrant, the Exercise Agreement shall be substantially in the
form set forth in Exhibit I hereto, except that if the shares of
Common Stock are not to be issued in the name of the Person in
whose name this Warrant is registered, the Exercise Agreement
shall also state the name of the Person to whom the certificates
for the shares of
Page 110 of 196 Pages
<PAGE>
Common Stock are to be issued, and if the number of shares of
Common Stock to be issued does not include all the shares of
Common Stock purchasable hereunder, it shall also state the name
of the Person to whom a new Warrant for the unexercised portion
of the rights hereunder is to be delivered. Such Exercise
Agreement shall be dated the actual date of execution thereof.
1D. Fractional Shares. If a fractional share of
Common Stock would, but for the provisions of paragraph 1A, be
issuable upon exercise of the rights represented by this Warrant,
the Company shall, within five business days after the date of
the Exercise Time, deliver to the Purchaser a check payable to
the Purchaser in lieu of such fractional share in an amount equal
to the difference between Market Price of such fractional share
as of the date of the Exercise Time and the Exercise Price of
such fractional share.
Section 2. Adjustment of Exercise Price and Number of Shares.
In order to prevent dilution of the rights granted under this
Warrant, the Exercise Price shall be subject to adjustment from
time to time as provided in this Section 2, and the number of
shares of Common Stock obtainable upon exercise of this Warrant
shall be subject to adjustment from time to time as provided in
this Section 2.
2A. Adjustment of Exercise Price and Number of Shares
upon Issuance of Common Stock. If and whenever on or after the
Date of Issuance of this Warrant, the Company issues or sells, or
in accordance with paragraph 2B is deemed to have issued or sold,
any share of Common Stock for a consideration per share less than
the Exercise Price in effect immediately prior to such time, then
immediately upon such issue or sale the Exercise Price shall be
reduced to the lowest net price per share (as determined pursuant
to paragraph 2B(v) below) at which such share of Common Stock has
been issued or sold or is deemed to have been issued or sold.
Upon each such adjustment of the Exercise Price hereunder, the
number of shares of Common acquirable upon exercise of this
Warrant shall be adjusted to the number of shares determined by
multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of shares of Common acquirable upon
exercise of this Warrant immediately prior to such adjustment and
dividing the product thereof by the Exercise Price resulting from
such adjustment. Notwithstanding the foregoing, there shall be
no adjustment to the Exercise Price hereunder with respect to the
granting of stock options to employees or directors of the
Company
Page 111 of 196 Pages
<PAGE>
and its Subsidiaries or the exercise thereof or the granting of
stock appreciation rights, phantom stock rights or other similar
rights to employees or directors of the Company for (or rights
relating to) an aggregate of 1,586,702 shares of Common Stock
(976,594 options being currently outstanding) (as such number of
shares is equitably adjusted for subsequent stock splits, stock
combinations, stock dividends and recapitalizations and such
number shall include all stock options outstanding as of the date
of the Purchase Agreement).
2B. Effect on Exercise Price of Certain Events. For
purposes of determining the adjusted Exercise Price under
paragraph 2A, the following shall be applicable:
(i) Issuance of Rights or Options. If the Company in
any manner grants or sells any Options and the lowest price per
share for which any one share of Common Stock is issuable upon
the exercise of any such Option, or upon conversion or exchange
of any Convertible Security issuable upon exercise of such
Option, is less than the Exercise Price in effect immediately
prior to the time of the granting or sale of such Option, then
such share of Common Stock shall be deemed to have been issued
and sold by the Company at such time for such price per share.
For purposes of this paragraph, the "lowest price per share for
which any one share of Common Stock is issuable" shall be equal
to the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to any one
share of Common Stock upon the granting or sale of the Option,
upon exercise of the Option and upon conversion or exchange of
the Convertible Security. No further adjustment of the Exercise
Price shall be made upon the actual issue of such Common Stock or
of such Convertible Security upon the exercise of such Options or
upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Security.
(ii) Issuance of Convertible Securities. If the
Company in any manner issues or sells any Convertible Security
and the lowest price per share for which any one share of Common
Stock is issuable upon conversion or exchange thereof is less
than the Exercise Price in effect immediately prior to the time
of such issue or sale, then such share or shares of Common Stock
shall be deemed to have been issued and sold by the Company at
such time for such price per share. For the purposes of this
paragraph, the "lowest price per share for which any one share of
Common Stock is issuable" shall be equal to the sum of the lowest
amounts of
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consideration (if any) received or receivable by the Company with
respect to any one share of Common Stock upon the issuance of the
Convertible Security and upon the conversion or exchange of such
Convertible Security. No further adjustment of the Exercise
Price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of any Convertible Security, and if
any such issue or sale of such Convertible Security is made upon
exercise of any Options for which adjustments of the Exercise
Price had been or are to be made pursuant to other provisions of
this Section 2, no further adjustment of the Exercise Price shall
be made by reason of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion or
exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable for
Common Stock changes at any time, the Exercise Price in effect at
the time of such change shall be adjusted immediately to the
Exercise Price which would have been in effect at such time had
such Options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or
changed conversion rate, as the case may be, at the time
initially granted, issued or sold and the number of shares of
Common Stock issuable hereunder shall be correspondingly
adjusted; provided that if such adjustment would result in an
increase of the Exercise Price then in effect, such adjustment
shall not be effective until 30 days after written notice thereof
has been given by the Company to all holders of the Warrants.
For purposes of this paragraph 2B, if the terms of any Option or
Convertible Security which was outstanding as of the date of
issuance of this Warrant are changed in the manner described in
the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such change; provided that no such
change shall at any time cause the Exercise Price hereunder to be
increased.
(iv) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the
termination of any right to convert or exchange any Convertible
Securities without the exercise of such Option or right, the
Exercise Price then in effect shall be adjusted immediately to
the Exercise Price which would have been in effect at the time of
such expiration or termination had such Option or Convertible
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Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued; provided that if
such expiration or termination would result in an increase in the
Exercise Price then in effect, such increase shall not be
effective until 30 days after written notice thereof has been
given to all holders of the Warrants. For purposes of this
paragraph 2B, the expiration or termination of any Option or
Convertible Security which was outstanding as of the date of
issuance of this Warrant shall not cause the Exercise Price
hereunder to be adjusted unless, and only to the extent that, a
change in the terms of such Option or Convertible Security caused
it to be deemed to have been issued after the date of issuance of
this Warrant.
(v) Calculation of Consideration Received. If any
Common Stock, Options or Convertible Securities are issued or
sold or deemed to have been issued or sold for cash, the
consideration received therefor shall be deemed to be the net
amount received by the Company therefor. In case any Common
Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of the consideration
other than cash received by the Company shall be the fair value
of such consideration, except where such consideration consists
of securities, in which case the amount of consideration received
by the Company shall be the Market Price thereof as of the date
of receipt. In case any Common Stock, Options or Convertible
Securities are issued to the owners of the non-surviving entity
in connection with any merger in which the Company is the
surviving corporation, the amount of consideration therefor shall
be deemed to be the fair value of such portion of the net assets
and business of the non-surviving entity as is attributable to
such Common Stock, Options or Convertible Securities, as the case
may be. The fair value of any consideration other than cash or
securities shall be determined jointly by the Company and the
Registered Holders of Warrants representing a majority of the
shares of Common Stock obtainable upon exercise of such Warrants.
If such parties are unable to reach agreement within a reasonable
period of time, such fair value shall be determined by an
appraiser jointly selected by the Company and the Registered
Holders of Warrants representing a majority of the shares of
Common Stock obtainable upon exercise of such Warrants. The
determination of such appraiser shall be final and binding on the
Company and the Registered Holders of the Warrants, and the fees
and expenses of such appraiser shall be paid by the Company.
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(vi) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities
of the Company, together comprising one integrated transaction in
which no specific consideration is allocated to such Options by
the parties thereto, the Options shall be deemed to have been
issued for consideration of $.01.
(vii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned
or held by or for the account of the Company or any Subsidiary,
and the disposition of any shares so owned or held shall be
considered an issue or sale of Common Stock.
(viii) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock,
Options or in Convertible Securities or (B) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then
such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
2C. Subdivision or Combination of Common Stock. If
the Company at any time subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more classes of
its outstanding shares of Common Stock into a greater number of
shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of
shares of Common Stock obtainable upon exercise of this Warrant
shall be proportionately increased. If the Company at any time
combines (by reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect immediately prior
to such combination shall be proportionately increased and the
number of shares of Common Stock obtainable upon exercise of this
Warrant shall be proportionately decreased.
2D. Reorganization, Reclassification, Consolidation,
Merger or Sale. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or
substantially all of the Company's assets or other transaction,
in each case which is effected in such a way that the holders of
Common Stock are entitled to receive (either directly or upon
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subsequent liquidation) stock, securities or assets with respect
to or in exchange for Common Stock is referred to herein as
"Organic Change." Prior to the consummation of any Organic
Change, the Company shall make appropriate provision (in form and
substance satisfactory to the Registered Holders of the Warrants
representing a majority of the Common Stock obtainable upon
exercise of all Warrants then outstanding) to insure that each of
the Registered Holders of the Warrants shall thereafter have the
right to acquire and receive, in lieu of or addition to (as the
case may be) the shares of Common Stock immediately theretofore
acquirable and receivable upon the exercise of such holder's
Warrant, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for the number
of shares of Common Stock immediately theretofore acquirable and
receivable upon exercise of such holder's Warrant had such
Organic Change not taken place. In any such case, the Company
shall make appropriate provision (in form and substance
satisfactory to the Registered Holders of the Warrants
representing a majority of the Common Stock obtainable upon
exercise of all Warrants then outstanding) with respect to such
holders' rights and interests to insure that the provisions of
this Section 2 and Sections 3 and 4 hereof shall thereafter be
applicable to the Warrants (including, in the case of any such
consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Company, an immediate
adjustment of the Exercise Price to the value for the Common
Stock reflected by the terms of such consolidation, merger or
sale, and a corresponding immediate adjustment in the number of
shares of Common Stock acquirable and receivable upon exercise of
the Warrants, if the value so reflected is less than the Exercise
Price in effect immediately prior to such consolidation, merger
or sale). The Company shall not effect any such consolidation,
merger or sale, unless prior to the consummation thereof, the
successor entity (if other than the Company) resulting from
consolidation or merger or the entity purchasing such assets
assumes by written instrument (in form and substance satisfactory
to the Registered Holders of Warrants representing a majority of
the Common Stock obtainable upon exercise of all of the Warrants
then outstanding), the obligation to deliver to each such holder
such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to acquire.
2E. Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 2 but not
expressly provided for by such provisions (including the granting
of stock appreciation rights, phantom stock rights or other
rights with
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equity features), then the Company's board of directors shall
make an appropriate adjustment in the Exercise Price and the
number of shares of Common Stock obtainable upon exercise of this
Warrant so as to protect the rights of the holders of the
Warrants; provided that no such adjustment shall increase the
Exercise Price or decrease the number of shares of Common Stock
obtainable as otherwise determined pursuant to this Section 2.
2F. Notices.
(i) Immediately upon any adjustment of the Exercise
Price, the Company shall give written notice thereof to the
Registered Holder, setting forth in reasonable detail and
certifying the calculation of such adjustment.
(ii) The Company shall give written notice to the
Registered Holder at least 20 days prior to the date on which the
Company closes its books or takes a record (A) with respect to
any dividend or distribution upon the Common Stock, (B) with
respect to any pro rata subscription offer to holders of Common
Stock or (C) for determining rights to vote with respect to any
Organic Change, dissolution or liquidation.
(iii) The Company shall also give written notice to the
Registered Holders at least 20 days prior to the date on which
any Organic Change, dissolution or liquidation shall take place.
Section 3. Liquidating Dividends. If the Company
declares or pays a dividend upon the Common Stock payable
otherwise than in cash out of earnings or earned surplus
(determined in accordance with generally accepted accounting
principles, consistently applied) except for a stock dividend
payable in shares of Common Stock (a "Liquidating Dividend"),
then the Company shall pay to the Registered Holder of this
Warrant at the time of payment thereof the Liquidating Dividend
which would have been paid to such Registered Holder on the
Common Stock had this Warrant been fully exercised immediately
prior to the date on which a record is taken for such Liquidating
Dividend, or, if no record is taken, the date as of which the
record holders of Common Stock entitled to such dividends are to
be determined.
Section 4. Purchase Rights. If at any time the
Company grants, issues or sells any Options, Convertible
Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of
Common Stock (the
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"Purchase Rights"), then the Registered holder of this Warrant
shall be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such holder
could have acquired if such holder had held the number of shares
of Common Stock acquirable upon complete exercise of this Warrant
immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of
Common Stock are to be determined for the grant, issue or sale of
such Purchase Rights.
Section 5. Definitions. The following terms have
meanings set forth below:
"Common Stock" means the Company's Common Stock, $.015
par value, and except for purposes of the shares obtainable upon
exercise of this Warrant, any capital stock of any class of the
Company which is not limited to a fixed sum or percentage of par
or stated value in respect to the rights of the holders thereof
to participate in dividends or in the distribution of assets upon
any liquidation, dissolution or winding up of the Company;
provided that where such term refers to the security receivable
upon exercise of this Warrant and there is a change such that the
securities issuable upon exercise of this Warrant are issued by
an entity other than the Company or there is a change in the type
or class of securities so issuable, the term "Common Stock" shall
mean one share of the security issuable upon conversion of this
Warrant if such security is issuable in shares, or shall mean the
smallest unit in which such security is issuable if such security
is not issuable in shares.
"Convertible Securities" means any stock or securities
(directly or indirectly) convertible into or exchangeable for
Common Stock.
"Fundamental Change" has the meaning set forth in the
Amendment.
"Market Price" means as to any security the average of
the closing prices of such security's sales on all domestic
securities exchanges on which such security may at the time be
listed, or, if there have been no sales on any such exchange on
any day, the average of the highest bid and lowest asked prices
on all such exchanges at the end of such day, or, if on any day
such security is not so listed, the average of the representative
bid
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and asked prices quoted in the NASDAQ System as of 4:00 P.M., New
York time, on such day, or, if on any day such security is not
quoted in the NASDAQ System, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter
market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such
case averaged over a period of 15 days consisting of the day as
of which "Market Price" is being determined and the 14
consecutive business days prior to such day; provided that if
such security is listed on any domestic securities exchange the
term "business days" as used in this sentence means business days
on which such exchange is open for trading. If at any time such
security is not listed on any domestic securities exchange or
quoted in the NASDAQ System or the domestic over-the-counter
market, the "Market Price" shall be the fair value thereof
determined jointly by the Company and the Registered Holders of
Warrants representing a majority of the Common Stock purchasable
upon exercise of all the Warrants then outstanding; provided that
if such parties are unable to reach agreement within a reasonable
period of time, such fair value shall be determined by an
appraiser jointly selected by the Company and the Registered
Holders of Warrants representing a majority of the Common Stock
purchasable upon exercise of all the Warrants then outstanding.
The determination of such appraiser shall be final and binding on
the Company and the Registered Holders of the Warrants, and the
fees and expenses of such appraiser shall be paid by the Company.
"Options" means any rights or options to subscribe for
or purchase Common Stock or Convertible Securities.
"Person" means an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an
unincorporated organization and a government or any department or
agency thereof.
Other capitalized terms used in this Warrant but not
defined herein shall have the meanings set forth in the Purchase
Agreement.
Section 6. No Voting Rights; Limitations of Liability.
This Warrant shall not entitle the holder hereof to any voting
rights or other rights as a stockholder of the Company. No
provision hereof, in the absence of affirmative action by the
Registered Holder to purchase Common Stock, and no enumeration
herein of the rights or privileges of the Registered Holder shall
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give rise to any liability of such holder for the Exercise Price
of Common Stock acquirable by exercise hereof or as a stockholder
of the Company.
Section 7. Warrant Transferable. Subject to the
transfer conditions referred to in the legend endorsed hereon,
this Warrant and all rights hereunder are transferable, in whole
or in part, without charge to the Registered Holder, upon
surrender of this Warrant with a properly executed Assignment (in
the form of Exhibit II hereto) at the principal office of the
Company.
Section 8. Warrant Exchangeable for Different
Denominations. This Warrant is exchangeable, upon the surrender
hereof by the Registered Holder at the principal office of the
Company, for new Warrants of like tenor representing in the
aggregate the purchase rights hereunder, and each of such new
Warrants shall represent such portion of such rights as is
designated by the Registered Holder at the time of such
surrender. The date the Company initially issues this Warrant
shall be deemed to be the "Date of Issuance" hereof regardless of
the number of times new certificates representing the unexpired
and unexercised rights formerly represented by this Warrant shall
be issued. All Warrants representing portions of the rights
hereunder are referred to herein as the "Warrants."
Section 9. Replacement. Upon receipt of evidence
reasonably satisfactory to the Company (an affidavit of the
Registered Holder shall be satisfactory) of the ownership and the
loss, theft, destruction or mutilation of any certificate
evidencing this Warrant, and in the case of any such loss, theft
or destruction, upon receipt of indemnity reasonably satisfactory
to the Company (provided that if the holder is a financial
institution or other institutional investor its own agreement
shall be satisfactory), or, in the case of any such mutilation
upon surrender of such certificate, the Company shall (at its
expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the same rights represented
by such lost, stolen, destroyed or mutilated certificate and
dated the date of such lost, stolen, destroyed or mutilated
certificate.
Section 10. Notices. Except as otherwise expressly
provided herein, all notices referred to in this Warrant shall be
given in accordance with paragraph 7L of the Purchase Agreement.
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Section 11. Amendment and Waiver. Except as otherwise
provided herein, the provisions of the Warrants may be amended
and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if
the Company has obtained the written consent of the Registered
Holders of Warrants representing a majority of the shares of
Common Stock obtainable upon exercise of the Warrants; provided
that no such action may change the Exercise Price of the Warrants
or the number of shares or class of stock obtainable upon
exercise of each Warrant without the written consent of the
Registered Holders of Warrants representing at least 66% of the
shares of Common Stock obtainable upon exercise of the Warrants.
Section 12. Descriptive Headings; Governing Law. The
descriptive headings of the several Sections and paragraphs of
this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The corporation laws of the
State of Delaware shall govern all issues concerning the relative
rights of the Company and its Stockholders. All other questions
concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by the internal
law of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State
of New York.
* * * * * *
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IN WITNESS WHEREOF, the Company has caused this Warrant
to be signed and attested by its duly authorized officers under
its corporate seal and to be dated the Date of Issuance hereof.
ACC CORP.
By_________________________
Its________________________
[Corporate Seal]
Attest:
______________________________
Title: ______________________
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EXHIBIT I
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth
in the attached Warrant (Certificate No. CW-____), hereby agrees
to subscribe for the purchase of ______ shares of the Common
Stock covered by such Warrant and makes payment herewith in full
therefor at the price per share provided by such Warrant.
Signature ____________________
Address ______________________
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, ______________________________
hereby sells, assigns and transfers all of the rights of the
undersigned under the attached Warrant (Certificate No. CW-_____)
with respect to the number of shares of the Common Stock covered
thereby set forth below, unto:
Names of Assignee Address No. of Shares
Signature ____________________
____________________
Witness ____________________
Page 123 of 196 Pages
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EXHIBIT C
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 have 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
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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 t
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.
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EXHIBIT D
PREFERRED STOCK TERMS
Section 1. Dividends.
1A. General Obligation. When and as declared by the
Corporation's Board of Directors and to the extent permitted
under the General Corporation Law of Delaware, the Corporation
shall pay preferential dividends in cash to the holders of the
Series A Preferred Stock (the "Series A Preferred") as provided
in this Section 1. Except as otherwise provided herein,
dividends on each share of the Series A Preferred (a "Share")
shall accrue on a daily basis at the rate of 12% per annum of the
sum of the Liquidation Value thereof plus all accumulated and
unpaid dividends thereon from and including the date of issuance
of such Share to and including the first to occur of (i) the date
on which the Liquidation Value of such Share (plus all accrued
and unpaid dividends thereon) is paid to the holder thereof in
connection with the liquidation of the Corporation or the
redemption of such Share by the Corporation, (ii) the date on
which such Share is converted into shares of Conversion Stock
hereunder or (iii) the date on which such share is otherwise
acquired by the Corporation. Such dividends shall accrue whether
or not they have been declared and whether or not there are
profits, surplus or other funds of the Corporation legally
available for the payment of dividends. The date on which the
Corporation initially issues any Share shall be deemed to be its
"date of issuance" regardless of the number of times transfer of
such Share is made on the stock records maintained by or for the
Corporation and regardless of the number of certificates which
may be issued to evidence such Share.
1B. Dividend Reference Dates. To the extent not paid
on March 31, June 30, September 30 and December 31 of each year,
beginning June 30, 1995 (the "Dividend Reference Dates"), all
dividends which have accrued on each Share outstanding during the
three-month period (or other period in the case of the initial
Dividend Reference Date) ending upon each such Dividend Reference
Date shall be accumulated and shall remain accumulated dividends
with respect to such Share until paid to the holder thereof.
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1C. Distribution of Partial Dividend Payments. Except
as otherwise provided herein, if at any time the Corporation pays
less than the total amount of dividends then accrued with respect
to the Series A Preferred, such payment shall be distributed pro
rata among the holders thereof based upon the number of Shares
held by each such holder.
Section 2. Liquidation.
Upon any liquidation, dissolution or winding up of the
Corporation (whether voluntary or involuntary), each holder of
Series A Preferred shall be entitled to be paid, before any
distribution or payment is made upon any Junior Securities, an
amount in cash equal to the aggregate Liquidation Value of all
Shares held by such holder (plus all accrued and unpaid dividends
thereon), and the holders of Series A Preferred shall not be
entitled to any further payment. If upon any such liquidation,
dissolution or winding up of the Corporation the Corporation's
assets to be distributed among the holders of the Series A
Preferred are insufficient to permit payment to such holders of
the aggregate amount which they are entitled to be paid under
this Section 2, then the entire assets available to be
distributed to the Corporation's stockholders shall be
distributed pro rata among such holders based upon the aggregate
Liquidation Value (plus all accrued and unpaid dividends) of the
Series A Preferred held by each such holder. Prior to the
liquidation, dissolution or winding up of the Corporation, the
Corporation shall declare for payment all accrued and unpaid
dividends with respect to the Series A Preferred, but only to the
extent of funds of the Corporation legally available for the
payment of dividends. Not less than 60 days prior to the payment
date stated therein, the Corporation shall mail written notice of
any such liquidation, dissolution or winding up to each record
holder of Series A Preferred, setting forth in reasonable detail
the amount of proceeds to be paid with resect to each Share and
each share of Common Stock in connection with such liquidation,
dissolution or winding up. Neither the consolidation or merger
of the Corporation into or with any other entity or entities
(whether or not the Corporation is the surviving entity), nor the
sale or transfer by the Corporation of all or any part of its
assets, nor the reduction of the capital stock of the Corporation
nor any other form of recapitalization or reorganization
affecting the Corporation shall be deemed to be a
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liquidation, dissolution or winding up of the Corporation within
the meaning of this Section 2.
Section 3. Priority of Series A Preferred on Dividends
and Redemptions.
So long as any Series A Preferred remains outstanding,
without the prior written consent of the holders of a majority of
the outstanding shares of Series A Preferred, the Corporation
shall not, nor shall it permit any Subsidiary to, redeem,
purchase or otherwise acquire directly or indirectly any Junior
Securities, nor shall the Corporation directly or indirectly pay
or declare any dividend or make any distribution upon any Junior
Securities.
Section 4. Redemptions.
4A. Scheduled Redemption. On May 19, 2002 (the
"Scheduled Redemption Date"), the Corporation shall redeem all
outstanding Shares of Series A Preferred at a price per Share
equal to the greater of (i) the Liquidation Value thereof (plus
accrued and unpaid dividends thereon) or (ii) the Market Price of
the Common Stock into which such Shares of Series A Preferred (on
the date which is five days prior to the Scheduled Redemption
Date) are convertible on the Schedule Redemption Date.
4B. Optional Redemptions. The Corporation may at any
time and from time to time redeem all or any portion of the
Shares of Series A Preferred then outstanding; provided that the
minimum number of shares subject to such redemption shall be the
lesser of 100 shares or the number of shares outstanding as of
such redemption. Upon any such redemption, the Corporation shall
pay a price per Share equal to the Liquidation Value thereof
(plus all accrued and unpaid dividends thereon).
4C. Redemption Payments. For each Share which is to
be redeemed hereunder, the Corporation shall be obligated on the
Redemption Date to pay to the holder thereof (upon surrender by
such holder at the Corporation's principal office of the certifi-
cate representing such Share) an amount in cash equal to the
Liquidation Value of such Share (plus all accrued and unpaid
dividends thereon); provided that, in the case of a redemption
pursuant to paragraph 4A, to the extent the amount in
subparagraph 4A(ii) exceeds the amount in subparagraph 4A(i), all
or a portion
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of such excess may, at the option of the Corporation's Board of
Directors, be paid in the form of Common Stock (valued at the
Market Price of the Common Stock on the date which is five
trading days prior to the Scheduled Redemption Date) up to and
not exceeding a number of shares of Common Stock equal to 20
multiplied by the average daily trading volume of the Common
Stock in the public markets for a period of 45 consecutive
trading days ending five days prior to the Scheduled Redemption
Date and the remainder shall be paid in cash. Such shares of
Common Stock shall be applied first to the repayment of
Liquidation Value, then to accrued but unpaid dividends. If the
funds of the Corporation legally available for redemption of
Shares on the Scheduled Redemption Date are insufficient to
redeem the total number of Shares to be redeemed on such date,
those funds which are legally available shall be used to redeem
the maximum possible number of Shares pro rata among the holders
of the Shares to be redeemed based upon the aggregate Liquidation
Value of such Shares held by each such holder (plus all accrued
and unpaid dividends thereon). At any time thereafter when
additional funds of the Corporation are legally available for the
redemption of Shares, such funds shall immediately be used to
redeem the balance of the Shares which the Corporation has become
obligated to redeem on the Scheduled Redemption Date but which it
has not redeemed. Prior to any redemption of Series A Preferred,
the Corporation shall declare for payment all accrued and unpaid
dividends with respect to the Shares which are to be redeemed,
but only to the extent of funds of the Corporation legally
available for the payment of dividends.
4D. Notice of Redemption. Except as otherwise
provided herein, the Corporation shall mail written notice of
each redemption of any Series A Preferred (other than a redemp-
tion at the request of a holder or holders of Series A Preferred)
to each record holder thereof not more than 60 nor less than 30
days prior to the date on which such redemption is to be made.
Upon mailing any notice of redemption which relates to a
redemption at the Corporation's option, the Corporation shall
become obligated to redeem the total number of Shares specified
in such notice at the time of redemption specified therein. In
case fewer than the total number of Shares represented by any
certificate are redeemed, a new certificate representing the
number of unredeemed Shares shall be issued to the holder thereof
without cost to such holder within five business days after
surrender of the certificate representing the redeemed Shares.
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4E. Determination of the Number of Each Holder's
Shares to be Redeemed. Except as otherwise provided herein, the
number of Shares of Series A Preferred to be redeemed from each
holder thereof in redemptions hereunder shall be the number of
Shares determined by multiplying the total number of Shares to be
redeemed times a fraction, the numerator of which shall be the
total number of Shares then held by such holder and the
denominator of which shall be the total number of Shares then
outstanding.
4F. Dividends After Redemption Date. No Share shall
be entitled to any dividends accruing after the date on which the
Liquidation Value of such Share (plus all accrued and unpaid
dividends thereon) is paid to the holder of such Share. On such
date, all rights of the holder of such Share shall cease, and
such Share shall no longer be deemed to be issued and
outstanding.
4G. Redeemed or Otherwise Acquired Shares. Any Shares
which are redeemed or otherwise acquired by the Corporation shall
be canceled and retired to authorized but unissued shares and
shall not be reissued, sold or transferred.
4H. Other Redemptions or Acquisitions. The
Corporation shall not, nor shall it permit any Subsidiary to,
redeem or otherwise acquire any Shares of Series A Preferred,
except as expressly authorized herein or pursuant to a purchase
offer made pro rata to all holders of Series A Preferred on the
basis of the number of Shares owned by each such holder.
4I. Payment of Accrued Dividends. Except as provided
in paragraph 4J, the Corporation may not redeem any Series A
Preferred, unless all dividends accrued on the outstanding
Series A Preferred through the immediately preceding Dividend
Reference Date have been declared and paid in full.
4J. Special Redemptions.
(i) If a Change in Control has occurred or the
Corporation obtains knowledge that a Change in Control is
proposed to occur, the Corporation shall give prompt written
notice of such Change in Control describing in reasonable detail
the material terms and date of consummation thereof to each
holder of Series A Preferred, but in any event such notice shall
not be given later than five days after the occurrence of such
Change in Control, and
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the Corporation shall give each holder of Series A Preferred
prompt written notice of any material change in the terms or
timing of such transaction. Any holder of Series A Preferred may
require the Corporation to redeem all or any portion of the
Series A Preferred owned by such holder or holders at a price per
Share equal to the greater of (1) the Liquidation Value thereof
(plus all accrued and unpaid dividends thereon), (2) the Market
Price (as of the date which is five trading days prior to the
occurrence of such Change in Control) of the Common Stock into
which such Shares of Series A Preferred are convertible on such
date or (3) the value of the Common Stock into which such Shares
of Series A Preferred are convertible as of the consummation of
the Change in Control reflected by the Change in Control
transaction, by giving written notice to the Corporation of such
election prior to the later of (a) 21 days after receipt of the
Corporation's notice and (b) five days prior to the consummation
of the Change in Control (the "Expiration Date"). The
Corporation shall give prompt written notice of any such election
to all other holders of Series A Preferred within five days after
the receipt thereof, and each such holder shall have until the
later of (a) the Expiration Date or (b) ten days after receipt of
such second notice to request redemption hereunder (by giving
written notice to the Corporation) of all or any portion of the
Series A Preferred owned by such holder.
(ii) Upon receipt of such election(s), the Corporation
shall be obligated to redeem the aggregate number of Shares
specified therein on the occurrence of the Change in Control. If
any proposed Change in Control does not occur, all requests for
redemption in connection therewith shall be automatically
rescinded, or if there has been a material change in the terms or
the timing of the transaction, any holder of Series A Preferred
may rescind such holder's request for redemption by giving
written notice of such rescission to the Corporation.
(iii) A "Change in Control" shall be deemed to have
occurred at such time as any of the following events shall occur:
(a) any sale, transfer or issuance or series of sales, transfers
and/or issuances of Common Stock by the Corporation or any
holders thereof which results in any Person or group of Persons
(as the term "group" is used under the Securities Exchange Act of
1934) owning more than 40% of the Common Stock outstanding
immediately after such sale, transfer or issuance or series of
sales, transfers and/or issuances or (b) during any 12-month
period, individuals who
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at the beginning of such period constituted the Corporation's
Board of Directors (together with any new directors whose
election by such Board of Directors or whose nomination for
election by the stockholders of the Corporation was approved by a
majority vote of the directors who were either directors at the
beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to
constitute a majority of the Corporation's Board of Directors
then in office.
(iv) If a Fundamental Change is proposed to occur, the
Corporation shall give written notice of such Fundamental Change
describing in reasonable detail the material terms and date of
consummation thereof to each holder of Series A Preferred not
more than 45 days nor less than 20 days prior to the consummation
of such Fundamental Change, and the Corporation shall give each
holder of Series A Preferred prompt written notice of any
material change in the terms or timing of such transaction. Any
holder of Series A Preferred may require the Corporation to
redeem all or any portion of the Series A Preferred owned by such
holder at a price per Share equal to the greater of
(1) Liquidation Value thereof (plus all accrued and unpaid
dividends thereon), (2) the Market Price (as of the date which is
five trading days prior to the occurrence of such Fundamental
Change) of the Common Stock into which such Shares of Series A
Preferred are convertible on such date or (3) the value of the
Common Stock into which such Shares of Series A Preferred are
convertible as of the consummation of the Fundamental Change
reflected by the Fundamental Change transaction, by giving
written notice to the Corporation of such election prior to the
later of (a) ten days prior to the consummation of the
Fundamental Change or (b) ten days after receipt of notice from
the Corporation. The Corporation shall give prompt written
notice of such election to all other holders of Series A
Preferred (but in any event within five days prior to the
consummation of the Fundamental Change), and each such holder
shall have until two days after the receipt of such notice to
request redemption (by written notice given to the Corporation)
of all or any portion of the Series A Preferred owned by such
holder.
(v) Upon receipt of such election(s), the Corporation
shall be obligated to redeem the aggregate number of Shares
specified therein upon the consummation of such Fundamental
Change. If any proposed Fundamental Change does not occur, all
requests for redemption in connection therewith shall be
automatically re-
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<PAGE>
scinded, or if there has been a material change in the terms or
the timing of the transaction, any holder of Series A Preferred
may rescind such holder's request for redemption by delivering
written notice thereof to the Corporation prior to the
consummation of the transaction.
(vi) The term "Fundamental Change" means (a) any sale
or transfer of more than 50% of the assets of the Corporation and
its Subsidiaries on a consolidated basis (measured either by book
value in accordance with generally accepted accounting principles
consistently applied or by fair market value determined in the
reasonable good faith judgment of the Corporation's Board of
Directors) in any transaction or series of transactions (other
than sales in the ordinary course of business) and (b) any merger
or consolidation to which the Corporation is a party, except for
a merger in which the Corporation is the surviving corporation,
the terms of the Series A Preferred are not changed and the
Series A Preferred is not exchanged for cash, securities or other
property, and after giving effect to such merger, no Person or
group of Persons (as the term "group" is used under the
Securities Act of 1934) owns more than 40% of the Common Stock
outstanding immediately after such merger.
Section 5. Voting Rights.
5A. Election of Directors. So long as at least 3,300
Shares of the Series A Preferred remain outstanding, in the
election of directors of the Corporation, the holders of the
Series A Preferred, voting separately as a single class to the
exclusion of all other classes of the Corporation's capital stock
and with each Share of Series A Preferred entitled to one vote,
shall be entitled to elect one director to serve on the
Corporation's Board of Directors until his successor is duly
elected by the holders of the Series A Preferred or he is removed
from office by the holders of the Series A Preferred. If the
holders of the Series A Preferred for any reason fail to elect
anyone to fill any such directorship, such position shall remain
vacant until such time as the holders of the Series A Preferred
elect a director to fill such position and shall not be filled by
resolution or vote of the Corporation's Board of Directors or the
Corporation's other stockholders.
5B. Other Voting Rights. The holders of the Series A
Preferred shall be entitled to notice of all stockholders
meetings
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<PAGE>
in accordance with the Corporation's bylaws, and the holders of
the Series A Preferred shall be entitled to vote on all matters
submitted to the stockholders for a vote together with the
holders of the Common Stock voting together as a single class
with each share of Common Stock entitled to one vote per share
and each Share of Series A Preferred entitled to one vote for
each share of Common Stock issuable upon conversion of the
Series A Preferred as of the record date for such vote or, if no
record date is specified, as of the date of such vote.
Section 6. Conversion.
6A. Conversion Procedure.
(i) At any time and from time to time, any holder of
Series A Preferred may convert all or any portion of the Series A
Preferred (including any fraction of a Share) held by such holder
into a number of shares of Conversion Stock computed by
multiplying the number of Shares to be converted by $1,000 and
dividing the result by the Conversion Price then in effect.
(ii) Except as otherwise provided herein, each
conversion of Series A Preferred shall be deemed to have been
effected as of the close of business on the date on which the
certificate or certificates representing the Series A Preferred
to be converted have been surrendered for conversion at the
principal office of the Corporation. At the time any such
conversion has been effected, the rights of the holder of the
Shares converted as a holder of Series A Preferred shall cease
and the Person or Persons in whose name or names any certificate
or certificates for shares of Conversion Stock are to be issued
upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Conversion Stock represented
thereby.
(iii) The conversion rights of any Share subject to
redemption hereunder shall terminate on the Redemption Date for
such Share unless the Corporation has failed to pay to the holder
thereof the Liquidation Value of such Share (plus all accrued and
unpaid dividends thereon).
(iv) Notwithstanding any other provision hereof, if a
conversion of Series A Preferred is to be made in connection with
a Public Offering, a Change in Control, a Fundamental Change or
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<PAGE>
other transaction affecting the Corporation, the conversion of
any Shares of Series A Preferred may, at the election of the
holder thereof, be conditioned upon the consummation of such
transaction, in which case such conversion shall not be deemed to
be effective until such transaction has been consummated.
(v) As soon as possible after a conversion has been
effected (but in any event within five business days in the case
of subparagraph (a) below), the Corporation shall deliver to the
converting holder:
(a) a certificate or certificates representing
the number of shares of Conversion Stock issuable by reason
of such conversion in such name or names and such denomina-
tion or denominations as the converting holder has
specified; and
(b) a certificate representing any Shares of
Series A Preferred which were represented by the certificate
or certificates delivered to the Corporation in connection
with such conversion but which were not converted.
(vi) Upon conversion, the accrued and unpaid dividends
on the Series A Preferred being converted shall be extinguished
and shall no longer be deemed payable.
(vii) The issuance of certificates for shares of Conver-
sion Stock upon conversion of Series A Preferred shall be made
without charge to the holders of such Series A Preferred for any
issuance tax in respect thereof or other cost incurred by the
Corporation in connection with such conversion and the related
issuance of shares of Conversion Stock. Upon conversion of each
Share of Series A Preferred, the Corporation shall take all such
actions as are necessary in order to insure that the Conversion
Stock issuable with respect to such conversion shall be validly
issued, fully paid and nonassessable, free and clear of all
taxes, liens, charges and encumbrances with respect to the
issuance thereof.
(viii) The Corporation shall not close its books against
the transfer of Series A Preferred or of Conversion Stock issued
or issuable upon conversion of Series A Preferred in any manner
which interferes with the timely conversion of Series A
Preferred. The Corporation shall assist and cooperate with any
holder of Shares
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<PAGE>
required to make any governmental filings or obtain any
governmental approval prior to or in connection with any
conversion of Shares hereunder (including, without limitation,
making any filings required to be made by the Corporation).
(ix) The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of
Conversion Stock, solely for the purpose of issuance upon the
conversion of the Series A Preferred, such number of shares of
Conversion Stock issuable upon the conversion of all outstanding
Series A Preferred. All shares of Conversion Stock which are so
issuable shall, when issued, be duly and validly issued, fully
paid and nonassessable and free from all taxes, liens and
charges. The Corporation shall take all such actions as may be
necessary to assure that all such shares of Conversion Stock may
be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic
securities exchange upon which shares of Conversion Stock may be
listed (except for official notice of issuance which shall be
immediately delivered by the Corporation upon each such
issuance). The Corporation shall not take any action which would
cause the number of authorized but unissued shares of Conversion
Stock to be less than the number of such shares required to be
reserved hereunder for issuance upon conversion of the Series A
Preferred.
(x) If any fractional interest in a share of
Conversion Stock would, except for the provisions of this
subparagraph, be delivered upon any conversion of the Series A
Preferred, the Corporation, in lieu of delivering the fractional
share therefor, shall pay an amount to the holder thereof equal
to the Market Price of such fractional interest as of the date of
conversion.
6B. Conversion Price.
(i) The initial Conversion Price shall be $16.00. In
order to prevent dilution of the conversion rights granted under
this Section 6, the Conversion Price shall be subject to
adjustment from time to time pursuant to this paragraph 6B.
(ii) If and whenever the Corporation issues or sells,
or in accordance with paragraph 6C is deemed to have issued or
sold, any share of Common Stock for a consideration per share
less than the Conversion Price in effect immediately prior to
such time, then
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<PAGE>
immediately upon such issue or sale or deemed issue or sale the
Conversion Price shall be reduced to the lowest net price per
share (as determined pursuant to paragraph 6C(v) below) at which
any such share of Common Stock has been issued or sold or is
deemed to have been issued or sold.
(iii) Notwithstanding the foregoing, there shall be no
adjustment to the Conversion Price hereunder with respect to the
granting of stock options to employees or directors of the
Corporation and its Subsidiaries or the exercise thereof or the
granting of stock appreciation rights, phantom stock rights or
other similar rights to employees or directors of the Corporation
for (or rights relating to) an aggregate of 1,596,702 shares of
Common Stock (976,594 options being currently outstanding) (as
such number of shares is equitably adjusted for subsequent stock
splits, stock combinations, stock dividends and recapitalizations
and such number shall include all stock options outstanding as of
the date of the Purchase Agreement).
6C. Effect on Conversion Price of Certain Events. For
purposes of determining the adjusted Conversion Price under
paragraph 6B, the following shall be applicable:
(i) Issuance of Rights or Options. If the Corporation
in any manner grants or sells any Option and the lowest price per
share for which any one share of Common Stock is issuable upon
the exercise of any such Option, or upon conversion or exchange
of any Convertible Security issuable upon exercise of any such
Option, is less than the Conversion Price in effect immediately
prior to the time of the granting or sale of such Option, then
such share of Common Stock shall be deemed to be outstanding and
to have been issued and sold by the Corporation at the time of
the granting or sale of such Option for such price per share.
For purposes of this paragraph, the "lowest price per share for
which any one share of Common Stock is issuable" shall be equal
to the sum of the lowest amounts of consideration (if any)
received or receivable by the Corporation with respect to any one
share of Common Stock upon the granting or sale of the Option,
upon exercise of the Option and upon conversion or exchange of
any Convertible Security issuable upon exercise of such Option.
No further adjustment of the Conversion Price shall be made upon
the actual issue of such Common Stock or such Convertible
Security upon the exercise of such
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<PAGE>
Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Security.
(ii) Issuance of Convertible Securities. If the
Corporation in any manner issues or sells any Convertible
Security and the lowest price per share for which any one share
of Common Stock is issuable upon conversion or exchange thereof
is less than the Conversion Price in effect immediately prior to
the time of such issue or sale, then such share of Common Stock
shall be deemed to be outstanding and to have been issued and
sold by the Corporation at the time of the issuance or sale of
such Convertible Securities for such price per share. For the
purposes of this paragraph, the "lowest price per share for which
any one share of Common Stock is issuable" shall be equal to the
sum of the lowest amounts of consideration (if any) received or
receivable by the Corporation with respect to any one share of
Common Stock upon the issuance or sale of the Convertible
Security and upon the conversion or exchange of such Convertible
Security. No further adjustment of the Conversion Price shall be
made upon the actual issue of such Common Stock upon conversion
or exchange of any Convertible Security, and if any such issue or
sale of such Convertible Security is made upon exercise of any
Options for which adjustments of the Conversion Price had been or
are to be made pursuant to other provisions of this Section 6, no
further adjustment of the Conversion Price shall be made by
reason of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Option, the additional
consideration (if any) payable upon the issue, conversion or
exchange of any Convertible Security or the rate at which any
Convertible Security is convertible into or exchangeable for
Common Stock changes at any time, the Conversion Price in effect
at the time of such change shall be adjusted immediately to the
Conversion Price which would have been in effect at such time had
such Option or Convertible Security originally provided for such
changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted, issued
or sold. For purposes of paragraph 6C, if the terms of any
Option or Convertible Security which was outstanding as of May
19, 1995 are changed in the manner described in the immediately
preceding sentence, then such Option or Convertible Security and
the Common Stock deemed issuable upon exercise, conversion or
exchange thereof shall be deemed to have
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<PAGE>
been issued as of the date of such change; provided that no such
change shall at any time cause the Conversion Price hereunder to
be increased.
(iv) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the
termination of any right to convert or exchange any Convertible
Security without the exercise of any such Option or right, the
Conversion Price then in effect hereunder shall be adjusted
immediately to the Conversion Price which would have been in
effect at the time of such expiration or termination had such
Option or Convertible Security, to the extent outstanding
immediately prior to such expiration or termination, never been
issued; provided that if such expiration or termination would
result in an increase in the Conversion Price then in effect,
such increase shall not be effective until 30 days after written
notice thereof has been given to all holders of the Series A
Preferred. For purposes of paragraph 6C, the expiration or
termination of any Option or Convertible Security which was
outstanding as of May 19, 1995 shall not cause the Conversion
Price hereunder to be adjusted unless, and only to the extent
that, a change in the terms of such Option or Convertible
Security caused it to be deemed to have been issued after such
date.
(v) Calculation of Consideration Received. If any
Common Stock, Option or Convertible Security is issued or sold or
deemed to have been issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by
the Corporation therefor (net of discounts, commissions and
related expenses). If any Common Stock, Option or Convertible
Security is issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the
Corporation shall be the fair value of such consideration, except
where such consideration consists of securities, in which case
the amount of consideration received by the Corporation shall be
the Market Price thereof as of the date of receipt. If any
Common Stock, Option or Convertible Security is issued to the
owners of the non-surviving entity in connection with any merger
in which the Corporation is the surviving corporation, the amount
of consideration therefor shall be deemed to be the fair value of
such portion of the net assets and business of the non-surviving
entity as is attributable to such Common Stock, Option or
Convertible Security, as the case may be. The fair value of any
consideration other than cash and
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<PAGE>
securities shall be determined jointly by the Corporation and the
holders of a majority of the outstanding Series A Preferred. If
such parties are unable to reach agreement within a reasonable
period of time, the fair value of such consideration shall be
determined by an independent appraiser experienced in valuing
such type of consideration jointly selected by the Corporation
and the holders of a majority of the outstanding Series A
Preferred. The determination of such appraiser shall be final
and binding upon the parties, and the fees and expenses of such
appraiser shall be borne by the Corporation.
(vi) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities
of the Corporation, together comprising one integrated
transaction in which no specific consideration is allocated to
such Option by the parties thereto, the Option shall be deemed to
have been issued for a consideration of $.01.
(vii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Corporation or any
Subsidiary, and the disposition of any shares so owned or held
shall be considered an issue or sale of Common Stock.
(viii) Record Date. If the Corporation takes a record of
the holders of Common Stock for the purpose of entitling them
(a) to receive a dividend or other distribution payable in Common
Stock, Options or in Convertible Securities or (b) to subscribe
for or purchase Common Stock, Options or Convertible Securities,
then such record date shall be deemed to be the date of the issue
or sale of the shares of Common Stock deemed to have been issued
or sold upon the declaration of such dividend or upon the making
of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
6D. Subdivision or Combination of Common Stock. If
the Corporation at any time subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more classes of
its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced, and if the Corpora-
tion at any time combines (by reverse stock split or otherwise)
one or more classes of its outstanding shares of Common Stock
into a smaller
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<PAGE>
number of shares, the Conversion Price in effect immediately
prior to such combination shall be proportionately increased.
6E. Reorganization, Reclassification, Consolidation,
Merger or Sale. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or
substantially all of the Corporation's assets or other
transaction, in each case which is effected in such a manner that
the holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for Common Stock, is
referred to herein as an "Organic Change". Prior to the
consummation of any Organic Change, the Corporation shall make
appropriate provisions (in form and substance satisfactory to the
holders of a majority of the Series A Preferred then outstanding)
to insure that each of the holders of Series A Preferred shall
thereafter have the right to acquire and receive, in lieu of or
in addition to (as the case may be) the shares of Conversion
Stock immediately theretofore acquirable and receivable upon the
conversion of such holder's Series A Preferred, such shares of
stock, securities or assets as such holder would have received in
connection with such Organic Change if such holder had converted
its Series A Preferred immediately prior to such Organic Change.
In each such case, the Corporation shall also make appropriate
provisions (in form and substance satisfactory to the holders of
a majority of the Series A Preferred then outstanding) to insure
that the provisions of this Section 6 and Sections 7 and 8 hereof
shall thereafter be applicable to the Series A Preferred
(including, in the case of any such consolidation, merger or sale
in which the successor entity or purchasing entity is other than
the Corporation, an immediate adjustment of the Conversion Price
to the value for the Common Stock reflected by the terms of such
consolidation, merger or sale, and a corresponding immediate
adjustment in the number of shares of Conversion Stock acquirable
and receivable upon conversion of Series A Preferred, if the
value so reflected is less than the Conversion Price in effect
immediately prior to such consolidation, merger or sale). The
Corporation shall not effect any such consolidation, merger or
sale, unless prior to the consummation thereof, the successor
entity (if other than the Corporation) resulting from
consolidation or merger or the entity purchasing such assets
assumes by written instrument (in form and substance satisfactory
to the holders of a majority of the Series A Preferred then
outstanding), the obligation to deliver to each such holder such
shares of stock,
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securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire.
6F. Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 6 but not
expressly provided for by such provisions (including the granting
of stock appreciation rights, phantom stock rights or other
rights with equity features), then the Corporation's Board of
Directors shall make an appropriate adjustment in the Conversion
Price so as to protect the rights of the holders of Series A
Preferred; provided that no such adjustment shall increase the
Conversion Price as otherwise determined pursuant to this
Section 6 or decrease the number of shares of Conversion Stock
issuable upon conversion of each Share of Series A Preferred.
6G. Notices.
(i) Immediately upon any adjustment of the Conversion
Price, the Corporation shall give written notice thereof to all
holders of Series A Preferred, setting forth in reasonable detail
and certifying the calculation of such adjustment.
(ii) The Corporation shall give written notice to all
holders of Series A Preferred at least 20 days prior to the date
on which the Corporation closes its books or takes a record
(a) with respect to any dividend or distribution upon Common
Stock, (b) with respect to any pro rata subscription offer to
holders of Common Stock or (c) for determining rights to vote
with respect to any Organic Change, dissolution or liquidation.
(iii) The Corporation shall also give written notice to
the holders of Series A Preferred at least 20 days prior to the
date on which any Organic Change shall take place.
6H. Mandatory Conversion. All of the Shares of issued
and outstanding Series A Preferred will be automatically
converted to Common Stock at the Conversion Price then in effect
without any further action on the part of the Corporation or the
holders thereof if, at any time after May 19, 1997, (i) the daily
trading volume of the Common Stock in the public markets exceeds
5% of the number of shares of Common Stock issuable upon
conversion of all Shares of Series A Preferred for each of 45
consecutive trading days, (ii) no holder of Series A Preferred is
subject to any
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underwriters lockup agreement restricting the transferability of
the shares of Conversion Stock issuable upon conversion of such
Series A Preferred and (iii) the Market Price of the Common Stock
on any of the anniversary dates of the issuance of the Notes set
forth below equals or exceeds the corresponding price set forth
below (subject to adjustment for stock splits, stock
consolidations and stock dividends):
2nd Anniversary $32.00
3rd Anniversary $32.00
4th Anniversary $39.06
5th Anniversary $39.81
6th Anniversary $47.78
7th Anniversary $57.33
In the event that any measurement of the market price
of the Common Stock is to occur on a date between two anniversary
dates, the share price amounts above shall be prorated (based
upon the number of days elapsed between such anniversary dates).
Section 7. Liquidating Dividends.
If the Corporation declares or pays a dividend upon the
Common Stock payable otherwise than in cash out of earnings or
earned surplus (determined in accordance with generally accepted
accounting principles, consistently applied) except for a stock
dividend payable in shares of Common Stock (a "Liquidating
Dividend"), then the Corporation shall pay to the holders of
Series A Preferred at the time of payment thereof the Liquidating
Dividends which would have been paid on the shares of Conversion
Stock had such Series A Preferred been converted immediately
prior to the date on which a record is taken for such Liquidating
Dividend, or, if no record is taken, the date as of which the
record holders of Common Stock entitled to such dividends are to
be determined.
Section 8. Purchase Rights.
If at any time the Corporation grants, issues or sells
any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record
holders of any class of Common Stock (the "Purchase Rights"),
then each holder of Series A Preferred shall be entitled to
acquire,
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upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such holder could have acquired if such
holder had held the number of shares of Conversion Stock
acquirable upon conversion of such holder's Series A Preferred
immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or if no such
record is taken, the date as of which the record holders of
Common Stock are to be determined for the grant, issue or sale of
such Purchase Rights.
Section 9. Events of Noncompliance.
9A. Definition. An Event of Noncompliance shall have
occurred if:
(i) the Corporation fails to make any redemption
payment with respect to the Series A Preferred which it is
required to make hereunder, whether or not such payment is
legally permissible or is prohibited by any agreement to which
the Corporation is subject, and such failure is not cured within
5 days after the occurrence thereof;
(ii) the Corporation breaches or otherwise fails to
perform or observe any other material covenant or agreement set
forth herein or in the Purchase Agreement, and such failure is
not cured within 30 days after the earlier of (A) the receipt of
notice thereof by the holders of the Series A Preferred or (B)
the discovery thereof by the Corporation;
(iii) any representation or warranty contained in the
Purchase Agreement or required to be furnished to any holder of
Series A Preferred pursuant to the Purchase Agreement, is false
or misleading in any material respect on the date made or
furnished and such false or misleading representation, warranty
or information relates to a material adverse effect on the
Corporation and its Subsidiaries, taken as a whole, or fails to
disclose a material adverse change on the Corporation and its
Subsidiaries, taken as a whole; provided that, notwithstanding
the foregoing, in the case of paragraph 5J of the Purchase
Agreement, any occurrence, event, transaction or claim which
results in any loss, damage or injury to the Corporation and its
Subsidiaries in excess of $4,000,000 shall conclusively be deemed
to have material adverse effect and be a material adverse change
hereunder;
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(iv) the Corporation or any Subsidiary makes an
assignment for the benefit of creditors or admits in writing its
inability to pay its debts generally as they become due; or an
order, judgment or decree is entered adjudicating the Corporation
or any Material Subsidiary bankrupt or insolvent; or any order
for relief with respect to the Corporation or any Material
Subsidiary is entered under the Federal Bankruptcy Code; or the
Corporation or any Material Subsidiary petitions or applies to
any tribunal for the appointment of a custodian, trustee,
receiver or liquidator of the Corporation or any Material
Subsidiary or of any substantial part of the assets of the
Corporation or any Material Subsidiary, or commences any
proceeding (other than a proceeding for the voluntary liquidation
and dissolution of a Subsidiary) relating to the Corporation or
any Material Subsidiary under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction; or any such petition or
application is filed, or any such proceeding is commenced,
against the Corporation or any Material Subsidiary and either
(a) the Corporation or any such Material Subsidiary by any act
indicates its approval thereof, consent thereto or acquiescence
therein or (b) such petition, application or proceeding is not
dismissed within 60 days;
(v) a judgment in excess of $500,000 is rendered
against the Corporation or any Material Subsidiary and, within 60
days after entry thereof, such judgment is not discharged or
execution thereof stayed pending appeal, or within 60 days after
the expiration of any such stay, such judgment is not discharged;
or
(vi) the Corporation or any Material Subsidiary
defaults in the performance of any obligation or agreement if the
effect of such default is to cause an amount exceeding $500,000
to become due prior to its stated maturity or to permit the
holder or holders of any obligation to cause an amount exceeding
$500,000 to become due prior to its stated maturity.
The foregoing shall constitute Events of Noncompliance
whatever the reason or cause for any such Event of Noncompliance
and whether it is voluntary or involuntary or is effected by
operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative
or governmental body.
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9B. Consequences of Events of Noncompliance.
(i) If an Event of Noncompliance of the type described
in subparagraph 9A(i), 9A(ii) or 9A(iii) (with respect to
paragraphs 5J and 5X of the Purchase agreement only) has occurred
and is continuing, the dividend rate on the Series A Preferred
shall increase immediately to 15%. Any increase of the dividend
rate resulting from the operation of this subparagraph shall
terminate as of the close of business on the date on which no
Event of Noncompliance of the type described in subparagraph
9A(i) or 9A(ii) exists, subject to subsequent increases pursuant
to this paragraph.
(ii) If any Event of Noncompliance of the type
described in subparagraph 9A(i), 9A(ii) or 9A(iii) (with respect
to paragraphs 5J and 5X of the Purchase Agreement only) has
occurred, the Conversion Price on the Series A Preferred shall be
reduced immediately by 1/3 of the Conversion Price in effect
immediately prior to such adjustment. In no event shall such
Conversion Price adjustment be rescinded, and in no event shall
there be more than one adjustment pursuant to this subparagraph.
(iii) If an Event of Noncompliance (other than an Event
of Noncompliance of the type described in subparagraph 9A(iv))
has occurred and is continuing, the holder or holders of a
majority of the Series A Preferred then outstanding may demand
(by written notice delivered to the Corporation) immediate
redemption of all or any portion of the Series A Preferred owned
by such holder or holders at a price per Share equal to the
Liquidation Value thereof (plus all accrued and unpaid dividends
thereon). The Corporation shall give prompt written notice of
such election to the other holders of Series A Preferred (but in
any event within five days after receipt of the initial demand
for redemption), and each such other holder may demand immediate
redemption of all or any portion of such holder's Series A
Preferred by giving written notice thereof to the Corporation
within seven days after receipt of the Corporation's notice. The
Corporation shall redeem all Series A Preferred as to which
rights under this paragraph have been exercised within 15 days
after receipt of the initial demand for redemption. The amounts
payable hereunder with respect to the Series A Preferred shall be
the greater of (1) the Liquidation Value of such Series A
Preferred and (2) the Market Price (on the date which is five
trading days prior to the date of payment) of
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the Common Stock into which such Series A Preferred is
convertible; provided that to the extent the amount in clause (2)
above exceeds the amount in clause (1) above, all or a portion of
such excess may, at the option of the Corporation's Board of
Directors, be paid in the form of Common Stock (valued at the
Market Price of the Common Stock on such date) up to and not
exceeding a number of shares of Common Stock equal to 20
multiplied by the average daily trading volume of the Common
Stock in the public markets for a period of 45 consecutive
trading days ending on such date and the remainder shall be paid
in cash.
(iv) If an Event of Noncompliance of the type described
in subparagraph 9A(iv) has occurred, all of the Series A
Preferred then outstanding shall be subject to immediate
redemption by the Corporation (without any action on the part of
the holders of the Series A Preferred) at a price per Share equal
to the Liquidation Value thereof (plus all accrued and unpaid
dividends thereon). The Corporation shall immediately redeem all
Series A Preferred upon the occurrence of such Event of
Noncompliance.
(v) If any Event of Noncompliance exists, each holder
of Series A Preferred shall also have any other rights which such
holder is entitled to under any contract or agreement at any time
and any other rights which such holder may have pursuant to
applicable law.
Section 10. Registration of Transfer.
The Corporation shall keep at its principal office a
register for the registration of Series A Preferred. Upon the
surrender of any certificate representing Series A Preferred at
such place, the Corporation shall, at the request of the record
holder of such certificate, execute and deliver (at the
Corporation's expense) a new certificate or certificates in
exchange therefor representing in the aggregate the number of
Shares represented by the surrendered certificate. Each such new
certificate shall be registered in such name and shall represent
such number of Shares as is requested by the holder of the
surrendered certificate and shall be substantially identical in
form to the surrendered certificate, and dividends shall accrue
on the Series A Preferred represented by such new certificate
from the date to which dividends have been fully paid on such
Series A Preferred represented by the surrendered certificate.
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Section 11. Replacement.
Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the registered holder shall be
satisfactory) of the ownership and the loss, theft, destruction
or mutilation of any certificate evidencing Shares of Series A
Preferred, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to
the Corporation (provided that if the holder is a financial
institution or other institutional investor its own agreement
shall be satisfactory), or, in the case of any such mutilation
upon surrender of such certificate, the Corporation shall (at its
expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of Shares of
such class represented by such lost, stolen, destroyed or
mutilated certificate and dated the date of such lost, stolen,
destroyed or mutilated certificate, and dividends shall accrue on
the Series A Preferred represented by such new certificate from
the date to which dividends have been fully paid on such lost,
stolen, destroyed or mutilated certificate.
Section 12. Definitions.
"Change in Control" has the meaning set forth in
paragraph 4J hereof.
"Common Stock" means, collectively, the Corporation's
Common Stock, par value $.015, and any capital stock of any class
of the Corporation which is not limited to a fixed sum or
percentage of par or stated value in respect to the rights of the
holders thereof to participate in dividends or in the
distribution of assets upon any liquidation, dissolution or
winding up of the Corporation.
"Conversion Stock" means shares of the Corporation's
Common Stock, par value $.015 per share; provided that if there
is a change such that the securities issuable upon conversion of
the Series A Preferred are issued by an entity other than the
Corporation or there is a change in the type or class of
securities so issuable, then the term "Conversion Stock" shall
mean one share of the security issuable upon conversion of the
Series A Preferred if such security is issuable in shares, or
shall mean the smallest
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unit in which such security is issuable if such security is not
issuable in shares.
"Convertible Securities" means any stock or securities
(other than Options) directly or indirectly convertible into or
exchangeable for Common Stock.
"Fundamental Change" has the meaning set forth in
paragraph 4J hereof.
"Junior Securities" means any capital stock or other
equity securities of the Corporation, except for the Series A
Preferred.
"Liquidation Value" of any Share as of any particular
date shall be equal to $1,000.
"Market Price" of any publicly traded security means
the average of the closing prices of such security's sales on all
securities exchanges on which such security may at the time be
listed, or, if there has been no sales on any such exchange on
any day, the average of the highest bid and lowest asked prices
on all such exchanges at the end of such day, or, if on any day
such security is not so listed, the average of the representative
bid and asked prices quoted in the NASDAQ System as of 4:00 P.M.,
New York time, or, if on any day such security is not quoted in
the NASDAQ System, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market
as reported by the National Quotation Bureau, Incorporated, or
any similar successor organization, in each such case averaged
over a period of 15 days consisting of the day as of which
"Market Price" is being determined and the 14 consecutive
business days prior to such day. "Market Price" of any security
which is not publicly traded means the fair value of such
security determined jointly by the Corporation and the holders of
a majority of the Series A Preferred; provided that if such
parties are unable to reach agreement within a reasonable period
of time, such fair value shall be determined by an independent
appraiser experienced in valuing securities jointly selected by
the Corporation and the holders of a majority of the Series A
Preferred without application of any minority or blockage
discounts. The determination of such appraiser shall be final
and binding upon the parties, and the Corporation shall pay the
fees and expenses of such appraiser.
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"Options" means any rights, warrants or options to
subscribe for or purchase Common Stock or Convertible Securities.
"Person" means an individual, a partnership, a corpora-
tion, a limited liability company, a limited liability, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Public Offering" means any offering by the Corporation
of its capital stock or equity securities to the public pursuant
to an effective registration statement under the Securities Act
of 1933, as then in effect, or any comparable statement under any
similar federal statute then in force.
"Purchase Agreement" means the Note and Warrant
Purchase Agreement, dated as of May 19, 1995 by and among the
Corporation and certain investors, as such agreement may from
time to time be amended in accordance with its terms.
"Redemption Date" as to any Share means the date
specified in the notice of any redemption at the Corporation's
option or the applicable date specified herein in the case of any
other redemption; provided that no such date shall be a
Redemption Date unless the Liquidation Value of such Share (plus
all accrued and unpaid dividends thereon and any required premium
with respect thereto) is actually paid in full on such date, and
if not so paid in full, the Redemption Date shall be the date on
which such amount is fully paid.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, association
or other business entity of which (i) if a corporation, a
majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the
time owned or controlled, directly or indirectly, by that Person
or one or more of the other Subsidiaries of that Person or a
combination thereof, or (ii) if a limited liability company,
partnership, association or other business entity, a majority of
the partnership or other similar ownership interest thereof is at
the time owned or controlled, directly or indirectly, by any
Person or one or more Subsidiaries of that Person or a
combination thereof. For purposes
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hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership,
association or other business entity if such Person or Persons
shall be allocated a majority of limited liability company, part-
nership, association or other business entity gains or losses or
shall be or control any managing director or general partner of
such limited liability company, partnership, association or other
business entity.
Section 13. Amendment and Waiver.
No amendment, modification or waiver shall be binding
or effective with respect to any provision of Sections 1 to 14
hereof without the prior written consent of the holders of a
majority of the Series A Preferred outstanding at the time such
action is taken; provided that no such action shall change
(a) the rate at which or the manner in which dividends on the
Series A Preferred accrue or the times at which such dividends
become payable or the amount payable on redemption of the
Series A Preferred or the times at which redemption of Series A
Preferred is to occur, without the prior written consent of the
holders of at least 66% of the Series A Preferred then
outstanding, (b) the Conversion Price of the Series A Preferred
or the number of shares or class of stock into which the Series A
Preferred is convertible, without the prior written consent of
the holders of at least 66% of the Series A Preferred then
outstanding or (c) the percentage required to approve any change
described in clauses (a) and (b) above, without the prior written
consent of the holders of at least 66% of the Series A Preferred
then outstanding; and provided further that no change in the
terms hereof may be accomplished by merger or consolidation of
the Corporation with another corporation or entity unless the
Corporation has obtained the prior written consent of the holders
of the applicable percentage of the Series A Preferred then
outstanding.
Section 14. Notices. Except as otherwise provided
hereunder, all notices referred to herein shall be in writing and
shall be deemed to have been given when delivered personally to
the recipient, sent to the recipient by reputable overnight
carrier service (charges prepaid) or five days after being mailed
to the recipient by certified or registered mail, return receipt
requested and postage prepaid. Such notices, demands and other
communications shall be sent (i) to the Corporation, at its
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principal executive offices and (ii) to any stockholder, at such
holder's address as it appears in the stock records of the
Corporation (unless otherwise indicated by any such holder).
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EXHIBIT E
ACC CORP.
REGISTRATION AGREEMENT
THIS AGREEMENT is made as of May 22, 1995, between ACC
Corp., a Delaware corporation (the "Company"), Fleet Venture
Resources, Inc. ("Fleet Venture"), Fleet Equity Partners VI, L.P.
("Fleet Equity") and Chisholm Partners II, L.P. ("Chisholm").
The parties to this Agreement are parties to a Note and
Warrant Purchase Agreement of even date herewith (the "Purchase
Agreement"). In order to induce Fleet Venture, Fleet Equity and
Chisholm (the "Investors") to enter into the Purchase Agreement,
the Company has agreed to provide the registration rights set
forth in this Agreement. The execution and delivery of this
Agreement is a condition to the Closing under the Purchase
Agreement. Unless otherwise provided in this Agreement,
capitalized terms used herein shall have the meanings set forth
in paragraph 8 hereof.
The parties hereto agree as follows:
1. Demand Registrations.
1A. Requests for Registration. At any time, the
holders of a majority of the Registrable Securities may request
registration under the Securities Act of all or any portion of
their Registrable Securities on Form S-1 or any similar long-form
registration ("Long-Form Registrations"), and the holders of a
majority of the Registrable Securities may request registration
under the Securities Act of all or any portion of their
Registrable Securities on Form S-2 or S-3 or any similar
short-form registration ("Short-Form Registrations") if
available. All registrations requested pursuant to this paragraph
1(a) are referred to herein as "Demand Registrations". Each
request for a Demand Registration shall specify the approximate
number of Registrable Securities requested to be registered and
the anticipated per share price range for such offering. Within
ten days after receipt of any such request, the Company shall
give written notice of such requested registration to all other
holders of Registrable Securities and shall include in such
registration all Registrable Securities with respect to which the
Company has
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received written requests for inclusion therein within 15 days
after the receipt of the Company's notice.
1B. Long-Form Registrations. The holders of
Registrable Securities shall be entitled to request two Long-Form
Registrations in which the Company shall pay all Registration
Expenses; provided that the aggregate offering value of the
Registrable Securities requested to be registered in any Long-
Form Registration must equal at least $7,500,000. A registration
shall not count as one of the permitted Long-Form Registrations
until it has become effective; provided that in any event the
Company shall pay all Registration Expenses in connection with
any registration initiated as a Long-Form Registration whether or
not it has become effective. All Long-Form Registrations shall
be underwritten registrations.
1C. Short-Form Registrations. In addition to the
Long-Form Registrations provided pursuant to paragraph 1(b), the
holders of the Registrable Securities shall be entitled to
request five Short-Form Registrations in which the Company shall
pay all Registration Expenses; provided that the aggregate
offering value of the Registrable Securities requested to be
registered in any Short-Form Registration must equal at least
$5,000,000. Demand Registrations shall be Short-Form Registra-
tions whenever the Company is permitted to use any applicable
short form. The Company shall use its best efforts to make
Short-Form Registrations available for the sale of Registrable
Securities. A registration shall not count as one of the
permitted Short-Form Registrations until it has become effective;
provided that in any event the Company shall pay all Registration
Expenses in connection with any registration initiated as a
Short-Form Registration whether or not it has become effective.
1D. Priority on Demand Registrations. The Company
shall not include in any Demand Registration any securities which
are not Registrable Securities without the prior written consent
of the holders of a majority of the Registrable Securities
included in such registration. If a Demand Registration is an
underwritten offering and the managing underwriters advise the
Company in writing that in their opinion the number of
Registrable Securities and, if permitted hereunder, other
securities requested to be included in such offering exceeds the
number of Registrable Securities and other securities, if any,
which can be sold in an orderly manner in such offering within a
price range acceptable to the holders of a majority of the
Registrable Securities initially
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requesting registration, the Company shall include in such
registration prior to the inclusion of any securities which are
not Registrable Securities the number of Registrable Securities
requested to be included which in the opinion of such
underwriters can be sold in an orderly manner within the price
range of such offering, pro rata among the respective holders
thereof on the basis of the amount of Registrable Securities
owned by each such holder. Any Persons other than holders of
Registrable Securities who participate in Demand Registrations
which are not at the Company's expense must pay their share of
the Registration Expenses as provided in paragraph 5 hereof.
1E. Restrictions on Long-Form Registrations. The
Company shall not be obligated to effect any Long-Form
Registration within 180 days after the effective date of a
previous Long-Form Registration.
1F. Selection of Underwriters. The holders of a
majority of the Registrable Securities included in any Demand
Registration shall have the right to select the investment
banker(s) and manager(s) to administer the offering, subject to
the Company's approval which shall not be unreasonably withheld.
2. Piggyback Registrations.
2A. Right to Piggyback. Whenever the Company proposes
to register any of its securities under the Securities Act (other
than pursuant to a Demand Registration and other than for
employee benefit plans, stock purchase plan, or shares issuable
upon conversion of Convertible Securities) and the registration
form to be used may be used for the registration of Registrable
Securities (a "Piggyback Registration"), the Company shall give
prompt written notice (in any event within three business days
after its receipt of notice of any exercise of demand
registration rights other than under this Agreement) to all
holders of Registrable Securities of its intention to effect such
a registration and shall include in such registration all
Registrable Securities with respect to which the Company has
received written requests for inclusion therein within 20 days
after the receipt of the Company's notice.
2B. Piggyback Expenses. The Registration Expenses of
the holders of Registrable Securities shall be paid by the
Company in all Piggyback Registrations.
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2C. Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of
the Company, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested
to be included in such registration exceeds the number which can
be sold in an orderly manner in such offering within a price
range acceptable to the Company, the Company shall include in
such registration (i) first, the securities the Company proposes
to sell, (ii) second, the Registrable Securities requested to be
included in such registration, pro rata among the holders of such
Registrable Securities on the basis of the number of shares owned
by each such holder, and (iii) third, other securities requested
to be included in such registration.
2D. Priority on Secondary Registrations. If a
Piggyback Registration is an underwritten secondary registration
on behalf of holders of the Company's securities, and the
managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in an orderly
manner in such offering within a price range acceptable to the
holders initially requesting such registration, the Company shall
include in such registration (i) first, the securities requested
to be included therein by the holders requesting such
registration and the Registrable Securities requested to be
included in such registration, pro rata among the holders of such
securities on the basis of the number of securities so requested
to be included therein, and (ii) second, other securities
requested to be included in such registration.
2E. Other Registrations. If the Company has
previously filed a registration statement with respect to
Registrable Securities pursuant to paragraph 1 or pursuant to
this paragraph 2, and if such previous registration has not been
withdrawn or abandoned, the Company shall not file or cause to be
effected any other registration of any of its equity securities
or securities convertible or exchangeable into or exercisable for
its equity securities under the Securities Act (except on Form
S-8 or any successor form), whether on its own behalf or at the
request of any holder or holders of such securities, until a
period of at least 90 days has elapsed from the effective date of
such previous registration.
3. Holdback Agreements.
3A. Each holder of Registrable Securities shall not
effect any public sale or distribution (including sales pursuant
to
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Rule 144) of equity securities of the Company, or any securities
convertible into or exchangeable or exercisable for such securi-
ties, during the seven days prior to and the 90-day period begin-
ning on the effective date of any underwritten registration of
the Company's Common Stock (except as part of such underwritten
registration), unless the underwriters managing the registered
public offering otherwise agree.
3B. The Company shall not effect any public sale or
distribution of its equity securities, or any securities convert-
ible into or exchangeable or exercisable for such securities,
during the seven days prior to and during the 90-day period
beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration (except
as part of such underwritten registration or pursuant to
registrations on Form S-8 or any successor form), unless the
underwriters managing the registered public offering otherwise
agree.
4. Registration Procedures. Whenever the holders of
Registrable Securities have requested that any Registrable
Securities be registered pursuant to this Agreement, the Company
shall use its best efforts to effect the registration of such
Registrable Securities in accordance with the intended method of
disposition thereof and pursuant thereto the Company shall as
expeditiously as possible:
4A. prepare and file with the Securities and Exchange
Commission a registration statement with respect to such
Registrable Securities and use its best efforts to cause such
registration statement to become effective (provided that before
filing a registration statement or prospectus or any amendments
or supplements thereto, the Company shall furnish to the counsel
selected by the holders of a majority of the Registrable
Securities covered by such registration statement copies of all
such documents proposed to be filed, which documents shall be
subject to the review and comment of such counsel);
4B. notify each holder of Registrable Securities of
the effectiveness of each registration statement filed hereunder
and prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a
period of not less than 90 days and comply with the provisions of
the Securities Act with respect to the disposition of all
securities covered by such
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<PAGE>
registration statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth
in such registration statement;
4C. furnish to each seller of Registrable Securities
such number of copies of such registration statement, each amend-
ment and supplement thereto, the prospectus included in such
registration statement (including each preliminary prospectus)
and such other documents as such seller may reasonably request in
order to facilitate the disposition of the Registrable Securities
owned by such seller;
4D. use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky
laws of such jurisdictions as any seller reasonably requests and
do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities
owned by such seller (provided that the Company shall not be
required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify
but for this subparagraph, (ii) subject itself to taxation in any
such jurisdiction or (iii) consent to general service of process
in any such jurisdiction);
4E. notify each seller of such Registrable Securities,
at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or
omits any fact necessary to make the statements therein not
misleading, and, at the request of any such seller, the Company
shall prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not contain an
untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading;
4F. cause all such Registrable Securities to be listed
on each securities exchange on which similar securities issued by
the Company are then listed and, if not so listed, to be listed
on the NASD automated quotation system and, if listed on the NASD
automated quotation system, use its best efforts to secure
designation of all such Registrable Securities covered by such
registration statement as a NASDAQ "national market system
security" within the meaning of Rule 11Aa2-1 of the Securities
and Exchange Commis
Page 158 of 196 Pages
<PAGE>
sion or, failing that, to secure NASDAQ authorization for such
Registrable Securities and, without limiting the generality of
the foregoing, to arrange for at least two market makers to
register as such with respect to such Registrable Securities with
the NASD;
4G. provide a transfer agent and registrar for all
such Registrable Securities not later than the effective date of
such registration statement;
4H. enter into such customary agreements (including
underwriting agreements in customary form for a firm commitment
underwriting) and take all such other actions as the holders of a
majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities
(including effecting a stock split or a combination of shares);
4I. make available for inspection by any seller of
Registrable Securities, any underwriter participating in any
disposition pursuant to such registration statement and any
attorney, accountant or other agent retained by any such seller
or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the
Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in
connection with such registration statement;
4J. otherwise use its best efforts to comply with all
applicable rules and regulations of the Securities and Exchange
Commission, and make available to its security holders, as soon
as reasonably practicable, an earnings statement covering the
period of at least twelve months beginning with the first day of
the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder;
4K. permit any holder of Registrable Securities which
holder, in its sole and exclusive judgment, might be deemed to be
an underwriter or a controlling person of the Company, to
participate in the preparation of such registration or comparable
statement and to require the insertion therein of material,
furnished to the Company in writing, which in the reasonable
judgment of such holder and its counsel should be included; and
Page 159 of 196 Pages
<PAGE>
4L. in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of
any order suspending or preventing the use of any related
prospectus or suspending the qualification of any common stock
included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to
obtain the withdrawal of such order.
5. Registration Expenses.
5A. All expenses incident to the Company's performance
of or compliance with this Agreement, including all registration
and filing fees, fees and expenses of compliance with securities
or blue sky laws, printing expenses, messenger and delivery
expenses, fees and disbursements of custodians, and fees and
disbursements of counsel for the Company and all independent
certified public accountants, underwriters (excluding discounts
and commissions) and other Persons retained by the Company (all
such expenses being herein called "Registration Expenses"), shall
be borne as provided in this Agreement, except that the Company
shall, in any event, pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of
any annual audit or quarterly review, the expense of any
liability insurance and the expenses and fees for listing the
securities to be registered on each securities exchange on which
similar securities issued by the Company are then listed or on
the NASD automated quotation system.
5B. In connection with each Demand Registration and
each Piggyback Registration, the Company shall reimburse the
holders of Registrable Securities included in such registration
for the reasonable fees and disbursements of one counsel chosen
by the holders of a majority of the Registrable Securities
included in such registration.
5C. To the extent Registration Expenses are not
required to be paid by the Company, each holder of securities
included in any registration hereunder shall pay those
Registration Expenses allocable to the registration of such
holder's securities so included, and any Registration Expenses
not so allocable shall be borne by all sellers of securities
included in such registration in proportion to the aggregate
selling price of the securities to be so registered.
Page 160 of 196 Pages
<PAGE>
6. Indemnification.
6A. The Company agrees to indemnify, to the extent
permitted by law, each holder of Registrable Securities, its
officers and directors and each Person who controls such holder
(within the meaning of the Securities Act) against all losses,
claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any regis-
tration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading,
except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder
expressly for use therein or by such holder's failure to deliver
a copy of the registration statement or prospectus or any
amendments or supplements thereto after the Company has furnished
such holder with a sufficient number of copies of the same. In
connection with an underwritten offering, the Company shall
indemnify such underwriters, their officers and directors and
each Person who controls such underwriters (within the meaning of
the Securities Act) to the same extent as provided above with
respect to the indemnification of the holders of Registrable
Securities.
6B. In connection with any registration statement in
which a holder of Registrable Securities is participating, each
such holder shall furnish to the Company in writing such informa-
tion and affidavits as the Company reasonably requests for use in
connection with any such registration statement or prospectus
and, to the extent permitted by law, shall indemnify the Company,
its directors and officers and each Person who controls the
Company (within the meaning of the Securities Act) against any
losses, claims, damages, liabilities and expenses resulting from
any untrue or alleged untrue statement of material fact contained
in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or
omission is contained in any information or affidavit so
furnished in writing by such holder; provided that the obligation
to indemnify shall be individual, not joint and several, for each
holder and shall be limited to the net amount of proceeds
received by such holder from the sale of Registrable Securities
pursuant to such registration statement.
Page 161 of 196 Pages
<PAGE>
6C. Any Person entitled to indemnification hereunder
shall (i) give prompt written notice to the indemnifying party of
any claim with respect to which it seeks indemnification
(provided that the failure to give prompt notice shall not impair
any Person's right to indemnification hereunder to the extent
such failure has not prejudiced the indemnifying party) and (ii)
unless in such indemnified party's reasonable judgment a conflict
of interest between such indemnified and indemnifying parties may
exist with respect to such claim, permit such indemnifying party
to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is
assumed, the indemnifying party shall not be subject to any
liability for any settlement made by the indemnified party
without its consent (but such consent shall not be unreasonably
withheld). An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim shall not be
obligated to pay the fees and expenses of more than one counsel
for all parties indemnified by such indemnifying party with
respect to such claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with
respect to such claim.
6D. The indemnification provided for under this Agree-
ment shall remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or
any officer, director or controlling Person of such indemnified
party and shall survive the transfer of securities. The Company
also agrees to make such provisions, as are reasonably requested
by any indemnified party, for contribution to such party in the
event the Company's indemnification is unavailable for any
reason.
7. Participation in Underwritten Registrations. No
Person may participate in any registration hereunder which is
underwritten unless such Person (i) agrees to sell such Person's
securities on the basis provided in any underwriting arrangements
approved by the Person or Persons entitled hereunder to approve
such arrangements and (ii) completes and executes all question-
naires, powers of attorney, indemnities, underwriting agreements
and other documents required under the terms of such underwriting
arrangements; provided that no holder of Registrable Securities
included in any underwritten registration shall be required to
make any representations or warranties to the Company or the
underwriters (other than representations and warranties regarding
such holder and such holder's intended method of distribution) or
to undertake any indemnification obligations to the Company or
the
Page 162 of 196 Pages
<PAGE>
underwriters with respect thereto, except as otherwise provided
in paragraph 6 hereof.
8. Definitions.
8A. "Registrable Securities" means (i) any Common
Stock issued upon the conversion of any Notes issued pursuant to
the Purchase Agreement, (ii) any Common Stock issued upon
conversion of any Class A Preferred issued upon conversion of any
Notes issued pursuant to the Purchase Agreement, (iii) any Common
Stock issued upon exercise of any Warrants issued pursuant to the
Purchase Agreement, (iv) any Common Stock issued in connection
with a repayment of the Notes or a redemption of Class A
Preferred and (v) any Common Stock issued or issuable with
respect to the securities referred to in clauses (i), (ii), (iii)
and (iv) above by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. As to any
particular Registrable Securities, such securities shall cease to
be Registrable Securities when they have been distributed to the
public pursuant to a offering registered under the Securities Act
or sold to the public through a broker, dealer or market maker in
compliance with Rule 144 under the Securities Act (or any similar
rule then in force). For purposes of this Agreement, a Person
shall be deemed to be a holder of Registrable Securities, and the
Registrable Securities shall be deemed to be in existence,
whenever such Person has the right to acquire directly or
indirectly such Registrable Securities (upon conversion or
exercise in connection with a transfer of securities or
otherwise, but disregarding any restrictions or limitations upon
the exercise of such right), whether or not such acquisition has
actually been effected, and such Person shall be entitled to
exercise the rights of a holder of Registrable Securities
hereunder.
8B. Unless otherwise stated, other capitalized terms
contained herein have the meanings set forth in the Purchase
Agreement.
9. Miscellaneous.
9A. No Inconsistent Agreements. The Company shall not
hereafter enter into any agreement with respect to its securities
which is inconsistent with or violates the rights granted to the
holders of Registrable Securities in this Agreement.
Page 163 of 196 Pages
<PAGE>
9B. Adjustments Affecting Registrable Securities. The
Company shall not take any action, or permit any change to occur,
with respect to its securities which would materially and
adversely affect the ability of the holders of Registrable
Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would
materially and adversely affect the marketability of such
Registrable Securities in any such registration (including,
without limitation, effecting a stock split or a combination of
shares).
9C. Remedies. Any Person having rights under any
provision of this Agreement shall be entitled to enforce such
rights specifically to recover damages caused by reason of any
breach of any provision of this Agreement and to exercise all
other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for
any breach of the provisions of this Agreement and that any party
may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or other
security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions
of this Agreement.
9D. Amendments and Waivers. Except as otherwise
provided herein, the provisions of this Agreement may be amended
or waived only upon the prior written consent of the Company and
holders of a majority of the Registrable Securities.
9E. Successors and Assigns. All covenants and agree-
ments in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed
or not. In addition, whether or not any express assignment has
been made, the provisions of this Agreement which are for the
benefit of purchasers or holders of Registrable Securities are
also for the benefit of, and enforceable by, any subsequent
holder of Registrable Securities.
9F. Severability. Whenever possible, each provision
of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of
this Agreement is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating
the remainder of this Agreement.
Page 164 of 196 Pages
<PAGE>
9G. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need
not contain the signatures of more than one party, but all such
counterparts taken together shall constitute one and the same
Agreement.
9H. Descriptive Headings. The descriptive headings of
this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
9I. Governing Law. The corporate law of the State of
Delaware shall govern all issues and questions concerning the
relative rights of the Company and its stockholders. All other
issues and questions concerning the construction, validity,
interpretation and enforcement of this Agreement and the exhibits
and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of New York, without
giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
9J. Notices. All notices, demands or other communica-
tions to be given or delivered under or by reason of the
provisions of this Agreement shall be given in accordance with
paragraph 7L of the Purchase Agreement.
Page 165 of 196 Pages
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
ACC CORP.
By ___________________________
Its __________________________
FLEET VENTURE RESOURCES, INC.
By
Its President
FLEET EQUITY PARTNERS VI, L.P.
By Silverado IV Corp.
Its General Partner
By ___________________________
Its President
CHISHOLM PARTNERS II, L.P.
By Silverado II, L.P.
Its General Partner
By Silverado II, Corp.
Its General Partner
By ___________________________
Its President
Page 166 of 196 Pages
<PAGE>
EXHIBIT F
PARTICIPATION AGREEMENT
THIS AGREEMENT is made as of May 22, 1995, between
Fleet Venture Resources, Inc., Fleet Equity Partners VI, L.P. and
Chisholm Partners II, L.P. (collectively, the "Investors") and
Richard T. Aab ("Executive").
The execution and delivery of this Agreement by the
Executive is a condition to the purchase of Notes and Warrants by
the Investors pursuant to a Note and Warrant Purchase Agreement
dated as of the date hereof (the "Purchase Agreement").
Capitalized terms not otherwise defined herein shall have the
meanings set forth in the Purchase Agreement.
The parties hereto agree as follows:
1. Restrictions on Transfer.
(a) Transfer of Executive Stock. Executive shall not
sell, transfer, assign, pledge or otherwise dispose of (whether
with or without consideration any interest in any shares of
Common Stock (a "Transfer"), except pursuant to the provisions of
this paragraph 1; provided that in no event shall any Transfer of
Common Stock pursuant to this paragraph 1 be made for any
consideration other than cash payable upon consummation of such
Transfer or in installments over time (other than in a
transaction in which all shares of the Company's capital stock
are sold, transferred or exchanged for new consideration). Prior
to making any Transfer, Executive shall deliver written notice
(the "Sale Notice") to Investors. The Sale Notice shall disclose
in reasonable detail the identity of the prospective
transferee(s), the number of shares to be transferred and the
terms and conditions of the proposed transfer. Executive shall
not consummate any Transfer until 30 days after the Sale Notice
has been given to the Investors, unless the parties to the
Transfer have been finally determined pursuant to this para-
graph 1 prior to the expiration of such 30-day period. The date
of the first to occur of such events is referred to herein as the
"Authorization Date".
Page 167 of 196 Pages
<PAGE>
(b) Participation Rights. Each Investor may elect to
participate in the contemplated transfer by delivering written
notice to Executive and the Company within 20 days after receipt
by the Investor of the Sale Notice. If any Investor has elected
to participate in such sale, Executive and the electing Investors
shall be entitled to sell in the contemplated sale, at the same
price and on the same terms, a number of shares of the Company's
Common Stock equal to the product of (i) the quotient determined
by dividing the percentage of the Common Stock (on a
fully-diluted basis) held by such person, by the aggregate
percentage of the Common Stock (on a fully-diluted basis) owned
by Executive and all electing Investors and (ii) the number of
shares of Common Stock to be sold in the contemplated sale.
For example, if the Sale Notice contemplated a sale of
100 shares of Common Stock, and if Executive was at
such time the owner of 30% of the Company's Common
Stock (on a fully-diluted basis) and if one Investor
elected to participate and the Investor owned 20% of
the Company's Common Stock (on a fully-diluted basis),
Executive would be entitled to sell 60 shares
(30% divided by 50% x 100 shares) and the Investor
would be entitled to sell 40 shares (20% divided by
50% x 100 shares).
Executive shall use his best efforts to obtain the agreement of
the prospective transferee(s) to the participation of the
Investors in the contemplated transfer and shall not transfer any
Common Stock to the prospective transferee(s) if such trans-
feree(s) refuses to allow the participation of the Investors.
Any Investor may participate in a sale of Common Stock pursuant
to this paragraph by tendering the number of shares of Series A
Preferred or the principal amount of any Note convertible into
the appropriate number of shares of Common Stock or by tendering
a Warrant for the purchase of the appropriate number of shares of
Common Stock with the exercise price thereof to be subtracted
from the final purchase price of the Warrants hereunder.
(c) Certain Permitted Transfers. The restrictions
contained in this paragraph 1 shall not apply with respect to
transfers of shares of Common Stock (i) to the public pursuant to
an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the
provisions
Page 168 of 196 Pages
<PAGE>
of Rule 144 adopted under the Securities Act, (ii) during any
one-year period, in an amount less than 1% of the number of
shares of Common Stock that Executive owns as of the date hereof,
(iii) contributions to Executive's charitable family trust or
foundation totalling not more than $500,000 worth of Common Stock
in the aggregate (valued at Market Price on the date of transfer)
and (iv) resulting from the foreclosure of shares pledged by
Executive.
(d) Pledges. Executive may pledge shares of Common
Stock; notwithstanding the foregoing, Executive may pledge shares
of Common Stock only pursuant to bona fide pledges to banks or
financial institutions (including brokerage firms) in connection
with the borrowing of funds.
(e) Termination of Restrictions. The restrictions on
the transfer of any share of Executive's Common Stock set forth
in this paragraph 1 shall terminate upon the earlier to occur of
(i) the Transfer of such share in accordance with the provisions
hereof, (ii) the date upon which Executive is no longer an
officer, director or employee of the Company or of its
Subsidiaries and (iii) the date upon which neither the Notes, the
Series A Preferred, nor the Springing Warrants remain
outstanding.
2. Holdback Agreement. Executive shall not effect any
public sale or distribution (including sales pursuant to Rule
144) of any shares of Executive's Common Stock or any other
equity securities of the Company, or any securities convertible
into or exchangeable or exercisable for such securities, during
the seven days prior to and the 90-day period beginning on the
effective date of any underwritten Demand Registration or any
underwritten Piggyback Registration (except as part of such
underwritten registration), unless the underwriters managing the
registered public offering otherwise agree. The terms Demand
Registration and Piggyback Registration have the meanings set
forth in the Registration Agreement dated May 22, 1995 between
the Company and the Investors.
3. Legend. Each certificate representing shares of
Common Stock held by Executive (exclusive of those subject to
pledge pursuant to paragraph 1(d) above) shall bear a legend in
substantially the following form:
Page 169 of 196 Pages
<PAGE>
"THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER SET FORTH IN A PARTICIPATION
AGREEMENT BETWEEN THE CERTAIN INVESTORS IN
THE COMPANY, DATED AS OF MAY 22, 1995, AS
AMENDED AND MODIFIED FROM TIME TO TIME. A
COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE
HOLDER HEREOF AT THE COMPANY'S PRINCIPAL
PLACE OF BUSINESS WITHOUT CHARGE.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES
REPRESENTED BY THIS CERTIFICATE SHALL BE
TRANSFERRABLE PURSUANT TO SEC RULE 144 OR
REGISTRATION UNDER THE SECURITIES ACT."
The above legend shall be removed in connection with any transfer
described in paragraph 1(c) above.
4. Notices. Any notice provided for in this
Agreement must be in writing and must be either personally
delivered, mailed by first class mail (postage prepaid and return
receipt requested) sent by reputable overnight courier service
(charges prepaid) or sent via facsimile transmission
(acknowledged by written confirmation of receipt or followed with
hard copy via certified mail or reputable overnight courier) to
the recipient at the address below indicated:
To the Investors:
c/o Fleet Equity Partners
Mail Stop: RI MO 227
111 Westminster Street
Providence, Rhode Island 02903
Attention: Robert Van Degna
Telecopy: (401) 278-6387
To Executive:
c/o ACC Corp.
400 West Avenue
Rochester, NY 14611
Telecopy: (716) 987-3335
Page 170 of 196 Pages
<PAGE>
or such other address or to the attention of such other person as
the recipient party shall have specified by prior written notice
to the sending party. Any notice under this Agreement shall be
deemed to have been given when so delivered or sent or, if
mailed, five days after deposit in the U.S. mail.
5. General Provisions.
(a) Transfers in Violation of Agreement. Any Transfer
or attempted Transfer of any Common Stock in violation of any
provision of this Agreement shall be void, and the Company shall
not record such Transfer on its books or treat any purported
transferee of such Executive Stock as the owner of such stock for
any purpose.
(b) Severability. Whenever possible, each provision
of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of
this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction,
such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as
if such invalid, illegal or unenforceable provision had never
been contained herein.
(c) Complete Agreement. This Agreement, those docu-
ments expressly referred to herein and other documents of even
date herewith embody the complete agreement and understanding
among the parties and supersede and preempt any prior under-
standings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter
hereof in any way.
(d) Counterparts. This Agreement may be executed in
separate counterparts, each of which is deemed to be an original
and all of which taken together constitute one and the same
agreement.
(e) Successors and Assigns. Except as otherwise
provided herein, this Agreement shall bind and inure to the
benefit of and be enforceable by Executive, the Investors and
their respective successors and assigns.
Page 171 of 196 Pages
<PAGE>
(f) Governing Law. The corporate law of the State of
Delaware shall govern all issues and questions concerning the
relative rights and obligations of the Company and its stock-
holders. All other issues and questions concerning the construc-
tion, validity, enforcement and interpretation of this Agreement
and the exhibits and schedules hereto shall be governed by, and
construed in accordance with, the laws of the State of New York,
without giving effect to any choice of law or conflict of law
rules or provisions (whether of the State of New York or any
other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of New York.
(g) Remedies. Each of the parties to this Agreement
shall be entitled to enforce its rights under this Agreement
specifically, to recover damages and costs (including reasonable
attorney's fees) caused by any breach of any provision of this
Agreement and to exercise all other rights existing in its favor.
The parties hereto agree and acknowledge that money damages would
not be an adequate remedy for any breach of the provisions of
this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction
(without posting any bond or deposit) for specific performance
and/or other injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
(h) Amendment and Waiver. The provisions of this
Agreement may be amended and waived only with the prior written
consent of the Executive and the Investors owning a majority of
the Common Stock on a fully-diluted basis held by all Investors.
(i) Business Days. If any time period for giving
notice or taking action hereunder expires on a day which is a
Saturday, Sunday or legal holiday in the state in which the
Company's chief executive office is located, the time period
shall be automatically extended to the business day immediately
following such Saturday, Sunday or holiday.
* * * *
Page 172 of 196 Pages
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the date first written above.
______________________________
Richard T. Aab
FLEET VENTURE RESOURCES, INC.
By
Its President
FLEET EQUITY PARTNERS VI, L.P.
By Silverado IV Corp.
Its General Partner
By ___________________________
Its President
CHISHOLM PARTNERS II, L.P.
By Silverado II, L.P.
Its General Partner
By Silverado II, Corp.
Its General Partner
By ___________________________
Its President
Agreed and Accepted:
ACC CORP.
By _________________________
Its ________________________
Page 173 of 196 Pages
<PAGE>
EXHIBIT G
Form of Opinion of Company's Counsel
1. The Company and each of its Subsidiaries have been
duly incorporated and organized, are validly existing under the
corporation and franchise tax laws of their respective
jurisdictions of incorporation and are duly qualified to transact
business in and are in good standing under the corporation and
franchise tax laws of every jurisdiction in which the failure to
so qualify would have a material adverse effect upon the business
prospects, assets, operations, financial condition or operating
results of the Company and its Subsidiaries taken as a whole;
2. The Company has all necessary corporate power and
authority to execute, deliver and perform its obligations under
the Purchase Agreement and the agreements and instruments set
forth as exhibits thereto (the "Related Agreements") to which the
Company is a party, and the Company and each of its Subsidiaries
have all necessary corporate power and authority and, to the best
of our knowledge after inquiry of Company's inside general
counsel, all material licenses, permits and authorizations
necessary to own their respective properties and to conduct their
respective businesses in the manner and the locations presently
owned and conducted;
3. The Purchase Agreement and the Related Agreements
to which the Company is a party, have been duly authorized,
executed and delivered by the Company, and are each enforceable
against the Company;
4. The Participation Agreement has been executed and
delivered by Richard T. Aab, and the Participation Agreement is
enforceable against Richard T. Aab;
5. The amendment to the Company's Certificate of
Incorporation containing the provisions set forth in Exhibit C to
the Purchase Agreement and the form of the Certificate of
Designation with respect to the Series A Preferred have been duly
approved by the Company's board of directors for submission to
the Company's stockholders for approval;
6. The Common Stock issuable upon proper conversion
of the Notes or the Series A Preferred and upon exercise of the
Page 174 of 196 Pages
<PAGE>
Warrants has been duly authorized and reserved for issuance by
the Company. There are not statutory, or to the best of our
knowledge after reasonable inquiry contractual, preemptive rights
of stockholders or rights of first refusal with respect to the
issuance of such Common Stock or the Series A Preferred to be
issued upon the conversion of the Notes, and such Common Stock to
be issued upon proper conversion of the Notes or Series A
Preferred and such Series A Preferred to be issued upon
conversion of the Notes shall upon such issuance be validly
issued, fully paid and nonassessable;
7. The execution and delivery by the Company of the
Purchase Agreement and the Related Agreements, the offering, sale
and issuance of the Notes and Warrants, the issuance of Common
Stock upon conversion of the Notes or the Series A Preferred and
upon exercise of the Warrants and the fulfillment of and the
compliance with the respective terms thereof by the Company do
not and shall not (A) conflict with or result in a breach of, (B)
constitute a default under, (C) result in the creation of any
lien, mortgage, security interest, charge or other encumbrance
upon the Company's or any of its Subsidiaries' capital stock or
assets pursuant to, (D) by themselves give any third party the
right to accelerate any obligation under, (E) result in a
violation of, or (F) require any authorization, consent,
approval, exemption or other action by or notice to any court or
administrative or governmental body pursuant to (i) the Company's
Certificate of Incorporate, the Company's bylaws or the charter
or bylaws of any of its Subsidiaries, (ii) any law, statute, rule
or regulation to which the Company or any of its Subsidiaries is
subject, or (iii) any Other Agreement, order, judgment or decree
to which the Company or any of its Subsidiaries is subject and
which is described or disclosed in any filing made by Company
with the United States Securities Exchange Commission;
8. To the best of our knowledge after reasonable
inquiry of the Company's employees responsible for such matters,
the schedule attached to this opinion correctly sets forth the
number of shares of each class of the Company's and each
Subsidiary's authorized capital stock and the number of
outstanding shares of each class as of the Closing;
9. To the best of our knowledge after reasonable
inquiry, there are not (A) outstanding shares of capital stock or
securities convertible into or exchangeable or exercisable for
shares of the Company's or any of its Subsidiaries' capital stock
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or for shares of stock or securities convertible into or
exchangeable or exercisable for shares of the Company's or any of
its Subsidiaries' capital stock, except for the Notes and the
Warrants, (B) outstanding options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise)
of, or any such commitments or claims of any character relating
to, any such capital stock or any shares of stock or securities
convertible into or exchangeable or exercisable for any such
capital stock, except for those options, plans or rights set
forth in the Capitalization Schedule to the Purchase Agreement or
(C) obligations (contingent or otherwise) of the Company or any
of its Subsidiaries to repurchase, exchange or otherwise acquire
or retire any shares of such capital stock or any shares of stock
or securities convertible into or exchangeable or exercisable for
any such capital stock except pursuant to the Notes or the
Related Agreements; and
10. The offering, sale and issuance of the Notes and
Warrants under the Purchase agreement, the issuance of the Common
Stock upon conversion of the Notes or the Series A Preferred and
the exercise of the Warrants, and the issuance of the Series A
Preferred upon conversion of the Notes, do not require
registration under the Securities Act of 1933, as amended, or
registration or qualification under any state securities laws.
Page 176 of 196 Pages
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EXHIBIT H
This Warrant was originally issued on May 22,
1995, and has not been registered under the
Securities Act of 1933, as amended. The
transfer of this Warrant is subject to the
conditions specified in the Purchase
Agreement, dated as of May 22, 1995 (as
amended and modified from time to time),
between the issuer hereof (the "Company") and
the initial holder hereof, and the Company
reserves the right to refuse the transfer of
such security until such conditions have been
fulfilled with respect to such transfer.
Upon written request, a copy of such
conditions shall be furnished by the Company
to the holder hereof without charge.
ACC CORP.
STOCK PURCHASE WARRANT
Date of Issuance: May 22, 1995 Certificate No. SW-______
This Warrant is being issued simultaneously with the
issuance of a Convertible Subordinated Promissory Note issued by
the Company in the principal amount of $______ (the "Note"), to
________________ pursuant to the Note and Warrant Purchase
Agreement dated as of May 22, 1995 (the "Purchase Agreement"),
between ACC Corp., a Delaware corporation (the "Company"), and
certain investors.
For value received, the Company hereby grants to
_______________________ or its registered assigns (the
"Registered Holder") the right to purchase from the Company after
an Optional Repayment of any Subject Securities a number of
shares of the Company's Common Stock equal to the aggregate
number of shares of Common Stock into which the Repaid Securities
were convertible as of the respective Repayment Dates thereof at
a price per share equal to $16.00 (such price as adjusted and
readjusted from time to time in accordance with Section 2 hereof,
the "Exercise Price").
Page 177 of 196 Pages
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This Warrant is one of several Springing Warrants
(collectively referred to herein as the "Warrants") issued
pursuant to the Purchase Agreement, and certain capitalized terms
used herein are defined in Section 5 hereof. The amount and kind
of securities obtainable pursuant to the rights granted hereunder
and the purchase price for such securities are subject to
adjustment pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
Section 1. Exercise of Warrant.
1A. Exercise Period. The Registered Holder may
exercise, in whole or in part (but not as to a fractional share
of Common Stock), the purchase rights represented by this Warrant
at any time and from time to time on and after the Repayment Date
of the Repaid Securities to which such rights relate to and
including the Scheduled Repayment Date of the Repaid Securities
to which such purchase rights relate up to and including and
including the earlier of (i) the seventh anniversary of the
Closing Date or (ii) the date which is six years after the first
date upon which no Notes or Series A Preferred remain outstanding
(the "Exercise Period"). The Company shall give the Registered
Holder written notice of the expiration of the Exercise Period at
least 30 days but not more than 90 days prior to the end of the
Exercise Period.
1B. Exercise Procedure.
(i) This Warrant shall be deemed to have been
exercised when the Company has received all of the following
items (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in
paragraph 1C below, executed by the Person exercising all or
part of the purchase rights represented by this Warrant (the
"Purchaser");
(b) this Warrant;
(c) if this Warrant is not registered in the name of
the Purchaser, an Assignment or Assignments in the form set
forth in Exhibit II hereto evidencing the assignment of this
Warrant to the Purchaser, in which case the Registered
Holder shall have complied with the provisions set forth in
Section 7 hereof; and
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(d) either (1) a check payable to the Company (in the
case of the original Holder of this Warrant only), a
certified check payable to the Company or a wire transfer of
immediately available funds to an account designated by the
Company in an amount equal to the product of the Exercise
Price multiplied by the number of shares of Common Stock
being purchased upon such exercise (the "Aggregate Exercise
Price"), (2) the surrender to the Company of debt or equity
securities of the Company having a Market Price equal to the
Aggregate Exercise Price of the Common Stock being purchased
upon such exercise (provided that for purposes of this
subparagraph, the Market Price of any note or other debt
security or any preferred stock shall be deemed to be equal
to the aggregate outstanding principal amount or liquidation
value thereof plus all accrued and unpaid interest thereon
or accrued or declared and unpaid dividends thereon) or (3)
a written notice to the Company that the Purchaser is
exercising the Warrant (or a portion thereof) by authorizing
the Company to withhold from issuance a number of shares of
Common Stock issuable upon such exercise of the Warrant
which when multiplied by the Market Price of the Common
Stock is equal to the Aggregate Exercise Price (and such
withheld shares shall no longer be issuable under this
Warrant).
(ii) Certificates for shares of Common Stock purchased
upon exercise of this Warrant shall be delivered by the Company
to the Purchaser within five business days after the date of the
Exercise Time. Unless this Warrant has expired or all of the
purchase rights represented hereby have been exercised, the
Company shall prepare a new Warrant, substantially identical
hereto, representing the rights formerly represented by this
Warrant which have not expired or been exercised and shall,
within such five-day period, deliver such new Warrant to the
Person designated for delivery in the Exercise Agreement.
(iii) The Common Stock issuable upon the exercise of
this Warrant shall be deemed to have been issued to the Purchaser
at the Exercise Time, and the Purchaser shall be deemed for all
purposes to have become the record holder of such Common Stock at
the Exercise Time.
(iv) The issuance of certificates for shares of Common
Stock upon exercise of this Warrant shall be made without charge
to the Registered Holder or the Purchaser for any issuance tax in
respect thereof or other cost incurred by the Company in
connection
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with such exercise and the related issuance of shares of Common
Stock. Each share of Common issuable upon exercise of this
Warrant shall, upon payment of the Exercise Price therefor, be
fully paid and nonassessable and free from all liens and charges
with respect to the issuance thereof.
(v) The Company shall not close its books against the
transfer of this Warrant or of any share of Common Stock issued
or issuable upon the exercise of this Warrant in any manner which
interferes with the timely exercise of this Warrant. The Company
shall from time to time take all such action as may be necessary
to assure that the par value per share of the unissued Common
Stock acquirable upon exercise of this Warrant is at all times
equal to or less than the Exercise Price then in effect.
(vi) The Company shall assist and cooperate with any
Registered Holder or Purchaser required to make any governmental
filings or obtain any governmental approvals prior to or in
connection with any exercise of this Warrant (including making
any filings required to be made by the Company).
(vii) Notwithstanding any other provision hereof, if an
exercise of any portion of this Warrant is to be made in
connection with a registered public offering or the sale of the
Company, the exercise of any portion of this Warrant may, at the
election of the holder hereof, be conditioned upon the
consummation of the public offering or sale of the Company in
which case such exercise shall not be deemed to be effective
until the consummation of such transaction.
(viii) The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common
Stock solely for the purpose of issuance upon the exercise of the
Warrants, such number of shares of Common Stock issuable upon the
exercise of all outstanding Warrants. All shares of Common Stock
which are so issuable shall, when issued, be duly and validly
issued, fully paid and nonassessable and free from all taxes,
liens and charges. The Company shall take all such actions as
may be necessary to assure that all such shares of Common Stock
may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic
securities exchange upon which shares of Common Stock may be
listed (except for official notice of issuance which shall be
immediately delivered by the Company upon each such issuance).
The Company shall from time to time take all such action as may
be necessary to assure that the
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par value of the unissued Common Stock acquirable upon exercise
of this Warrant is at all times equal to or less than the
Exercise Price. The Company shall not take any action which
would cause the number of authorized but unissued shares of
Common Stock to be less than the number of such shares required
to be reserved hereunder for issuance upon exercise of the
Warrant.
1C. Exercise Agreement. Upon any exercise of this
Warrant, the Exercise Agreement shall be substantially in the
form set forth in Exhibit I hereto, except that if the shares of
Common Stock are not to be issued in the name of the Person in
whose name this Warrant is registered, the Exercise Agreement
shall also state the name of the Person to whom the certificates
for the shares of Common Stock are to be issued, and if the
number of shares of Common Stock to be issued does not include
all the shares of Common Stock purchasable hereunder, it shall
also state the name of the Person to whom a new Warrant for the
unexercised portion of the rights hereunder is to be delivered.
Such Exercise Agreement shall be dated the actual date of
execution thereof.
1D. Fractional Shares. If a fractional share of
Common Stock would, but for the provisions of paragraph 1A, be
issuable upon exercise of the rights represented by this Warrant,
the Company shall, within five business days after the date of
the Exercise Time, deliver to the Purchaser a check payable to
the Purchaser in lieu of such fractional share in an amount equal
to the difference between the Market Price of such fractional
share as of the date of the Exercise Time and the Exercise Price
of such fractional share.
Section 2. Adjustment of Exercise Price and Number
of Shares. In order to prevent dilution of the rights granted
under this Warrant, the Exercise Price shall be subject to
adjustment from time to time as provided in this Section 2, and
the number of shares of Common Stock obtainable upon exercise of
this Warrant shall be subject to adjustment from time to time as
provided in this Section 2.
2A. Adjustment of Exercise Price and Number of Shares
upon Issuance of Common Stock. If and whenever on or after the
Date of Issuance of this Warrant, the Company issues or sells, or
in accordance with paragraph 2B is deemed to have issued or sold,
any share of Common Stock for a consideration per share less than
the Exercise Price in effect immediately prior to such time, then
immediately upon such issue or sale the Exercise Price shall be
Page 181 of 196 Pages
<PAGE>
reduced to the lowest net price per share (as determined pursuant
to paragraph 2B(v) below) at which such share of Common Stock has
been issued or sold or is deemed to have been issued or sold.
Upon each such adjustment of the Exercise Price hereunder, the
number of shares of Common acquirable upon exercise of this
Warrant shall be adjusted to the number of shares determined by
multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of shares of Common acquirable upon
exercise of this Warrant immediately prior to such adjustment and
dividing the product thereof by the Exercise Price resulting from
such adjustment. Notwithstanding the foregoing, there shall be
no adjustment to the Exercise Price hereunder with respect to the
granting of stock options to employees or directors of the
Company and its Subsidiaries or the exercise thereof or the
granting of stock appreciation rights, phantom stock rights or
other similar rights to employees or directors of the Company for
(or rights relating to) an aggregate of 1,586,702 shares of
Common Stock (976,594 options being currently outstanding) (as
such number of shares is equitably adjusted for subsequent stock
splits, stock combinations, stock dividends and recapitalizations
and such number shall include all stock options outstanding as of
the date of the Purchase Agreement).
2B. Effect on Exercise Price of Certain Events. For
purposes of determining the adjusted Exercise Price under
paragraph 2A, the following shall be applicable:
(i) Issuance of Rights or Options. If the Company in
any manner grants or sells any Options and the lowest price per
share for which any one share of Common Stock is issuable upon
the exercise of any such Option, or upon conversion or exchange
of any Convertible Security issuable upon exercise of such
Option, is less than the Exercise Price in effect immediately
prior to the time of the granting or sale of such Option, then
such share of Common Stock shall be deemed to have been issued
and sold by the Company at such time for such price per share.
For purposes of this paragraph, the "lowest price per share for
which any one share of Common Stock is issuable" shall be equal
to the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to any one
share of Common Stock upon the granting or sale of the Option,
upon exercise of the Option and upon conversion or exchange of
the Convertible Security. No further adjustment of the Exercise
Price shall be made upon the actual issue of such Common Stock or
of such Convertible Security upon the exercise of such Options or
upon the actual issue of such
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Common Stock upon conversion or exchange of such Convertible
Security.
(ii) Issuance of Convertible Securities. If the
Company in any manner issues or sells any Convertible Security
and the lowest price per share for which any one share of Common
Stock is issuable upon conversion or exchange thereof is less
than the Exercise Price in effect immediately prior to the time
of such issue or sale, then such share or shares of Common Stock
shall be deemed to have been issued and sold by the Company at
such time for such price per share. For the purposes of this
paragraph, the "lowest price per share for which any one share of
Common Stock is issuable" shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the
Company with respect to any one share of Common Stock upon the
issuance of the Convertible Security and upon the conversion or
exchange of such Convertible Security. No further adjustment of
the Exercise Price shall be made upon the actual issue of such
Common Stock upon conversion or exchange of any Convertible
Security, and if any such issue or sale of such Convertible
Security is made upon exercise of any Options for which
adjustments of the Exercise Price had been or are to be made
pursuant to other provisions of this Section 2, no further
adjustment of the Exercise Price shall be made by reason of such
issue or sale.
(iii) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion or
exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable for
Common Stock changes at any time, the Exercise Price in effect at
the time of such change shall be adjusted immediately to the
Exercise Price which would have been in effect at such time had
such Options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or
changed conversion rate, as the case may be, at the time
initially granted, issued or sold and the number of shares of
Common Stock issuable hereunder shall be correspondingly
adjusted; provided that if such adjustment would result in an
increase of the Exercise Price then in effect, such adjustment
shall not be effective until 30 days after written notice thereof
has been given by the Company to all holders of the Warrants.
For purposes of this paragraph 2B, if the terms of any Option or
Convertible Security which was outstanding as of the date of
issuance of this Warrant are changed in the manner described in
the immediately preceding sentence, then
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<PAGE>
such Option or Convertible Security and the Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be
deemed to have been issued as of the date of such change;
provided that no such change shall at any time cause the Exercise
Price hereunder to be increased.
(iv) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the
termination of any right to convert or exchange any Convertible
Securities without the exercise of such Option or right, the
Exercise Price then in effect shall be adjusted immediately to
the Exercise Price which would have been in effect at the time of
such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued; provided that if
such expiration or termination would result in an increase in the
Exercise Price then in effect, such increase shall not be
effective until 30 days after written notice thereof has been
given to all holders of the Warrants. For purposes of this
paragraph 2B, the expiration or termination of any Option or
Convertible Security which was outstanding as of the date of
issuance of this Warrant shall not cause the Exercise Price
hereunder to be adjusted unless, and only to the extent that, a
change in the terms of such Option or Convertible Security caused
it to be deemed to have been issued after the date of issuance of
this Warrant.
(v) Calculation of Consideration Received. If any
Common Stock, Options or Convertible Securities are issued or
sold or deemed to have been issued or sold for cash, the
consideration received therefor shall be deemed to be the net
amount received by the Company therefor. In case any Common
Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of the consideration
other than cash received by the Company shall be the fair value
of such consideration, except where such consideration consists
of securities, in which case the amount of consideration received
by the Company shall be the Market Price thereof as of the date
of receipt. In case any Common Stock, Options or Convertible
Securities are issued to the owners of the non-surviving entity
in connection with any merger in which the Company is the
surviving corporation, the amount of consideration therefor shall
be deemed to be the fair value of such portion of the net assets
and business of the non-surviving entity as is attributable to
such Common Stock, Options or Convertible Securities, as the case
may be. The fair value of any consideration other than cash or
securities shall be determined
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jointly by the Company and the Registered Holders of Warrants
representing a majority of the shares of Common Stock obtainable
upon exercise of such Warrants. If such parties are unable to
reach agreement within a reasonable period of time, such fair
value shall be determined by an appraiser jointly selected by the
Company and the Registered Holders of Warrants representing a
majority of the shares of Common Stock obtainable upon exercise
of such Warrants. The determination of such appraiser shall be
final and binding on the Company and the Registered Holders of
the Warrants, and the fees and expenses of such appraiser shall
be paid by the Company.
(vi) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities
of the Company, together comprising one integrated transaction in
which no specific consideration is allocated to such Options by
the parties thereto, the Options shall be deemed to have been
issued for consideration of $.01.
(vii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned
or held by or for the account of the Company or any Subsidiary,
and the disposition of any shares so owned or held shall be
considered an issue or sale of Common Stock.
(viii) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock,
Options or in Convertible Securities or (B) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then
such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
2C. Subdivision or Combination of Common Stock. If
the Company at any time subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more classes of
its outstanding shares of Common Stock into a greater number of
shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of
shares of Common Stock obtainable upon exercise of this Warrant
shall be proportionately increased. If the Company at any time
combines (by reverse stock split or otherwise) one or more
classes of its
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outstanding shares of Common Stock into a smaller number of
shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of
shares of Common Stock obtainable upon exercise of this Warrant
shall be proportionately decreased.
2D. Reorganization, Reclassification, Consolidation,
Merger or Sale. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or
substantially all of the Company's assets or other transaction,
in each case which is effected in such a way that the holders of
Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect
to or in exchange for Common Stock is referred to herein as
"Organic Change." Prior to the consummation of any Organic
Change, the Company shall make appropriate provision (in form and
substance satisfactory to the Registered Holders of the Warrants
representing a majority of the Common Stock obtainable upon
exercise of all Warrants then outstanding) to insure that each of
the Registered Holders of the Warrants shall thereafter have the
right to acquire and receive, in lieu of or addition to (as the
case may be) the shares of Common Stock immediately theretofore
acquirable and receivable upon the exercise of such holder's
Warrant, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for the number
of shares of Common Stock immediately theretofore acquirable and
receivable upon exercise of such holder's Warrant had such
Organic Change not taken place. In any such case, the Company
shall make appropriate provision (in form and substance
satisfactory to the Registered Holders of the Warrants
representing a majority of the Common Stock obtainable upon
exercise of all Warrants then outstanding) with respect to such
holders' rights and interests to insure that the provisions of
this Section 2 and Sections 3 and 4 hereof shall thereafter be
applicable to the Warrants (including, in the case of any such
consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Company, an immediate
adjustment of the Exercise Price to the value for the Common
Stock reflected by the terms of such consolidation, merger or
sale, and a corresponding immediate adjustment in the number of
shares of Common Stock acquirable and receivable upon exercise of
the Warrants, if the value so reflected is less than the Exercise
Price in effect immediately prior to such consolidation, merger
or sale). The Company shall not effect any such consolidation,
merger or sale, unless prior to the consummation thereof, the
successor entity (if other than the Company) resulting from
consolidation or
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merger or the entity purchasing such assets assumes by written
instrument (in form and substance satisfactory to the Registered
Holders of Warrants representing a majority of the Common Stock
obtainable upon exercise of all of the Warrants then
outstanding), the obligation to deliver to each such holder such
shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire.
2E. Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 2 but not
expressly provided for by such provisions (including the granting
of stock appreciation rights, phantom stock rights or other
rights with equity features), then the Company's board of
directors shall make an appropriate adjustment in the Exercise
Price and the number of shares of Common Stock obtainable upon
exercise of this Warrant so as to protect the rights of the
holders of the Warrants; provided that no such adjustment shall
increase the Exercise Price or decrease the number of shares of
Common Stock obtainable as otherwise determined pursuant to this
Section 2.
2F. Notices.
(i) Immediately upon any adjustment of the Exercise
Price, the Company shall give written notice thereof to the
Registered Holder, setting forth in reasonable detail and
certifying the calculation of such adjustment.
(ii) The Company shall give written notice to the
Registered Holder at least 20 days prior to the date on which the
Company closes its books or takes a record (A) with respect to
any dividend or distribution upon the Common Stock, (B) with
respect to any pro rata subscription offer to holders of Common
Stock or (C) for determining rights to vote with respect to any
Organic Change, dissolution or liquidation.
(iii) The Company shall also give written notice to the
Registered Holders at least 20 days prior to the date on which
any Organic Change, dissolution or liquidation shall take place.
Section 3. Liquidating Dividends. If at any time on
or after the date this Warrant becomes exercisable the Company
declares or pays a dividend upon the Common Stock payable
otherwise than in cash out of earnings or earned surplus
(determined in accordance with generally accepted accounting
principles, consistently applied) except for a stock dividend
payable in shares of
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Common Stock (a "Liquidating Dividend"), then the Company shall
pay to the Registered Holder of this Warrant at the time of
payment thereof the Liquidating Dividend which would have been
paid to such Registered Holder on the Common Stock had this
Warrant been fully exercised immediately prior to the date on
which a record is taken for such Liquidating Dividend, or, if no
record is taken, the date as of which the record holders of
Common Stock entitled to such dividends are to be determined.
Section 4. Purchase Rights. If at any time on or
after the date this Warrant becomes exercisable the Company
grants, issues or sells any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of Common Stock (the
"Purchase Rights"), then the Registered Holder of this Warrant
shall be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such holder
could have acquired if such holder had held the number of shares
of Common Stock acquirable upon complete exercise of this Warrant
immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of
Common Stock are to be determined for the grant, issue or sale of
such Purchase Rights.
Section 5. Definitions. The following terms have
meanings set forth below:
"Common Stock" means, the Company's Common Stock, par
value $.015 and any capital stock of any class of the Company
hereafter authorized which is not limited to a fixed sum or
percentage of par or stated value in respect to the rights of the
holders thereof to participate in dividends or in the
distribution of assets upon any liquidation, dissolution or
winding up of the Company; provided that where such term refers
to the security receivable upon exercise of this Warrant and
there is a change such that the securities issuable upon exercise
of this Warrant are issued by an entity other than the Company or
there is a change in the type or class of securities so issuable,
the term "Common Stock" shall mean one share of the security
issuable upon conversion of this Warrant if such security is
issuable in shares, or shall mean the smallest unit in which such
security is issuable if such security is not issuable in shares.
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"Convertible Securities" means any stock or securities
(other than Options) directly or indirectly convertible into or
exchangeable for Common Stock.
"Market Price" means as to any security the average of
the closing prices of such security's sales on all domestic
securities exchanges on which such security may at the time be
listed, or, if there have been no sales on any such exchange on
any day, the average of the highest bid and lowest asked prices
on all such exchanges at the end of such day, or, if on any day
such security is not so listed, the average of the representative
bid and asked prices quoted in the NASDAQ System as of 4:00 P.M.,
New York time, on such day, or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid
and lowest asked prices on such day in the domestic over-the-
counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such
case averaged over a period of 15 days consisting of the day as
of which "Market Price" is being determined and the 14
consecutive business days prior to such day; provided that if
such security is listed on any domestic securities exchange the
term "business days" as used in this sentence means business days
on which such exchange is open for trading. If at any time such
security is not listed on any domestic securities exchange or
quoted in the NASDAQ System or the domestic over-the-counter
market, the "Market Price" shall be the fair value thereof
determined jointly by the Company and the Registered Holders of
Warrants representing a majority of the Common Stock purchasable
upon exercise of all the Warrants then outstanding; provided that
if such parties are unable to reach agreement within a reasonable
period of time, such fair value shall be determined by an
appraiser jointly selected by the Company and the Registered
Holders of Warrants representing a majority of the Non-Voting
Common purchasable upon exercise of all the Warrants then
outstanding. The determination of such appraiser shall be final
and binding on the Company and the Registered Holders of the
Warrants, and the fees and expenses of such appraiser shall be
paid by the Company.
"Optional Repayment" means a repayment of all or any
portion of the Subject Securities pursuant to paragraph 4B of the
Amendment or paragraph 2(a) of the Notes, as applicable.
"Options" means any rights or options to subscribe for
or purchase Common Stock or Convertible Securities.
Page 189 of 196 Pages
<PAGE>
"Person" means an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an
unincorporated organization and a government or any department or
agency thereof.
"Redemption Date" and "Scheduled Redemption Date" shall
have the meanings set forth in the terms of the Series A
Preferred in the Amendment and shall also include, respectively,
"Repayment Date" and "Scheduled Repayment Date", as defined in
the Note.
"Repaid Securities" means the aggregate amount or
number of Subject Securities repaid by the Company pursuant to
any Optional Repayment.
"Subject Securities" means the Note and the Series A
Preferred issued in respect of the Note.
Other capitalized terms used in this Warrant but not
defined herein shall have the meanings set forth in the Purchase
Agreement.
Section 6. No Voting Rights; Limitations of Liability.
This Warrant shall not entitle the holder hereof to any voting
rights or other rights as a stockholder of the Company. No
provision hereof, in the absence of affirmative action by the
Registered Holder to purchase Common Stock, and no enumeration
herein of the rights or privileges of the Registered Holder shall
give rise to any liability of such holder for the Exercise Price
of Common Stock acquirable by exercise hereof or as a stockholder
of the Company.
Section 7. Warrant Transferable. Subject to the
transfer conditions referred to in the legend endorsed hereon,
this Warrant and all rights hereunder are transferable, in whole
or in part, without charge to the Registered Holder, upon
surrender of this Warrant with a properly executed Assignment (in
the form of Exhibit II hereto) at the principal office of the
Company.
Section 8. Warrant Exchangeable for Different
Denominations. This Warrant is exchangeable, upon the surrender
hereof by the Registered Holder at the principal office of the
Company, for new Warrants of like tenor representing in the
aggregate the purchase rights hereunder, and each of such new
Warrants shall represent such portion of such rights as is
designated by the Registered Holder at the time of such
surrender; provided that, as
Page 190 of 196 Pages
<PAGE>
long as any Subject Securities remain outstanding, this Warrant
shall only be exchangeable in connection with the exchange of the
certificate representing such Subject Securities pursuant to the
Company's Certificate of Incorporation. The date the Company
initially issues this Warrant shall be deemed to be the "Date of
Issuance" hereof regardless of the number of times new
certificates representing the unexpired and unexercised rights
formerly represented by this Warrant shall be issued. All
Warrants representing portions of the rights hereunder are
referred to herein as the "Warrants."
Section 9. Replacement. Upon receipt of evidence
reasonably satisfactory to the Company (an affidavit of the
Registered Holder shall be satisfactory) of the ownership and the
loss, theft, destruction or mutilation of any certificate
evidencing this Warrant, and in the case of any such loss, theft
or destruction, upon receipt of indemnity reasonably satisfactory
to the Company (provided that if the holder is a financial
institution or other institutional investor its own agreement
shall be satisfactory), or, in the case of any such mutilation
upon surrender of such certificate, the Company shall (at its
expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the same rights represented
by such lost, stolen, destroyed or mutilated certificate and
dated the date of such lost, stolen, destroyed or mutilated
certificate.
Section 10. Notices. Except as otherwise expressly
provided herein, all notices referred to in this Warrant shall be
in writing and shall be given in accordance with paragraph 7L of
the Purchase Agreement.
Section 11. Amendment and Waiver. Except as otherwise
provided herein, the provisions of the Warrants may be amended
and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if
the Company has obtained the written consent of the Registered
Holders of Warrants representing a majority of the shares of
Common Stock obtainable upon exercise of the Warrants; provided
that no such action may change the Exercise Price of the Warrants
or the number of shares or class of stock obtainable upon
exercise of each Warrant without the written consent of the
Registered Holders of Warrants representing at least 66% of the
shares of Common Stock obtainable upon exercise of the Warrants.
Page 191 of 196 Pages
<PAGE>
Section 12. Descriptive Headings; Governing Law. The
descriptive headings of the several Sections and paragraphs of
this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The corporation laws of the
State of Delaware shall govern all issues concerning the relative
rights of the Company and its stockholders. All other questions
concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by the internal
law of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State
of New York.
* * * *
Page 192 of 196 Pages
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant
to be signed and attested by its duly authorized officers under
its corporate seal and to be dated the Date of Issuance hereof.
ACC CORP.
By____________________________
Its___________________________
[Corporate Seal]
Attest:
____________________________
Secretary
Page 193 of 196 Pages
<PAGE>
EXHIBIT I
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth
in the attached Warrant (Certificate No. SW-____), hereby agrees
to subscribe for the purchase of ______ shares of the Non-Voting
Common covered by such Warrant and makes payment herewith in full
therefor at the price per share provided by such Warrant.
Signature ____________________
Address ______________________
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, _____________________________
hereby sells, assigns and transfers all of the rights of the
undersigned under the attached Warrant (Certificate No. SW-_____)
with respect to the number of shares of the Non-Voting Common
covered thereby set forth below, unto:
Names of Assignee Address No. of Shares
Dated: Signature _______________________
_______________________
Witness _______________________
Page 194 of 196 Pages
AGREEMENT RE JOINT FILING OF
SCHEDULE 13D AND AUTHORIZATION
The undersigned agree as follows:
(i) Each of them is individually eligible to use the
Schedule 13D to which this Exhibit is attached, and such Schedule
13D is filed on behalf of each of them;
(ii) Each of them is responsible for the timely filing
of such Schedule 13D and any amendments thereto, and for the
completeness and accuracy of the information concerning such
person contained therein; but none of them is responsible for the
completeness or accuracy of the information concerning the other
persons making the filing, unless such person knows or has reason
to believe that such information is inaccurate; and
(iii) Pursuant to Rule 13d-1(f)(1) of the
Securities and Exchange Commission, each of them agrees that the
statement on Schedule 13D (including all amendments thereto) with
respect to the Common Stock of ACC Corp. to which this Agreement
is attached is to be filed on behalf of each of them and that
Fleet Venture Resources, Inc. is hereby authorized to sign and
file any and all required amendments to such Schedule 13D on
behalf of each of them.
Date: May 26, 1995 FLEET VENTURE RESOURCES, INC.
By /s/ Robert M. Van Degna
Its President
FLEET PRIVATE EQUITY CO., INC.
By /s/ Robert M. Van Degna
Its President
FLEET GROWTH RESOURCES, INC.
By /s/ Robert M. Van Degna
Its President
FLEET FINANCIAL GROUP, INC.
By /s/ Marc C. Leslie
Its Assistant Secretary
Page 195 of 196 Pages
<PAGE>
FLEET EQUITY PARTNERS VI, L.P.
By Silverado IV Corp
Its General Partner
By /s/ Robert M. Van Degna
Its President
By Fleet Growth Resources II, Inc.
Its General Partner
By Silverado II Corp
Its General Partner
By /s/ Robert M. Van Degna
Its President
FLEET GROWTH RESOURCES II, INC.
By /s/ Robert M. Van Degna
Its President
SILVERADO IV CORP.
By /s/ Robert M. Van Degna
Its President
Chisholm PARTNERS II, L.P.
By Silverado II, L.P.
Its General Partner
SILVERADO II, CORP.
By /s/ Robert M. Van Degna
Its President
SILVERADO II, L.P.
By Silverado II, Corp
Its General Partner
By /s/ Robert M. Van Degna
Its President
SILVERADO II, CORP.
By /s/ Robert M. Van Degna
Its President
Page 196 of 196 Pages
