NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 14, 1996
The Annual Meeting of Shareholders of ACC CORP. (the "Company") will
be held at the Strong Museum, One Manhattan Square, Rochester, New York on
Friday, June 14, 1996, at 10:00 A.M., for the following purposes:
1. To elect Directors of the Company to serve until the next Annual
Meeting of Shareholders and until the election and qualification of their
successors.
2.To act on a proposal to amend the Company's Employee Long Term
Incentive Plan.
3. To act on a proposal to approve the Company's Non-Employee
Directors' Stock Option Plan.
4.To act on a proposal to ratify the selection of Arthur Andersen LLP as
auditors of the books and financial records of the Company for its fiscal
year ending December 31, 1996.
5.To transact such other business as may properly come before the
Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on April 16,
1996 as the record date for the determination of shareholders entitled to
notice of and to vote at the Meeting.
By Order of the Board of Directors
David K. Laniak,
Chief Executive Officer
Rochester, New York
April 29, 1996
YOUR VOTE IS IMPORTANT. PLEASE SIGN AND DATE THE ENCLOSED PROXY
CARD AND RETURN IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE,
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING.
YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON
SHOULD YOU DECIDE TO ATTEND THE MEETING.
PROXY STATEMENT
1996 ANNUAL MEETING OF
SHAREHOLDERS OF ACC CORP.
GENERAL
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of ACC Corp. (the "Company") for use
at the Annual Meeting of Shareholders of the Company to be held at the
Strong Museum, One Manhattan Square, Rochester, New York on Friday, June
14, 1996, at 10:00 A.M., or at any adjournments thereof.
Any proxy properly given and received prior to the commencement of the
Meeting will be voted with respect to all shares represented by it and will
be voted in accordance with the instructions, if any, given therein. If no
contrary instructions are given, the proxy will be voted (1) FOR the
election as Directors of the nominees named herein; (2) FOR the proposal to
amend the Company's Employee Long Term Incentive Plan; (3) FOR the proposal
to approve the Company's Non-Employee Directors' Stock Option Plan; (4) FOR
the ratification of the selection of Arthur Andersen LLP to serve as the
Company's auditors for its fiscal year ending December 31, 1996; and (5) in
accordance with the proxyholders' best judgment on any other matters which
may properly come before the Meeting. A shareholder giving a proxy has the
right to revoke it by a duly executed proxy bearing a later date, by
attending the Meeting and voting in person, or by otherwise notifying the
Company in writing prior to the Meeting.
Under Delaware law, the total votes received, including abstentions
and votes by brokers holding shares in "street name" or other fiduciary
capacity on "routine" matters, are counted in determining the presence of a
quorum at the Meeting. With respect to the election of Directors, votes
may be cast for or withheld from voting with respect to any or all of the
Directors. Votes that are withheld will have no effect on the election of
Directors. Abstentions may be specified on all Proposals other than the
election of Directors and will be counted as present for purposes of the
matter with respect to which the abstention is noted. Under the Company's
Certificate of Incorporation and Bylaws, Directors are elected by a
plurality of the votes cast, while the approval of Proposals 2, 3 and 4
will each require the affirmative vote of a majority of the shares present,
in person or by proxy, and entitled to vote. Therefore, under the
Company's Certificate of Incorporation and Bylaws and under Delaware law,
assuming the presence of a quorum at the Meeting, non-votes by brokers will
have no effect on any of the Proposals to be acted upon at the Meeting.
However, abstentions would have the effect of "no" votes with respect to
Proposals 2, 3 and 4.
The close of business on April 16, 1996 has been fixed as the record
date for the determination of the shareholders entitled to notice of, and
to vote at, the Annual Meeting. On that date, there were 8,104,026 shares
of Class A Common Stock outstanding and entitled to vote at the Annual
Meeting. Each share of Class A Common Stock is entitled to one vote. In
addition, on the record date there were 10,000 shares of the Company's
Series A Preferred Stock outstanding. These shares are held by Fleet
Venture Resources, Inc. and affiliated entities (the "Fleet Equity
Investors") pursuant to their 1995 $10 million investment in the Company.
Under the terms of the Series A Preferred Stock, so long as at least 3,300
such shares are outstanding, the holders of the Series A Preferred Stock
are entitled to vote as a separate class to elect one Director nominated by
them to the Company's Board of Directors and are entitled to vote on all
matters to be voted upon by the Company's shareholders on an as-converted
basis with the shares of Class A Common Stock outstanding. As of the
record date for the Annual Meeting, the shares of Series A Preferred Stock
outstanding were convertible into 625,000 shares of Class A Common Stock
based on the conversion price of $16.00 per share in effect on that date.
For a further discussion of this matter and a description of the principal
holders of the Company's Class A Common Stock, see the discussion under
"Principal Holders of Common Stock."
The principal executive offices of the Company are located at 400 West
Avenue, Rochester, New York 14611.
This Proxy Statement and the enclosed proxy card are being furnished
to shareholders on or about April 29, 1996.
Additional copies may be obtained from the Office of the Vice
President--Human Resources and Corporate Communications, ACC Corp., 400
West Avenue, Rochester, New York 14611, telephone (716) 987-3000.
PROPOSAL 1
ELECTION OF DIRECTORS
Seven Directors, making up the entire membership of the Board of
Directors of the Company as designated by the Board, are to be elected at
the Annual Meeting to hold office until the next Annual Meeting of
Shareholders and until the election and qualification of their successors.
The Board of Directors intends to nominate Richard T. Aab, Hugh F. Bennett,
Arunas A. Chesonis, Willard Z. Estey, David K. Laniak and Daniel D. Tessoni
for election to the Board. All of these nominees are currently Directors
of the Company. Unless authority is withheld with respect to any
individual nominee or all of the nominees, the shares represented by the
proxies received as a result of this solicitation will be voted in favor of
the nominees listed below. In the event any nominee declines or is unable
to serve, proxies will be voted for the election of the others so named and
may be voted for such substitute nominees as the Board may recommend, or
the Board may reduce the number of Directors to eliminate the vacancy. The
Board of Directors, however, does not anticipate that any of these nominees
will decline or be unable to serve.
Under the terms of the Company's Series A Preferred Stock, so long as
at least 3,300 such shares are outstanding, the holders of the Series A
Preferred Stock are entitled to vote as a separate class to elect one
Director nominated by them to the Company's Board of Directors and are
entitled to vote on all matters to be voted upon by the Company's
shareholders on an as-converted basis with the shares of Class A Common
Stock outstanding. The holders of the Series A Preferred Stock have
nominated Robert M. Van Degna to continue to be their representative on the
Company's Board of Directors.
The Board conducts its business through the meetings and activities of
the full Board and its committees. The Board of Directors held thirteen
meetings during 1995. Currently, the committees of the Board are the Audit
Committee, the Executive Compensation Committee and the Executive
Committee.
The Audit Committee periodically reviews the Company's auditing and
accounting policies and procedures and recommends to the Board the
selection of the Company's independent auditors. Its members are: Daniel
D. Tessoni, Chairman, Hugh F. Bennett and Willard Z. Estey. This Committee
met four times during 1995.
The Executive Compensation Committee sets and reviews the compensation
and benefits paid to the Company's executives. Its members are: Hugh F.
Bennett, Chairman, Daniel D. Tessoni and Robert M. Van Degna. This
Committee met five times during 1995.
The Executive Committee was formed for the purpose of acting on behalf
of the Board of Directors between meetings of the full Board should the
need arise, in accordance with the Company's Bylaws. Its members are:
David K. Laniak, Chairman, Richard T. Aab, Daniel D. Tessoni and Robert M.
Van Degna, with Hugh F. Bennett serving as an alternate member. This
Committee met once during 1995.
During 1995, the Board established a Special Committee, consisting of
David K. Laniak, Chairman, Hugh F. Bennett, Willard Z. Estey, Daniel D.
Tessoni and Robert M. Van Degna, to review and make any determinations
necessary with respect to a related-party transaction involving the Company
and Richard T. Aab, the Company's Chairman and former Chief Executive
Officer. This Committee met eighteen times during 1995.
Each of the Directors attended at least 75% of the meetings held
during 1995 by the Board and by each Committee of which he is a member.
The following sets forth information concerning the principal
occupations and business experience of the nominees for election as
Directors of the Company:
RICHARD T. AAB, 46, is a co-founder of the Company who has served as
Chairman of the Board of Directors since March 1983 and as a Director since
October 1982. Mr. Aab also served as Chief Executive Officer from August
1983 through October 1995, and as Chairman of the Board of Directors of ACC
TelEnterprises Ltd., the Company's 70%-owned Canadian subsidiary, from
April 1993 through February 1994.
HUGH F. BENNETT, 39, has been a Director of the Company since June
1988. Since March 1990, Mr. Bennett has been a Vice President, Director and
Secretary-Treasurer of Gagan, Bennett & Co., Inc., an investment banking
firm.
ARUNAS A. CHESONIS, 33, was elected President and Chief Operating
Officer of the Company in April 1994. He previously served as President of
the Company and of its North American operations since April 1994, and as
President of ACC Long Distance Corp. from January 1989 through April 1994.
From August 1990 through March 1991, he also served as President of ACC
TelEnterprises Ltd., and from May 1987 through January 1989, Mr. Chesonis
served as Senior Vice President of Operations for ACC Long Distance Corp.
Mr. Chesonis was elected a Director of the Company in October 1994.
THE HON. WILLARD Z. ESTEY, C.C., Q.C., 74, was elected a Director of
the Company at its 1994 Annual Meeting. Mr. Estey is Counsel to the
Toronto, Ontario law firm of McCarthy, Tetrault. After serving as Chief
Justice of Ontario, Mr. Estey was a Justice of the Supreme Court of Canada
from 1977 through 1988. From 1988 through 1990, Mr. Estey was Deputy
Chairman of Central Capital Corporation, Toronto, Ontario. Since May 1993,
Mr. Estey has also served as a Director of ACC TelEnterprises Ltd.
DAVID K. LANIAK, 60, was elected the Company's Chief Executive Officer
in October 1995. Mr. Laniak has been a Director of the Company since
February 1989. Prior to joining the Company, Mr. Laniak was Executive Vice
President and Chief Operating Officer of Rochester Gas and Electric
Corporation, Rochester, New York, where he worked in a variety of positions
for more than 30 years. Mr. Laniak also has served since October 1995 and
from May 1993 through July 1994 served as a Director of ACC TelEnterprises
Ltd.
DANIEL D. TESSONI, 48, has been a Director of the Company since May
1987. Mr. Tessoni is an Associate Professor of Accounting at the College of
Business of the Rochester Institute of Technology, where he has taught
since 1977. He holds a Ph.D. degree, is a certified public accountant and
is Treasurer of several privately-held business concerns.
ROBERT M. VAN DEGNA, 51, has been a Director of the Company since May
1995. Mr. Van Degna is Managing Partner of Fleet Equity Partners, an
investment firm affiliated with Fleet Financial Group, Inc. and based in
Providence, Rhode Island. Mr Van Degna joined Fleet Financial Group in 1971
and held a variety of lending and management positions until he organized
Fleet Equity Partners in 1982 and became its general partner. Mr. Van Degna
currently serves on the Boards of Directors of Orion Network Systems, Inc.
and of Preferred Networks, Inc., as well as those of several privately-held
companies. Mr. Van Degna is the nominee of the holders of the Company's
Series A Preferred Stock and was initially elected to the Company's Board
of Directors pursuant to the terms of the investment in the Company by the
Fleet Equity Investors described under "Principal Holders of Common Stock"
below.
SECURITIES OWNED BY COMPANY MANAGEMENT
The following table sets forth, as of March 1, 1996, the number and
percentage of outstanding shares of Class A Common Stock beneficially owned
by each Director of the Company, by each of the four Named Executives (in
addition to Mr. Laniak) named in the compensation tables that appear
hereafter in this Proxy Statement, and by all Directors and executive
officers of the Company as a group. The Company believes that each
individual in this group has sole investment and voting power with respect
to his or her shares subject to community property laws where applicable
and except as otherwise noted:
Name of Nominee for Director Shares Beneficially Owned
OR EXECUTIVE OFFICER NUMBER PERCENTAGE
Richard T. Aab 927,554 (1) 11.5
Hugh F. Bennett 3,000 (2) *
Arunas A. Chesonis 86,508 (3) 1.1
Willard Z. Estey -0- (4) *
David K. Laniak 62,406 (5) *
Daniel D. Tessoni 22,500 (6) *
Robert M. Van Degna 725,000 (7) 8.3
Christopher Bantoft 20,100 (8) *
Steve M. Dubnik 20,100 (9) *
All Directors and Executive Officers
as a Group (14 persons, including
those named above) 1,955,917 (1) (2) 21.7
(3) (4)
(5) (6)
(7) (8)
(9) (10)
__________________________________
*Indicates less than 1% of the Company's issued and outstanding shares.
(1)This number includes 139,500 shares that are owned by Melrich
Associates, L.P., a family partnership of which Mr. Aab is a general
partner and therefore shares investment and voting power with respect to
such shares, and options to purchase 12,322 shares that are currently
exercisable by Mr. Aab. Does not include 29,722 shares issuable upon the
exercise of options that are not deemed to be presently exercisable.
(2)Mr. Bennett shares investment and voting power with his wife with
respect to 1,500 of these shares. Does not include an option to purchase
5,000 shares granted to him, subject to shareholder approval, under the
Non-Employee Directors' Stock Option Plan.
(3)Includes 488 shares owned by Mr. Chesonis's spouse, options to purchase
76,350 shares that are currently exercisable by Mr. Chesonis, and options
to purchase 6,950 shares that are currently exercisable by Mr. Chesonis's
spouse. Does not include 80,850 shares issuable upon the exercise of
options that are not deemed to be presently exercisable by Mr. Chesonis nor
3,050 shares issuable upon the exercise of options that are not deemed to
be presently exercisable by Mr. Chesonis's spouse.
(4)Does not include an option to purchase 5,000 shares granted to Mr.
Estey, subject to shareholder approval, under the Non-Employee Directors'
Stock Option Plan.
(5)Includes options to purchase 56,406 shares that are currently or will
become exercisable by Mr. Laniak within the next 60 days. Does not include
37,694 shares issuable upon the exercise of options that are not deemed to
be presently exercisable.
(6)Mr. Tessoni and his wife share investment and voting power with respect
to all shares which he beneficially owns. Does not include an option to
purchase 5,000 shares granted to him, subject to shareholder approval,
under the Non-Employee Directors' Stock Option Plan.
(7)Includes (i) 456,750 shares of Class A Common Stock beneficially owned
by Fleet Venture Resources, Inc. (''Fleet Venture Resources''), of which
393,750 shares are issuable upon the conversion of Series A Preferred Stock
and 63,000 shares are issuable upon the exercise of warrants; (ii) 195,750
shares of Class A Common Stock beneficially owned by Fleet Equity Partners
VI, L.P. (''Fleet Equity Partners''), of which 168,750 shares are issuable
upon the conversion of Series A Preferred Stock and 27,000 shares are
issuable upon the exercise of warrants; and (iii) 72,500 shares of Class A
Common Stock beneficially owned by Chisholm Partners II, L.P.
(''Chisholm''), of which 62,500 shares are issuable upon the conversion of
Series A Preferred Stock and 10,000 shares are issuable upon the exercise
of warrants. As of March 1, 1996, the conversion price for the Series A
Preferred Stock and the exercise price of such warrants was $16.00 per
share. Does not include a total of 625,000 shares of Class A Common Stock
issuable to Fleet Venture Resources, Fleet Equity Partners and Chisholm
upon the exercise of warrants, which warrants would become exercisable upon
an optional redemption of the Series A Preferred Stock by the Company or an
option to purchase 5,000 shares granted to him, subject to shareholder
approval, under the Non-Employee Directors' Stock Option Plan. Mr. Van
Degna is the Chairman and Chief Executive Officer of Fleet Venture
Resources and the Chairman and Chief Executive Officer or President of each
general partner of Fleet Equity Partners and Chisholm. Mr. Van Degna
disclaims beneficial ownership of the shares held by these entities, except
for his limited partnership interest in Fleet Equity Partners and in the
general partner of Chisholm.
(8)Includes options to purchase 20,100 shares that are currently
exercisable by Mr. Bantoft. Does not include 49,900 shares issuable upon
the exercise of options that are not deemed to be presently exercisable,
nor 10,000 stock incentive rights granted on February 5, 1996.
(9)Includes options to purchase 18,100 shares that are currently
exercisable by Mr. Dubnik. Does not include 53,700 shares issuable upon
the exercise of options that are not deemed to be presently exercisable.
(10)Includes options to purchase a total of 39,400 shares that are or will
become exercisable by four executive officers of the Company, in addition
to those named above, within the next 60 days. Does not include a total of
162,575 shares issuable upon the exercise of options that are not deemed to
be presently exercisable by five executive officers of the Company, in
addition to those named above.
COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's executive officers, Directors and other
persons who own more than ten percent of the Company's securities
(collectively, "reporting persons") to file reports of their ownership of
and changes in ownership in their Company shareholdings with both the
Securities and Exchange Commission ("SEC") and The Nasdaq Stock Market and
to furnish the Company with copies of all such forms (known as Forms 3, 4
and 5) filed. Based solely on its review of the copies of such forms it
received and on written representations received from certain reporting
persons that they were not required to file a Form 5 report with respect to
1995, the Company believes that with respect to transactions occurring in
1995, all Form 3, 4 and 5 filing requirements applicable to its reporting
persons were complied with.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
In compliance with the SEC's executive compensation disclosure rules,
what follows below is a Report of the Company's Executive Compensation
Committee, a series of tables detailing certain cash compensation and
stock option information, and a five-year stock price performance chart,
all of which are intended by the SEC to standardize the reporting of such
information by public companies to their shareholders.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
COMPENSATION OF THE COMPANY'S EXECUTIVE OFFICERS. Under the Company's
Bylaws, this Committee is charged with reviewing and setting the
compensation and benefits payable to the Company's senior executives. The
Committee has established two basic components to the compensation awarded
to the Company's senior executives: annual cash compensation and long-term
incentive compensation. In general, the annual cash compensation of the
Company's five highest paid executives consists of a base salary set at the
beginning of the year and a bonus awarded at the end of the year related to
the Company's overall performance for that year -- both financial and
otherwise. The long-term component of the compensation paid to these
executives consists of stock options and/or stock incentive rights granted
under the Company's Employee Long Term Incentive Plan, which are awarded at
the direction of this Committee with two goals in mind: to ensure that the
executive's financial interest in increasing the value of the Company is
closely aligned with that of the shareholders and to aid in retaining the
executive. Other forms of compensation such as one-time stock bonuses may
occasionally be awarded depending upon unusual or unique circumstances that
the Committee believes should be recognized.
With respect to annual cash compensation, in setting salary levels for
the Company's senior management, the basic objective is to pay competitive
rates to attract and retain competent executives. The Committee determines
competitive pay levels based upon independent industry surveys, proxy
disclosures, salaries paid to attract new managers and its own judgments
based upon past experience.
In November 1994, this Committee approved a new Executive Compensation
Plan effective beginning in 1995 that includes both short-term and long-
term performance based incentive plans. The Annual Incentive Plan is a
cash-based, multiple criteria bonus plan measuring the attainment of
certain targeted goals for sales revenue, gross margin, operating expenses
and operating income that were established by this Committee in late 1994
based upon the Company's 1995 business plan and budget. The purpose of
this bonus plan is to emphasize achieving the goals set for these four key
financial measures in the Company's annual operating plan.
In connection with the Executive Compensation Plan, this Committee has
established a policy of making annual awards of stock options under the
Company's Employee Long Term Incentive Plan based upon the recipient's
salary and position within the Company, with awards for the next succeeding
year subject to the attainment of certain predetermined operating
performance thresholds in the current fiscal year that are keyed to the
Annual Incentive Plan. This arrangement balances the operating objectives
of the Annual Incentive Plan with the Company's longer term shareholder
value-building objectives. Under this formula, for 1995 the following
positions were targeted to receive option grants of the following amounts:
Chief Executive Officer: two times annual salary; Chief Operating Officer
and Chief Financial Officer: one and one-half times annual salary;
operating subsidiary Presidents and Corporate Vice Presidents: one times
annual salary; and managers: one-half times annual salary.
In November 1994, this Committee also adopted a set of Executive Stock
Ownership Guidelines applicable to the Company's executives. This plan
establishes a stock ownership requirement for Company executives from the
Vice President level up equal to certain multiples of salary depending on
the individual's position within the Company, which must be met within five
years. The salary multiples range from one times annual salary for Vice
Presidents up to four times annual salary for the Chief Executive Officer.
The purpose of this plan is to further motivate increasing shareholder
value by aligning an increasingly larger portion of the financial assets of
each Company executive with shareholder interests.
COMPENSATION OF DAVID K. LANIAK, THE COMPANY'S CHIEF EXECUTIVE
OFFICER. In August 1995, Richard T. Aab, the Company's Chairman of the
Board and then-Chief Executive Officer, discussed with the Board of
Directors his desire to step down as the Company's Chief Executive Officer.
At the Board's direction, this Committee began an arms-length negotiation
with Mr. Laniak of the terms of his proposed employment as the Company's
CEO. After reaching agreement on those terms, the Board appointed Mr.
Laniak the Company's CEO on October 5, 1995.
The Company entered into a two-year Employment Agreement with Mr.
Laniak employing him as its CEO through October 1997, under which he will
receive a base salary of $300,000 per year, plus a bonus determined under
the Company's Annual Incentive Plan, plus other benefits given to the
Company's other executives. This agreement also provides for payment of
his then current compensation and benefits for the remainder of the term of
the agreement and vesting of all outstanding stock options if, as a result
of or within one year following a change in control of the Company, Mr.
Laniak's employment is terminated without cause by the Company or the
acquiror or Mr. Laniak voluntarily terminates his employment as a result of
certain events, including a significant change in the nature or scope of
his duties, relocation outside of the Rochester, New York area or a
reduction in his compensation or benefits. The severance payment to Mr.
Laniak is conditioned on his agreement not to compete with the Company
during and for one year following termination of his employment and to
maintain confidentiality of trade secrets.
In determining Mr. Laniak's salary and compensation package, the
Committee obtained market survey data as to CEO base salaries for both
telecommunications companies of similar size and for selected companies of
comparable size in certain other industries, while also taking into account
the Company's current executive salary and compensation structure.
Upon commencing his employment as the Company's CEO, Mr. Laniak also
automatically began participating in the Annual Incentive Plan subject to
the performance criteria for the CEO established by this Committee in
November 1994. For 1995, Mr. Laniak was awarded a bonus of $38,500, or
approximately 50% of his total 1995 salary, based upon the Company's 1995
performance against the predetermined target levels for 1995 consolidated
revenues, consolidated gross margin, consolidated sales, general and
administrative expenses and consolidated operating income.
Likewise with respect to the stock options awarded to Mr. Laniak upon
his becoming the Company's CEO, the Committee desired that Mr. Laniak have
a significant portion of his total compensation tied to increasing
shareholder value over the longer term. Accordingly, of the total 68,000
options awarded him upon his becoming CEO, all at an exercise price of
$17.25 per share, approximately 75% of these options were Non-Qualified
Stock Options, which the Committee made subject to the additional vesting
conditions that 50% of such options would not become exercisable until such
time as the market price for the Company's Class A Common Stock closed at
or above $21.56 per share for 15 consecutive trading days (a 25% increase
over their exercise price), and the additional 50% of such options would
not become exercisable until such time as the market price for the
Company's Class A Common Stock closed at or above $25.88 per share for 15
consecutive trading days (a 50% increase over their exercise price). In
addition to placing an important emphasis on building shareholder value,
the structure and size of this option grant will provide an incentivized
means to enable Mr. Laniak to meet the Company's Executive Stock Ownership
Guidelines requirement that he own four times his annual salary in value
(approximately 40,000 shares at current market prices) of the Company's
Class A Common Stock within the next five years.
COMPENSATION OF RICHARD T. AAB, THE COMPANY'S FORMER CHIEF EXECUTIVE
OFFICER. For 1995, after reviewing industry salary surveys with respect to
CEO compensation and considering other factors, the Committee determined
that Mr. Aab's 1994 base salary of $310,000 remained appropriate.
Effective October 6, 1995, Mr. Aab resigned his position as the Company's
Chief Executive Officer. He remains its Chairman of the Board and an
employee of the Company, however. In connection with this change, the
Company entered into both a Non-Competition Agreement and a Salary
Continuation and Deferred Compensation Agreement with Mr. Aab. Under the
terms of Mr. Aab's Non-Competition Agreement, he will not compete against
the Company for three years following any "event of termination" (as
defined in this Agreement) as an employee of the Company and as its
Chairman of the Board, for which he received a lump-sum payment of $750,000
in 1995. Under the terms of his Salary Continuation and Deferred
Compensation Agreement, Mr. Aab will receive a salary of $200,000 per year,
plus a bonus determined under the Company's Annual Incentive Plan, plus
continuation of his current benefits for as long as he remains the Chairman
of the Board and an employee of the Company. At such time as he ever
resigns or is terminated as a Company employee and from serving as the
Chairman of the Board, except in a circumstance involving a "termination
for cause" as defined in this Agreement, he will receive a payment of
$1,000,000, payable over a three year term following the date of such
termination or resignation, contingent on his continued compliance with the
terms of his Non-Competition Agreement, with the payment of such amount
accelerated and paid in full within 30 days following a change in control
of the Company (as defined in the Agreement). Mr. Aab would also receive
such payment if, as a condition precedent to, as a result of or within one
year following a change in control of the Company, he were terminated for
cause.
In negotiating the Non-Competition Agreement, the Committee desired to
more specifically and tightly restrict Mr. Aab's ability to compete against
the Company were he ever to leave the Company than had been the case under
the terms of his former Severance Agreement with the Company, as well as to
extend the term of the non-compete to three years in all events following
any termination of his employment. In negotiating the Salary Continuation
and Deferred Compensation Agreement, the Committee desired both to provide
some recognition for Mr. Aab's many years of leadership and service to the
Company in his role as its CEO and to pay him to continue to provide
services to the Company. The Committee believes that these agreements
accomplish these objectives and that both agreements are in the Company's
best interests.
For 1995, under the Annual Incentive Plan performance targets
established by this Committee in November 1994, Mr. Aab was awarded a bonus
of $145,312, or approximately 50% of his total 1995 salary, based upon the
Company's performance against the predetermined target levels for 1995
consolidated revenues, consolidated gross margin, consolidated selling,
general and administrative expenses and consolidated operating income.
In January 1995, Mr. Aab was awarded Incentive Stock Options to
purchase 24,644 shares of the Company's Class A Common Stock pursuant to
the formula for making annual stock option grants based upon the
executive's base salary that was approved as a component of the Executive
Compensation Plan by this Committee in November 1994. In the case of the
Company's CEO, this plan provides for an annual grant of options equal to
two times the CEO's salary based on the market price of the Company's stock
at the time of grant.
This report was prepared by the members of this Committee in April
1996: Hugh F. Bennett, Chairman, Daniel D. Tessoni and Robert M. Van
Degna.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
and benefits paid by the Company for all services rendered during 1995,
1994 and 1993 to five individuals: David K. Laniak, who is and was, at
December 31, 1995, serving as the Company's Chief Executive Officer, and
Richard T. Aab, who was the Company's Chief Executive Officer through
October 5, 1995 and remains its Chairman of the Board, Arunas A. Chesonis,
Christopher Bantoft and Steve M. Dubnik, who were, as of December 31, 1995,
the other four most highly compensated executive officers of the Company
whose 1995 salary and bonus exceeded $100,000 in amount (individually, a
"Named Executive" and collectively, the "Named Executives"):
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long
Term
Compen-
sation
ANNUAL COMPENSATION
<S> <C> <C> <C> <C> <C> <C>
Awards
OTHER
Name ANNUAL SECURITIES ALL OTHER
and COMPEN- UNDERLYING COMPEN-
Principal SATION OPTIONS SATION
POSITION YEAR SALARY ($) BONUS ($) ($) (#) ($)
DAVID K. LANIAK, 1995 $70,384 $38,578 - 0- (2) 68,000(3) $599(4)
CHIEF EXECUTIVE OFFI- 1994 NA NA NA NA NA
CER (1) 1993 NA NA NA NA NA
RICHARD T. AAB, 1995 $284,615 $145,312 -- (2) 24,644(6) $760,145(7)
CHAIRMAN OF THE BOARD 1994 $315,962 $62,000 -- (2) -0- $6,985(8)
(5) 1993 $304,241 $330,000 -- (2) -0- $9,305(8)
(9)
ARUNAS A. CHESONIS, 1995 $191,124 $93,515 -- (2) 21,700(11) $4,773(12)
PRESIDENT AND 1994 $160,192 $32,000 -- (2) 50,000(13) $5,073(12)
CHIEF OPERATING 1993 $134,250 $44,000 -- (2) 30,000(14) $4,283(12)
OFFICER(10)
CHRISTOPHER BANTOFT, 1995 $144,925 $77,500 -- (2) 10,200(16) $14,492(17)
MANAGING DIRECTOR 1994 $134,430 $20,400 -- (2) 50,000(18) $9,017(19)
ACC LONG DISTANCE UK 1993 NA NA NA NA NA
LTD (15)
STEVE M. DUBNIK, 1995 $156,382 $54,675 --(2) 11,200(21) $34,003(22)
PRESIDENT AND CEO, 1994 $65,054 $22,900 --(2) 50,000(23) $14,245(24)
ACC TELENTERPRISES 1993 NA NA NA NA NA
LTD.
(20)
</TABLE>
______________________________
NAIndicates Not Applicable, because the particular Named Executive was not an
executive officer of the Company during the year indicated.
(1)The Company has a two-year Employment Agreement with Mr. Laniak that runs
through October 1997, under the terms of which he will receive a base salary
of $300,000 per year, plus a bonus determined under the Company's Annual
Incentive Plan, plus other benefits given to the Company's other executives.
This agreement also provides for payment of his then current compensation and
benefits for the remainder of the term of the agreement and vesting of all
outstanding stock options if, as a result of or within one year following a
change in control of the Company, Mr. Laniak's employment is terminated
without cause by the Company or the acquiror or Mr. Laniak voluntarily
terminates his employment as a result of certain events, including a
significant change in the nature or scope of his duties, relocation outside of
the Rochester, New York area or a reduction in his compensation or benefits.
The severance payment to Mr. Laniak is conditioned on his agreement not to
compete with the Company during and for one year following termination of his
employment and to maintain confidentiality of trade secrets.
(2)Under applicable SEC rules, the value of any perquisites or other personal
benefits provided by the Company to any of the Named Executives need not be
separately detailed and described if their aggregate value does not exceed
the lesser of $50,000 or 10% of that executive's total salary and bonus for
the year shown. For the year indicated, the value of such personal benefits,
if any, provided by the Company to this Named Executive did not exceed such
thresholds.
(3)In connection with his becoming the Company's new Chief Executive Officer,
on October 5, 1995, Mr. Laniak was granted incentive stock options ("ISOs") to
purchase 17,391 shares of the Company's Class A Common Stock at an exercise
price of $17.25 per share, exercisable over a ten-year term, and non-qualified
stock options ("NQSOs") to purchase 50,609 shares of Class A Common Stock also
at an exercise price of $17.25 per share and exercisable over a term of ten
years and one day, all under the Company's Employee Long Term Incentive Plan
("LTI Plan"). The NQSOs granted are subject to the additional vesting
conditions that 50% of such options would vest at such time as the closing
price for the Company's Class A Common Stock closed at or above $21.56 per
share for 15 consecutive trading days (a 25% increase over their exercise
price), with the additional 50% of such options to vest at such time as the
closing price for the Company's Class A Common Stock closed at or above $25.88
per share for 15 consecutive trading days (a 50% increase over their exercise
price).
(4)This amount represents additional group term life insurance premiums paid
on Mr. Laniak's behalf during 1995.
(5)Effective October 6, 1995, Mr. Aab resigned his position as the Company's
Chief Executive Officer. He remains its Chairman of the Board and an employee
of the Company, however. In connection with this change, the Company entered
into both a Non-Competition Agreement and a Salary Continuation and Deferred
Compensation Agreement with Mr. Aab. Under the terms of Mr. Aab's Non-
Competition Agreement, he will not compete against the Company for three years
following any "event of termination" (as defined in this Agreement) as an
employee of the Company and as its Chairman of the Board, for which he
received a lump-sum payment of $750,000 in 1995. Under the terms of his
Salary Continuation and Deferred Compensation Agreement, Mr. Aab will receive
a salary of $200,000 per year, plus a bonus determined under the Company's
Annual Incentive Plan, plus continuation of his current benefits for as long
as he remains the Chairman of the Board and an employee of the Company. At
such time as he ever resigns or is terminated as a Company employee and from
serving as the Chairman of the Board, except in a circumstance involving a
"termination for cause" as defined in this Agreement, he will receive a
payment of $1,000,000, payable over a three year term following the date of
such termination or resignation, with the payment of such amount accelerated
and paid in full within 30 days following a change in control of the Company.
Mr. Aab would also receive such payment if, as a condition precedent to, as a
result of or within one year following a change in control of the Company, he
were terminated for cause.
(6)On January 3, 1995, Mr. Aab was granted ISOs to purchase 24,644 shares of
the Company's Class A Common Stock at an exercise price of $16.23 per share,
exercisable over a five-year term, under the LTI Plan.
(7) Of this total, $750,000 represents the lump sum payment made to Mr. Aab
under his Non-Competition Agreement discussed in note (5) above, $4,413
represents the Company's 1995 contribution to Mr. Aab's account under its
401(k) Deferred Compensation and Retirement Savings Plan ("401(k) Plan"), and
$5,732 represents taxable group term and single policy life insurance premiums
paid by the Company on Mr. Aab's behalf during 1995.
(8)The amounts shown represent the Company's contributions under its 401(k)
Plan in the amount of: $ 4,601 for 1994; and $4,497 for 1993; as well as
taxable group term and single policy life insurance premiums paid on Mr. Aab's
behalf in the amount of: $2,384 in 1994; and $4,808 in 1993.
(9)Of this total, $155,000 represents Mr. Aab's bonus paid in 1994 for
services rendered in 1993, and $175,000 represents the one-time award he was
paid in 1993 in connection with the sale of the Company's cellular operations.
In early 1993, the Executive Compensation Committee of the Board of Directors
determined that certain Company executives, including this Named Executive,
were eligible to receive a special one-time award in 1993 contingent upon the
execution of a definitive agreement to sell the cellular assets of the
Company's Danbury Cellular Telephone Co. subsidiary. This award was paid in
lieu of any bonus for services rendered during 1992.
(10)The Company has entered into an Employment Continuation Incentive
Agreement with Mr. Chesonis that provides that if he is ever terminated
without cause or as the result of a change in control of the Company as
defined in the agreement, then he will be entitled to receive his then current
salary and benefits for up to one year following such termination. In
addition, should he be terminated without cause while he is disabled or dies
during the term of the agreement, any unexercised stock options that he may
hold on the date of either such event shall automatically become fully
exercisable for one year following such date, subject to the original term of
the relevant option grant(s). This agreement automatically renews for
successive one-year terms until terminated by the Company giving at least
twelve months' advance notice of its intent to terminate it at the end of its
then current or any renewal term.
(11)On January 3, 1995, Mr. Chesonis was granted ISOs to purchase 21,700
shares of the Company's Class A Common Stock at an exercise price of $14.75
per share, exercisable over a ten-year term, under the LTI Plan.
(12)The amounts shown represent the Company's contributions under its 401(k)
Plan in the amount of: $4,410 for 1995; $4,806 for 1994; and $4,132 for 1993;
as well as additional group term life insurance premiums paid on Mr.
Chesonis's behalf in the amount of: $363 in 1995; $267 in 1994; and $151 in
1993.
(13)On February 8, 1994, Mr. Chesonis was granted ISOs to purchase 50,000
shares of the Company's Class A Common Stock at an exercise price of $19.25
per share, exercisable over a ten-year term, under the LTI Plan. This award
was canceled and regranted on August 11, 1994 at an option exercise price of
$14.25 per share.
(14) On September 7, 1993, Mr. Chesonis was granted ISOs to purchase 30,000
shares of the Company's Class A Common Stock at an exercise price of $15.00
per share, exercisable over a ten-year term, under the LTI Plan.
(15)The Company has an Employment Agreement with Mr. Bantoft employing him as
Managing Director of ACC Long Distance UK Ltd. under the terms of which he
will receive a base salary of at least <pound-sterling>85,000 per year, plus a
bonus determined under the Company's Annual Incentive Plan, plus other
benefits given to the Company's other executives. This agreement also
provides for payment of his then current compensation and benefits for a
period of one year if, as a result of or within one year following a change in
control of the Company, Mr. Bantoft's employment is terminated without cause
by the Company or the acquiror or Mr. Bantoft voluntarily terminates his
employment as a result of certain events, including a significant change in
the nature or scope of his duties or a reduction in his compensation or
benefits. The agreement also requires Mr. Bantoft to maintain confidentiality
of the Company's trade secrets during its term and indefinitely following
termination of his employment.
(16) On January 3, 1995, Mr. Bantoft was granted ISOs to purchase 10,200
shares of the Company's Class A Common Stock at an exercise price of $14.75
per share, exercisable over a ten-year term, under the LTI Plan.
(17) This amount represents U.K. pension payments made on Mr. Bantoft's behalf
during 1995.
(18)On January 4, 1994, Mr. Bantoft was granted ISOs to purchase 10,000 shares
of the Company's Class A Common Stock at an exercise price of $18.75 per
share, on August 11, 1994, he was granted ISOs to purchase 15,000 shares of
the Company's Class A Common Stock at an exercise price of $14.25 per share,
and on November 15, 1994, he was granted ISOs to purchase 25,000 shares of the
Company's Class A Common Stock at an exercise price of $17.25 per share, each
tranche exercisable over a ten-year term, under the LTI Plan.
(19) This amount represents U.K. pension payments made on Mr. Bantoft's behalf
during 1994.
(20)The Company has an Employment Agreement with Mr. Dubnik under the terms of
which he will receive a base salary of Cdn.$208,312 per year, plus a bonus
determined under the Company's Annual Incentive Plan, plus other benefits
given to the Company's other executives. The agreement also provides that if
Mr. Dubnik is ever terminated without cause or as the result of a change in
control of the Company as defined in the agreement, then he will be entitled
to receive his/her then current salary and benefits for one year following
such termination. The agreement also provides that Mr. Dubnik will not
solicit Company customers during and for one year following the termination of
his employment, that he will not compete with the Company so long as he is
receiving payments thereunder, and that he will maintain the confidentiality
of the Company's trade secrets during the term of the agreement and
indefinitely following termination of his employment.
(21) On January 3, 1995, Mr. Dubnik was granted ISOs to purchase 11,200 shares
of the Company's Class A Common Stock at an exercise price of $14.75 per
share, exercisable over a ten-year term, under the LTI Plan.
(22)Of this total, $447 represents additional group term life insurance
premiums paid on Mr. Dubnik's behalf, $3,556 represents the Company's 1995
contribution to his Canadian Registered Retirement Savings Plan account, and
$30,000 represents moving expense reimbursements paid to Mr. Dubnik during
1995 in connection with his relocation from the Washington, D.C. metropolitan
area to Toronto, Canada.
(23)On August 11, 1994, Mr. Dubnik was granted ISOs to purchase 50,000 shares
of the Company's Class A Common Stock at an exercise price of $14.25 per
share, exercisable over a ten-year term, under the LTI Plan.
(24)This amount represents moving expense reimbursements paid to Mr. Dubnik
during 1994 in connection with his relocation from the Washington, D.C.
metropolitan area to Toronto, Canada.
COMPENSATION PURSUANT TO PLANS
EMPLOYEE LONG TERM INCENTIVE PLAN. The Company has an Employee Long Term
Incentive Plan (formerly known as the Employee Stock Option Plan) (the "LTI
Plan" or "Plan"), which it instituted in February, 1982, to provide long-term
incentive benefits to key Company employees as determined by the Executive
Compensation Committee of the Board of Directors (the "Committee"). This Plan
is administered by the Committee, whose duties include selecting the employees
who will receive stock option grants and/or awards of stock incentive rights
("SIRs") thereunder, the number of SIRs to be awarded and their vesting
schedule, and the numbers and exercise prices of the options granted to
optionees. In making its selections and determinations, the Committee has
substantial flexibility and makes its judgments based largely on the functions
and responsibilities of the particular employee, the employee's potential
contributions to the Company's profitability and growth, and the value of the
employee's service to the Company. Options granted under this Plan are either
intended to qualify as "incentive stock options" ("ISOs") within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
or are non-qualified stock options ("NQSOs"). Options granted under this Plan
represent rights to purchase shares of the Company's Class A Common Stock
within a fixed period of time and at a cash price per share ("exercise price")
specified by the Committee on the date of grant. The exercise price cannot be
less than the fair market value of a share of Class A Common Stock on the date
of award. Payment of the exercise price may be made in cash or, with the
Committee's approval, with shares of the Company's Class A Common Stock
already owned by the optionee and valued at their fair market value as of the
exercise date. Options are exercisable during the period fixed by the
Committee, except that no ISO may be exercised more than ten years from the
date of grant, and no NQSO may be exercised more than ten years and one day
from the date of the grant.
Beginning in July 1995, the Committee is also authorized, in its
discretion, to award SIRs under the Plan. SIRs are rights to receive shares
of the Company's Class A Common Stock without any cash payment to the Company,
conditioned only on continued employment with the Company throughout a
specified incentive period of at least three years. In general, the
recipient must remain employed by the Company for the designated incentive
period before receiving the shares subject to the SIR award; earlier
termination of employment, except in the event of death, permanent disability
or normal retirement, would result in the automatic cancellation of an SIR.
Should an SIR holder die, become permanently disabled or retire during an SIR
incentive period, he/she, or his/her estate, as the case may be, would receive
a pro-rated number of the shares underlying the SIR award based upon the ratio
that the number of months since the SIR had been granted bore to the
designated incentive period, less any shares already issued in the case of an
SIR with a staggered vesting schedule.
During the incentive period, should the Company declare any cash
dividends on its Class A Common Stock, the holder of an SIR would be entitled
to receive from the Company cash "dividend equivalent" payments equal to any
such cash dividends that the holder would have received had he/she owned the
shares of Class A Common Stock underlying his/her SIR. However, the holder of
an SIR would not have any other rights with respect to the shares underlying
an SIR award, e.g., the right to vote or pledge such shares, until such shares
were actually issued to the holder.
An employee can be awarded both SIRs and stock options in any
combinations that the Committee may determine. In such an event, an exercise
of an option would not in any way affect or cancel any SIRs an employee may
have received, nor would the earnout of shares under an SIR award in any way
affect or cancel any options held by an employee.
The following table shows information concerning options granted under
this Plan during 1995 to the five Named Executives:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS POTENTIAL REALIZABLE VALUE
OPTIONS GRANTED TO AT ASSUMED ANNUAL RATES OF
GRANTED EMPLOYEES EXERCISE STOCK PRICE APPRECIATION
# IN FISCAL PRICE EXPIRATION FOR OPTION TERM (1)
NAME YEAR ($/SHARE) DATE 0% 5% 10%
<S> <C> <C> <C> <C> <C> <C> <C>
DAVID K. 68,000(2) 19.9 $17.25 10/6/05 $-0- $737,693 $1,869,459
LANIAK
RICHARD T. 24,644(3) 7.2 $16.23 1/3/00 $-0- $110,504 $244,186
AAB
ARUNAS A. 21,700(4) 6.3 $14.75 1/3/05 $-0- $201,293 $510,117
CHESONIS
CHRISTOPHER 10,200(4) 3.0 $14.75 1/3/05 $-0- $94,656 $239,802
BANTOFT
STEVE M. 11,200(4) 3.3 $14.75 1/3/05 $-0- $103,936 $263,312
DUBNIK
</TABLE>
_________________________________
(1)These calculations show the potential gain that would be realized if the
options shown were not exercised until the end of their full five- or ten-year
term, assuming the compound annual rate of appreciation of the exercise prices
indicated (0%, 5%, and 10%) over the respective terms of the options shown,
net of the exercise prices paid.
(2)These options were granted on October 5, 1995. Of this total, 17,391 are
ISOs and 50,609 are NQSOs. The ISOs are for a term of ten years, one-third of
which first became exercisable on April 5, 1996, and an additional one-third
of which become exercisable on the first and second anniversaries of the grant
date. The NQSOs are for a term of ten years and one day, and are subject to
the additional vesting conditions that 50% of such options will vest at such
time as the closing price for the Company's Class A Common Stock is at or
above $21.56 per share for 15 consecutive trading days (a 25% increase over
their exercise price), with the additional 50% of such options to vest at such
time as the closing price for the Company's Class A Common Stock is at or
above $25.88 per share for 15 consecutive trading days (a 50% increase over
their exercise price).
(3)These ISOs were granted on January 3, 1995, for a term of five years, 25%
of which first became exercisable on July 4, 1995, and an additional 25% of
which become exercisable on the first, second and third anniversaries of the
grant date.
(4)These ISOs were granted on January 3, 1995, for a term of ten years, 25% of
which first became exercisable on July 4, 1995, and an additional 25% of which
become exercisable on the first, second and third anniversaries of the grant
date.
The following table reflects information concerning option exercises
under this Plan by the Named Executives during 1995, together with information
concerning the number and value of all unexercised options held by each of the
Named Executives at year end 1995 under this Plan:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES
ACQUIRED NUMBER OF SECURITIES VALUE OF UNEXERCISED
ON VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
EXERCISE REALIZED OPTIONS AT FY-END (#) FY-END ($) (1)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE Exercisable/Unexercisable
<S> <C> <C> <C> <C>
DAVID K. LANIAK -0- $-0- -0-/68,000 $-0-/$395,080
RICHARD T. AAB -0- $-0- 6,161/18,483 $42,080/126,239
ARUNAS A. CHESONIS -0- $-0- 70,925/68,775 $945,970/$567,770
CHRISTOPHER BANTOFT -0- $-0- 15,050/45,150 $101,315/$303,946
STEVE M. DUBNIK -0- $-0- 15,300/45,900 $133,393/$400,179
</TABLE>
________________________________
(1)For each Named Executive, these values are calculated by subtracting the
per share option exercise price for each block of options held on December 31,
1995 from the closing price of the Company's Class A Common Stock on that date
($23.06 on December 29, 1995), then multiplying that figure by the number of
options in that block, then aggregating the resulting subtotals.
As of December 31, 1995, 483,108 shares of the Company's Class A Common
Stock were available for grants under this Plan. As of that date, there were
1,070,919 options outstanding, with a weighted average exercise price of
$14.04 per share. The expiration dates of these option grants range from May
22, 1999 through October 6, 2005. During 1995, no SIRs were awarded under the
Plan.
401(K) DEFERRED COMPENSATION AND RETIREMENT SAVINGS PLAN. The Company
has a 401(k) Deferred Compensation and Retirement Savings Plan in which
employees with a minimum of six months continuous service are eligible to
participate. Contributions to a participating employee's 401(k) account are
made in accordance with the regulations set forth under Section 401 of the
Code. Under this Plan, the Company may make matching contributions to the
account of a participating employee up to an annual maximum of 50% of the
annual salary contributed in that year by that employee, up to a maximum of 3%
of that employee's salary. The Company's contributions vest at the rate of
20% per year of credited service as defined in the plan and become fully
vested after five years of credited service.
EMPLOYEE STOCK PURCHASE PLAN. The Company has an Employee Stock Purchase
Plan in which all employees who work 20 or more hours per week are eligible to
participate. Under this Plan, employees electing to participate can, through
payroll deductions, purchase shares of the Company's Class A Common Stock at
85% of market value on the date on which the annual offering period under this
Plan begins or on the last business day of each calendar quarter in which
shares are automatically purchased for a participant during an offering
period, whichever is lower. Participants cannot defer more than 15% of their
base pay into this Plan, nor purchase more than $25,000 per year of the
Company's Class A Common Stock through this Plan. As of December 31, 1995,
participants had purchased a total of 36,316 shares through this Plan, at an
average price during 1995 of $12.56 per share, leaving a total of 463,684
shares available for future purchases under the Plan.
ANNUAL INCENTIVE PLAN. The Company has an annual incentive plan, which
it instituted in 1995, pursuant to which the annual cash bonuses paid to the
Company's senior management and key personnel are determined. Under this
plan, at the beginning of a fiscal year, the Executive Compensation Committee
of the Board establishes performance targets based upon the Company's
revenues, gross margin, operating expenses and operating income for that
fiscal year. At the end of that year, the extent to which these performance
targets were met for the year determines the bonuses, if any, to be paid for
that year.
OTHER COMPENSATION PLANS. The Company provides additional group term
life and supplemental disability insurance coverage to its officers. The
additional group term life insurance provides additional life insurance
protection to an officer in the amount of two and one-half times his/her
current salary. The supplemental disability insurance provides additional
disability insurance protection to an officer in an amount selected by the
executive, not to exceed, when combined with the coverage provided by the
Company's basic disability insurance provided to all of its employees, 70% of
his/her current annual salary.
The Company also has a legal, medical and financial planning
reimbursement plan for its senior executives pursuant to which it will
reimburse each of them generally up to $4,000 per year (up to $12,000 per year
for Mr. Aab) for legal, accounting, financial planning and uninsured medical
expenses incurred by the executive.
COMPENSATION OF DIRECTORS
Directors who are not also employees of the Company are paid an annual
retainer of $6,000, plus a fee of $500 for each Board meeting attended.
Additionally, outside Directors who serve on committees of the Board receive
$300 per committee meeting attended.
As further discussed in Proposal 3 below, on January 19, 1996, subject to
obtaining shareholder approval at the 1996 Annual Meeting, the Company's Board
of Directors adopted a Non-Employee Directors' Stock Option Plan, and Messrs.
Bennett, Estey, Tessoni and Van Degna each received vested options to purchase
5,000 shares of Class A Common Stock at an exercise price of $23.00 per share
pursuant to this Plan. Subject to obtaining shareholder approval at the 1996
Annual Meeting, this plan provides for annual grants of non-qualified stock
options to purchase 5,000 shares of Class A Common Stock at an exercise price
equal to 100% of the fair market value of the stock on the date of grant,
which options vest at the first anniversary of their date of grant. The
maximum number of shares with respect to which options may be granted under
this Plan is 250,000, subject to adjustment for stock splits, stock dividends
and the like.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, the members of the Executive Compensation Committee of the
Company's Board of Directors were Directors Hugh F. Bennett, Chairman, David
K. Laniak, Robert F. Sykes, Daniel D. Tessoni and Robert M. Van Degna. Mr.
Sykes retired from the Board in July 1995 and Mr. Laniak resigned from
membership on this Committee upon becoming the Company's Chief Executive
Officer in October 1995. As further discussed in his biographical information
above and under "Principal Holders of Common Stock" below, during 1995, Mr.
Van Degna was elected to the Company's Board of Directors as the
representative of the holders of the Company's Series A Preferred Stock, which
was issued pursuant to the terms of the May 1995 $10 million investment in the
Company by the Fleet Equity Investors described under "Principal Holders of
Common Stock" below. The Company understands that the fees paid to Mr. Van
Degna for his services rendered as a Director of the Company are turned over
to Fleet Equity Partners.
Fleet Equity Partners is an affiliate of Fleet Financial Group, Inc.
Fleet Bank of Connecticut, another affiliate of Fleet Financial Group, Inc.,
is co-managing agent of the $35 million Credit Facility that the Company
entered into in July 1995, under which Fleet Bank of Connecticut is committed
to provide $17.5 million.
CERTAIN TRANSACTIONS
To accommodate its need for increased space, in June 1994, the Company
moved its principal executive offices to an industrial complex located at 400
West Avenue, Rochester, New York, which is owned by a real estate partnership
in which Richard T. Aab, the Company's Chairman and former Chief Executive
Officer, is a general partner. For 1995, the Company paid a total of
approximately $600,000 in rent and maintenance fees for this space to this
partnership.
During 1994 and early 1995, the Company initiated efforts to obtain new
telecommunications software programs from AMBIX Systems Corp. ("AMBIX"), a
software development company. The Company's Chairman of the Board and then
Chief Executive Officer, Richard T. Aab, was a controlling shareholder of
AMBIX during such period. In May of 1995, anticipating material agreements
with AMBIX and desiring to eliminate a conflict of interest situation, all of
the common shares owned by Mr. Aab in AMBIX were placed in escrow under the
direction of a Special Committee of disinterested Directors of the Company's
Board of Directors with the option of the Special Committee to authorize the
Company to accept the transfer and delivery of the shares in exchange for the
release or indemnification of Mr. Aab of his personal guarantee of certain
obligations of AMBIX to its lender and the substitution of the Company as the
guarantor of such obligations. The Special Committee, its outside consultants
and the Company's management then proceeded to review and evaluate the
software technology and the terms and conditions of proposed transactions with
AMBIX.
On February 21, 1996, pursuant to the approval of the Special Committee,
a software license agreement was entered into by and between the Company and
AMBIX Acquisition Corp., which is the purchaser of AMBIX's intellectual
property and other assets and is an affiliate of AMBIX. Immediately prior
thereto, the shares of AMBIX held in escrow were returned to AMBIX and the
related party nature of the Company's relationship with AMBIX was thereby
extinguished. In connection with the return of Mr. Aab's shares to AMBIX, the
Company paid approximately $200,000 to AMBIX's lender to release Mr. Aab's
personal guarantee of certain obligations of AMBIX to its lender. Such
benefit to Mr. Aab was the only consideration he received from the Company for
the return of his shares to AMBIX, and, to the Company's knowledge, Mr. Aab
did not receive any additional consideration from AMBIX for the return of his
shares nor did he receive any cash distributions from AMBIX during his
ownership of such shares.
For an aggregate consideration of $1.8 million (including the payment by
the Company of certain obligations of AMBIX to its lender) paid to or for the
benefit of AMBIX or AMBIX Acquisition Corp., the Company in return has
received a perpetual right to use the newly developed telecommunications
software programs. In making a business judgment as to the amount of such
consideration, the Special Committee considered a number of factors including,
among other matters, the opinion of its independent software consultants with
respect to the estimated cost of developing the major software program covered
by the license, the recommendations of management of the Company who were
experienced with oversight responsibilities for the development of software
programs, and the known benefit to the Company of the software programs as
demonstrated by their preliminary testing and use by the Company. The
Company does not know the full costs incurred by AMBIX in developing the
software programs.
The software programs and the Company's license to use them are
considered by the Company to be material and integral to its operations.
During 1995 the Company paid AMBIX $1.2 million, of which approximately
$700,000, relating to the purchase of certain hardware and acquisition of
certain software licenses, was capitalized and recorded on the balance sheet
as a component of property, plant and equipment, and $500,000 relating to
software development was expensed. During 1994 the Company paid AMBIX
$132,000, all of which related to software development which was expensed.
The Company anticipates that it will attempt to negotiate and enter into an
arrangement with AMBIX Acquisition Corp. to provide maintenance and support
for the software programs. There can be no assurance that the Company will
negotiate or enter into any such arrangements or regarding the terms thereof.
On May 22, 1995, Mr. Aab, the Company's Chairman of the Board and then
Chief Executive Officer, entered into a Participation Agreement with the Fleet
Equity Investors in connection with the purchase by the Fleet Equity Investors
of $10 million in aggregate principal amount of 12% convertible subordinated
notes of the Company, which notes were subsequently converted into 10,000
shares of Series A Preferred Stock. The Participation Agreement requires Mr.
Aab to notify the Fleet Equity Investors and the Company of certain proposed
transfers of his Class A Common Stock of the Company and, if any of the Fleet
Equity Investors elect to participate in the proposed transaction, Mr. Aab is
required to obtain the agreement of the purchaser to acquire from any
participating Fleet Equity Investor, at the same price and on the same terms
offered to Mr. Aab, a pro rata portion of the shares proposed to be purchased
from Mr. Aab. The Participation Agreement does not apply to certain transfers
of shares by Mr. Aab, including pursuant to a public offering registered under
the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
Rule 144 adopted under the Act, certain charitable transfers and transfers
resulting from any foreclosure upon shares which have been pledged, and the
transfer restrictions are extinguished if Mr. Aab ceases to be a Director or
employee of the Company or if the Series A Preferred Stock and certain
warrants issued to the Fleet Equity Investors are no longer outstanding.
<PAGE>
SHAREHOLDER RETURN PERFORMANCE INFORMATION
The SEC requires that the Company include in this Proxy Statement a line-
graph presentation comparing its cumulative, five-year shareholder returns, on
an indexed basis, with a broad equity market index and a published industry or
line-of-business index. The following graph compares the cumulative total
shareholder return on the Company's Class A Common Stock against the
cumulative total return of the CENTER FOR RESEARCH IN SECURITY PRICES TOTAL
RETURN INDEX FOR THE NASDAQ STOCK MARKET (which includes all U.S. and foreign
common stocks and American Depositary Receipts traded on The Nasdaq National
Market and Nasdaq Small-Cap Market) and the NASDAQ TELECOMMUNICATIONS TOTAL
RETURN INDEX for the five-year period beginning December 31, 1990 and ending
December 29, 1995, assuming the reinvestment of all dividends throughout the
period shown, and assuming the value of the investment in the Company and in
each Index was $100 on December 31, 1990.
[NOTE: Per Regulation S-T, Rule 304(d), this EDGAR submission contains
the tabular numerical data produced by CRSP on which the performance graph
points are plotted in the printed version of this Proxy Statement,
as follows:]
Comparison of Five-Year Cumulative Total Returns Performance Report
for ACC CORP.
Prepared by the Center for Research in Security Prices
Produced on 3/13/96 including data to 12/29/95
Company Index: CUSIP Ticker Class SIC Exchange
00079410 ACCC 4810 Nasdaq
Fiscal Year End: 12/31/95
Market Index: Nasdaq Stock Market (U.S. and Foreign)
Peer Index: Nasdaq Telecommunications Stocks
SIC 4800-4899 U.S. and Foreign
Date Company Market Market Peer Peer
Index Index Count Index Count
12/31/90 100.000 100.000 4231 100.000 93
01/31/91 94.444 110.647 4196 109.493 92
02/28/91 97.222 121.244 4180 115.333 92
03/28/91 111.556 129.388 4165 119.172 92
04/30/91 111.556 130.190 4123 125.924 92
05/31/91 122.711 136.199 4124 130.307 92
06/28/91 107.818 128.225 4143 117.108 92
07/31/91 120.421 135.757 4143 125.241 93
08/30/91 112.019 142.229 4156 127.200 95
09/30/91 132.096 142.934 4159 132.171 94
10/31/91 154.580 147.660 4170 132.162 95
11/29/91 153.175 142.742 4179 124.393 94
12/31/91 146.149 159.612 4188 137.922 96
01/31/92 155.038 169.175 4203 141.952 100
02/28/92 171.951 172.943 4203 148.855 98
03/31/92 189.316 164.938 4221 141.140 99
04/30/92 166.711 157.901 4219 141.175 100
05/29/92 163.885 159.934 4208 140.910 98
06/30/92 184.117 153.747 4188 140.230 98
07/31/92 186.949 158.880 4154 141.235 95
08/31/92 178.452 154.132 4136 139.701 93
09/30/92 187.424 159.564 4134 143.981 93
10/30/92 195.943 165.523 4151 140.903 94
11/30/92 247.059 178.492 4166 160.489 95
12/31/92 230.345 185.196 4191 169.399 95
01/29/93 281.533 190.709 4178 175.286 95
02/26/93 270.869 183.865 4210 179.651 95
03/31/93 286.310 189.413 4240 188.248 95
04/30/93 213.665 181.837 4280 183.115 96
05/28/93 222.211 192.773 4307 206.581 99
06/30/93 227.007 194.014 4348 216.210 98
07/30/93 244.140 194.353 4381 225.932 101
08/31/93 248.423 204.469 4423 251.447 106
09/30/93 326.103 210.202 4464 254.694 109
10/29/93 338.975 215.055 4514 281.202 111
11/30/93 330.393 208.270 4598 252.468 114
12/31/93 333.260 214.399 4678 261.200 121
01/31/94 353.123 221.238 4706 260.749 120
02/28/94 348.709 218.842 4748 248.195 126
03/31/94 391.166 205.427 4804 225.432 129
04/29/94 371.276 202.746 4831 217.740 130
05/31/94 300.557 202.985 4873 225.524 133
06/30/94 243.097 194.990 4892 215.983 139
07/29/94 243.633 199.607 4912 227.091 141
08/31/94 332.226 211.742 4929 235.806 137
09/30/94 328.321 211.449 4935 235.561 138
10/31/94 297.264 215.129 4956 237.095 140
11/30/94 292.827 207.654 4973 227.174 146
12/30/94 261.770 207.370 4982 215.920 146
01/31/95 275.604 208.178 4976 217.314 147
02/28/95 293.385 218.965 4979 228.833 148
03/31/95 297.830 225.140 4972 224.762 151
04/28/95 275.604 231.629 4987 218.984 153
05/31/95 242.734 237.475 4988 223.922 152
06/30/95 262.776 256.075 5011 237.684 153
07/31/95 316.222 273.764 5033 252.186 153
08/31/95 325.129 278.783 5057 255.498 153
09/29/95 293.953 286.983 5056 271.425 151
10/31/95 334.037 284.169 5099 254.756 152
11/30/95 383.029 290.063 5133 260.661 152
12/29/95 410.865 288.172 5180 260.057 153
The index level for all series was set to $100.00 on 12/31/90
<PAGE>
PROPOSAL 2
AMENDMENT OF THE COMPANY'S
EMPLOYEE LONG TERM INCENTIVE PLAN
The Company's LTI Plan was instituted in February 1982, to provide long-
term incentive benefits to key Company employees as determined by the
Executive Compensation Committee of the Board of Directors (the "Committee").
The Board of Directors and the Committee have approved an amendment to the
Plan to increase the number of shares of the Company's Class A Common Stock
authorized for issuance under this Plan by 500,000 shares. This amendment is
subject to shareholder approval.
This Plan is administered by the Committee, whose duties include
selecting the employees who will receive stock option grants and/or awards of
SIRs thereunder, the number of SIRs to be awarded and their vesting schedule,
and the numbers and exercise prices of the options granted to optionees. In
making its selections and determinations, the Committee has substantial
flexibility and makes its judgments based largely on the functions and
responsibilities of the particular employee, the employee's potential
contributions to the Company's profitability and growth, and the value of the
employee's service to the Company. The Committee also interprets and
implements the LTI Plan and the grants made thereunder. Directors who are not
employees of the Company are not eligible to participate in this Plan.
Options granted under this Plan are either intended to qualify as ISOs
within the meaning of Section 422 of the Code, or are NQSOs. Options granted
under this Plan represent rights to purchase shares of the Company's Class A
Common Stock within a fixed period of time and at a cash price per share
("exercise price") specified by the Committee on the date of grant. The
exercise price cannot be less than the fair market value of a share of Class A
Common Stock on the date of award. Payment of the exercise price may be made
in cash or, with the Committee's approval, with shares of the Company's Class
A Common Stock already owned by the optionee and valued at their fair market
value as of the exercise date. Options are exercisable during the period
fixed by the Committee, except that no ISO may be exercised more than ten
years from the date of grant, and no NQSO may be exercised more than ten years
and one day from the date of the grant.
The Committee is also authorized, in its discretion, to award SIRs under
the Plan. SIRs are rights to receive shares of the Company's Class A Common
Stock without any cash payment to the Company, conditioned only on continued
employment with the Company throughout a specified incentive period of at
least three years. In general, the recipient must remain employed by the
Company for the designated incentive period before receiving the shares
subject to the SIR award; earlier termination of employment, except in the
event of death, permanent disability or normal retirement, would result in the
automatic cancellation of an SIR. Should an SIR holder die, become
permanently disabled or retire during an SIR incentive period, he/she, or
his/her estate, as the case may be, would receive a pro-rated number of the
shares underlying the SIR award based upon the ratio that the number of months
since the SIR had been granted bore to the designated incentive period, less
any shares already issued in the case of an SIR with a staggered vesting
schedule.
During the incentive period, should the Company declare any cash
dividends on its Class A Common Stock, the holder of an SIR would be entitled
to receive from the Company cash "dividend equivalent" payments equal to any
such cash dividends that the holder would have received had he/she owned the
shares of Class A Common Stock underlying his/her SIR. However, the holder of
an SIR would not have any other rights with respect to the shares underlying
an SIR award, E.G., the right to vote or pledge such shares, until such shares
were actually issued to the holder.
An employee can be awarded both SIRs and stock options in any
combinations that the Committee may determine. In such an event, an exercise
of an option would not in any way affect or cancel any SIRs an employee may
have received, nor would the earnout of shares under an SIR award in any way
affect or cancel any options held by an employee.
Subject to the provisions of the Plan, the individuals to whom grants of
options and/or SIRs are awarded, the number of shares covered by each award,
the incentive period applicable to each SIR award, the times when options may
be exercised, the term and other provisions of each option are fixed by the
Committee. No ISOs may be granted to a person who owns at the time of grant,
or would own after full exercise of all options and rights to acquire the
Company's shares, more than 10% of the Company's Class A Common Stock unless,
at the time of grant, the exercise price of the option is at least 110% of the
fair market value of the shares subject to the option and the option is not
exercisable for more than five years from the date of grant.
Since its inception, options under the LTI Plan have been granted to the
Company's current executive officers and to approximately 100 other present
and former key Company employees.
If approved by the shareholders, this proposed amendment to the LTI Plan
will be effective as of June 14, 1996.
The Committee may, without further approval of the shareholders, suspend
or terminate the LTI Plan or amend it in any manner, except that this Plan
cannot be amended without prior shareholder approval to increase the number of
shares for which grants may be awarded, to change the eligibility requirements
for individuals entitled to receive awards, or to materially increase the
benefits accruing to participants under the Plan.
The recipient of an option grant has no rights as a shareholder until the
option is exercised and certificates for shares of Class A Common Stock are
issued to him or her. Pursuant to the Committee's implementation of the
Company's Executive Compensation Plan that was adopted in 1995, an option
becomes exercisable (or "vests") with respect to 25% of the shares subject
thereto immediately upon its date of grant (except with respect to options
granted to individuals who are subject to the restrictions imposed by Section
16 of the Exchange Act, no part of which are exercisable for six months
following their grant date), and vests with respect to an additional 25% of
such shares on each of the first, second and third anniversaries of its date
of grant. No grant under the LTI Plan may be transferred by the optionee
except by will or by the laws of descent and distribution. During the life of
an optionee, an option may be exercised only by the optionee or his/her
guardian or legal representative. As a general rule, an option otherwise
exercisable will be canceled if not exercised within 30 days following the
optionee's retirement or other termination of employment. However, if the
optionee's employment terminates by reason of permanent disability, the option
will be canceled if not exercised within one year following a termination of
employment due to disability. Additionally, in the case of NQSOs, the
Committee has the discretion to extend from 30 days to one year the period
following retirement or other termination of employment during which an
optionee may exercise his or her NQSOs. However, in no event will any option
be exercisable beyond the expiration of its term as established by the
Committee, nor, as applicable, beyond the ten-year maximum ISO exercise period
or the ten-year and one day maximum NQSO exercise period established by the
Plan. Upon the death of the holder of an option, the holder's estate may
exercise such option, but only to the extent the optionee was entitled to
exercise the option at the date of his/her death and only if it is exercised
prior to the expiration of its term.
With respect to ISOs granted under the Plan, the Company has been advised
by its counsel that an optionee will not be subject to federal income tax upon
either the grant of an ISO or its subsequent exercise. In addition, the
Company generally will not be allowed a business expense deduction with
respect to the grant or exercise of an ISO.
If the optionee holds the shares acquired upon the exercise of an ISO for
more than one year after the date of exercise and two years after the date of
grant, then the optionee's gain upon a subsequent sale or other taxable
disposition of the shares will be taxed as capital gain. "Gain" for this
purpose is measured by the difference between the exercise price and the
selling price of the shares. However, if these holding period rules are not
met, the gain that would have been realized at the time that the option was
exercised constitutes ordinary income to the optionee, rather than capital
gain, in the year of such a disposition (a "disqualifying disposition").
"Gain" for this purpose is equal to the lesser of (1) the amount (if any) by
which the fair market value of the shares on the ISO exercise date exceeds the
exercise price, or (2) the amount realized (if any) upon a disqualifying
disposition less the adjusted basis of such shares. Any gain in excess of the
amount reported as ordinary income is treated as capital gain. In the event
of a disqualifying disposition, the Company is entitled to a federal income
tax deduction equal to the amount of compensation realized by the optionee,
provided that the Company timely furnishes either a Form W-2 or W-2C to the
optionee.
There may also be certain alternative minimum tax ("AMT") consequences
attendant to the exercise of ISOs and/or the disposition of shares so
acquired. In general, the spread between the option exercise price and the
fair market value of the option stock at exercise, which receives favorable
treatment under the regular tax system, is considered an "item of adjustment"
for AMT purposes and is included in AMT income. However, if an optionee
acquires shares pursuant to the exercise of an ISO and disposes of such shares
in a disqualifying disposition in the same taxable year, the maximum amount
that will be included as AMT income is the gain on the disposition of such
shares. If a disqualifying disposition occurs in a year other than the year
of exercise, the income on the disqualifying disposition will not be
considered income for AMT purposes. In addition, a disqualifying disposition
could have an impact upon the determination of any corporate AMT to be paid by
the Company. However, due to the AMT credit-carryover provision, this may
merely result in a "prepayment."
With respect to NQSOs, an optionee will not be subject to federal income
tax upon the grant of a NQSO. On the exercise of a NQSO, the difference
between the fair market value of the Company's Class A Common Stock on the
exercise date and the exercise price will be treated as taxable income to the
optionee on that date. The optionee will thus have a tax basis for the shares
so acquired equal to the exercise price plus the amount of taxable income
realized upon exercise. Any subsequent sale or other disposition of any such
shares will be entitled to long-term capital gain or loss treatment if held
for more than one year at the time of such disposition, or short-term capital
gain or loss treatment if held for one year or less at the time of such
disposition. Subject to meeting applicable tax reporting and withholding
requirements, the Company is entitled to a federal income tax deduction at the
time a NQSO is exercised equal to the difference between the fair market value
of the Company's Class A Common Stock on the exercise date and the exercise
price.
With respect to SIRs granted under the Plan, the Company has been advised
that a recipient of an SIR award will not realize any income, nor will the
Company be entitled to any tax deduction, at the time of the grant of an SIR.
However, upon the expiration of an incentive period, the recipient of an SIR
will recognize ordinary income equal to the fair market value of the
underlying shares issued. Also, upon receipt of dividend equivalent payments
during an incentive period, the recipient of an SIR will recognize ordinary
income in an amount equal to the cash received. Upon the issuance of shares
underlying an SIR award, the Company will withhold a portion of such shares to
satisfy tax withholding obligations with respect to such issuance. Such
shares will be valued at their fair market value on the date of issuance and
the SIR holder will be taxed on the shares withheld as if he/she had sold
them. Provided that the Company timely furnishes either a Form W-2 or W-2C to
the holder, it will be entitled to a deduction for federal income tax purposes
at the same time and in the same amounts as the holder of an SIR is considered
to have recognized ordinary income.
The basis of shares acquired under an SIR award is the fair market value
taxed to the SIR holder. When he/she disposes of such shares, any amount
received in excess of that basis will be treated as long-term or short-term
capital gain, depending upon the length of time the shares have been held. If
the amount received is less than the basis of the shares, the loss will be
treated as long-term or short-term capital loss, again depending upon the
length of time the shares have been held.
The foregoing is only a summary and is based upon an analysis of the Code
as currently in effect, existing laws, judicial decisions, administrative
rulings, regulations and proposed regulations, all of which are subject to
change. Moreover, the preceding summary relates only to United States income
taxation and optionees subject to taxation in other jurisdictions may have
different tax consequences, either more or less favorable, from those
described above.
Shares issued under the Plan are authorized and unissued or treasury
shares of the Company's Class A Common Stock. The number of shares authorized
for issuance under the Plan is reduced one-for-one by each share issued
pursuant to an SIR or the exercise of an option granted thereunder. As of
December 31, 1995, there were a total of 483,108 shares that remained
available for grants under the Plan. If this amendment is approved, the
number of shares available for grants will increase to 983,108.
Reference is made to the discussion under "Compensation Pursuant to Plans
- -- Employee Long Term Incentive Plan" in Proposal 1 of this Proxy Statement
for additional information concerning this Plan. In view of the comprehensive
summary of this Plan presented above, the Company believes that including the
full text of the Plan as a part of this Proxy Statement will not substantially
further enhance the shareholders' understanding of it and therefore has
elected not to include it herein. Any shareholder who wishes a copy of this
Plan may request one by writing to the Office of the Vice President--Human
Resources and Corporate Communications, ACC Corp., 400 West Avenue, Rochester,
New York 14611.
On April 1, 1996, the Closing Price for the Company's Class A Common
Stock in Nasdaq trading was $29.75 per share, as quoted in THE WALL STREET
JOURNAL.
The Board of Directors recommends a vote FOR approval of this amendment
to the LTI Plan. Proxies solicited by the Board of Directors will be voted
FOR the foregoing Proposal unless otherwise indicated. The affirmative vote
of the holders of a majority of the outstanding shares of Class A Common Stock
present, in person or by proxy, and entitled to vote at the Annual Meeting is
required for approval of this proposed amendment to the LTI Plan.
PROPOSAL 3
APPROVAL OF THE COMPANY'S
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
In January 1996, upon the recommendation of its Executive Compensation
Committee (the "Committee") and subject to approval by the Company's
shareholders, the Company's Board of Directors approved the adoption of a Non-
Employee Directors' Stock Option Plan (the "Directors' Stock Option Plan" or
"Plan"). The purpose of this Plan is to secure for the Company and its
shareholders the benefits of the incentive inherent in increased ownership of
the Company's Class A Common Stock by members of the Board who are not
employees of the Company or any of its subsidiaries ("Non-Employee
Directors"). The Plan is designed to provide a means of giving existing and
new Non-Employee Directors an increased opportunity to acquire an investment
in the Company, thereby maintaining and strengthening their desire to remain
with or join the Company's Board of Directors and stimulating their efforts on
the Company's behalf.
SUMMARY OF PLAN
The Plan authorizes the Company to grant options ("Options") to purchase
shares of the Company's Class A Common Stock to Non-Employee Directors. Four
Directors are currently eligible to receive Options under the Plan. The
maximum number of shares of Class A Common Stock available for issuance upon
exercise of Options granted to Directors under the Plan is 250,000.
The Plan, which is intended to be a "formula plan" within the meaning of
Rule 16b-3 of the Exchange Act, will be administered by the Committee. The
Committee at all times shall consist of Directors who meet the eligibility
conditions provided in Rule 16b-3(b)(2) of the Exchange Act. The Committee is
authorized to construe and interpret the Plan and Options granted thereunder,
to establish and amend rules for its administration and to correct any defect
or omission or reconcile any inconsistency in the Plan or in any Option to the
extent the Committee deems desirable to carry the Plan or any Option into
effect.
Options granted under the Plan are Non-Qualified Stock Options. The
exercise price per share of Class A Common Stock under each Option (the
"exercise price") is the fair market value of a share of the Company's Class A
Common Stock on the date of grant. Subject to the approval of the Plan by
shareholders, the Plan provides for the grant of an Option to purchase 5,000
shares of Class A Common Stock to each Non-Employee Director as of January 19,
1996 (the date of the adoption of the Plan by the Board of Directors); and an
annual grant of an Option to purchase 5,000 shares of Class A Common Stock to
each Non-Employee Director elected at the Annual Meeting of Shareholders. The
fair market value is determined by reference to the closing price of the
Company's Class A Common Stock as reported on The Nasdaq National Market
System on the last business day immediately preceding the grant date of an
Option. On April 1, 1996, the closing price for the Company's Class A Common
Stock in Nasdaq trading was $29.75 per share, as quoted in THE WALL STREET
JOURNAL. The term of each Option is ten years and one day following its grant
date.
Options granted under the Plan are subject to such terms and conditions
and evidenced by agreements in such form as is determined from time to time by
the Committee and are in any event subject to the terms and conditions set
forth in the Plan. Options granted under the Plan are not transferable,
except by will and the laws of descent and distribution.
Options granted under the Plan shall vest and be exercisable in full on
the first anniversary of their date of grant, except that the initial Options
granted on January 19, 1996 by the Board to each of the current Non-Employee
Directors of the Company (Messrs. Bennett, Estey, Tessoni and Van Degna) to
purchase 5,000 shares at an exercise price of $23.00 per share will vest and
be exercisable in full on June 14, 1996 if this Plan is approved by the
Company's shareholders at the 1996 Annual Meeting. Any vested Option shall be
exercisable during the holder's term as a Director of the Company and, except
if the Director is removed from office for cause, shall remain exercisable for
one year following the date of his/her termination of service as a Director
regardless of the reason therefor, including, but not limited to his/her
resignation or retirement from the Board, disability as defined under Section
22(e)(3) of the Code or death, subject to the earlier expiration of the term
of such Option. Additionally, no shares of the Company's Class A Common Stock
underlying any Option may be sold, assigned, pledged or otherwise transferred
for a period of six months after the later of the adoption of the Plan by the
Company's shareholders or the date of the grant of such Option.
Options may be exercised by written notice to the Company accompanied by
payment in full of the exercise price in cash, by delivery (at the Committee's
discretion) of shares of the Company's Class A Common Stock (valued at the
fair market value thereof on the date of exercise), or by delivery of a
combination of cash and shares of Class A Common Stock. Shares issued under
this Plan are authorized and unissued or treasury shares of the Company's
Class A Common Stock. The number of shares authorized for issuance under the
Plan is reduced one-for-one by each share issued pursuant to the exercise of
an Option granted thereunder. No Director shall have any rights as a
shareholder with respect to any shares covered by an Option until the date a
stock certificate for such shares is issued to him or her.
Subject to receiving shareholder approval of this Plan, the Company
intends to file a registration statement under the Securities Act to register
the shares authorized for issuance under the Plan. As the Company's Directors
are deemed "affiliates" of the Company, they may resell shares acquired under
the Plan only by complying with the requirements and limitations of Rule 144
under the Securities Act.
The Plan provides that the Board or the Committee may at any time suspend
or terminate the Plan or make such additions or amendments as they deem
advisable; provided, that such additions or amendments are made in compliance
with Rule 16b-3 of the Exchange Act. Under Rule 16b-3, the Committee may not,
without approval of the Company's shareholders, amend the Plan (i) to
materially increase the benefits accruing to participants under the Plan, (ii)
to materially increase the maximum number of shares authorized for issuance
under the Plan (other than pursuant to the adjustment provisions discussed
below), (iii) to materially modify the requirements as to eligibility for
participation in the Plan, or (iv) to modify provisions affecting the amount
and timing of Options more than once every six months. If this Plan is
approved by the shareholders, no Options may be granted under it after January
19, 2006, although Options previously granted under the Plan and outstanding
on that date would remain outstanding, unless terminated, in accordance with
the terms of the Plan and the Option agreement under which they were granted.
The Plan provides that in the event of a reorganization, merger,
consolidation, recapitalization, stock split-up, stock dividend, combination
of shares or other change in the Class A Common Stock, appropriate changes to
prevent dilution or enlargement of Options will be made by the Committee in
the aggregate number of shares available for grant under the Plan and in the
number of shares and price per share subject to outstanding Options.
The Plan provides that in the event of a change in control of the Company
as defined therein, all then-outstanding Options shall, subject to the
discretion of the Committee, automatically become fully vested, and the
Options may be assumed by the successor corporation or substantially
equivalent Options substituted by the successor corporation. However, if the
successor corporation does not assume the Options or substitute Options, then
the value of each Option not exercised prior to the effective date of the
change in control of the Company, as measured by (i) the difference between
the fair market value of the Company's Class A Common Stock as of the date
that is five trading days prior to the effective date of the change in control
less the exercise price of each Option, multiplied by (ii) the number of
shares of Class A Common Stock covered by each such Option, shall be paid in
cash to the Option holder no later than the effective date of the change in
control of the Company, and each such Option shall thereupon be canceled.
In the event of a liquidation or dissolution of the Company, the Options
shall terminate immediately prior to the liquidation or dissolution if not
exercised prior to such date.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Company has been advised that a Director who is granted an Option
under this Plan will not be subject to federal income tax upon the grant of
the Option. On the exercise of an Option, the difference between the fair
market value of the Company's Class A Common Stock on the exercise date and
the exercise price will be treated as taxable income to the optionee on that
date. The optionee will thus have a tax basis for the shares so acquired
equal to the exercise price plus the amount of taxable income realized upon
exercise. Any subsequent sale or other disposition of any such shares will be
entitled to long-term capital gain or loss treatment if held for more than one
year at the time of such disposition, or short-term capital gain or loss
treatment if held for one year or less at the time of such disposition.
Subject to meeting applicable tax reporting requirements, the Company is
entitled to a federal income tax deduction at the time an Option is exercised
equal to the difference between the fair market value of the Company's Class A
Common Stock on the exercise date and the exercise price.
As the optionees will be Directors of the Company, the shares received
upon the exercise of an Option may be subject to restrictions under Section
16(b) of the Exchange Act if the Option is exercised and the underlying stock
is sold within six months after the grant date (the "Restriction Period").
Options exercised during the Restriction Period will not be deemed to be
exercised for purposes of the above income recognition rules until the date
that the Restriction Period ends, unless the optionee makes an election to be
taxed currently under Section 83(b) of the Code. If such an election is made
within 30 days after the transfer of Class A Common Stock pursuant to the
exercise of the Option, the optionee will recognize ordinary income on the
date of the actual exercise of the Option (and the Company will be entitled to
a corresponding tax deduction equal to the amount included in the optionee's
income).
If an optionee delivers previously-acquired shares of Class A Common
Stock, however acquired, in payment of all or part of the exercise price of an
Option, the optionee will not, as a result of such delivery, be required to
recognize as taxable income or loss any appreciation or depreciation in the
value of the previously-acquired shares after their acquisition date. The
fair market value of the shares received in excess of the shares surrendered
constitutes compensation taxable to the optionee as ordinary income. Such
fair market value is determined on the date of exercise. The Company is
entitled to a tax deduction equal to the compensation income included by the
optionee in his/her income.
The foregoing is only a summary and is based upon an analysis of the Code
as currently in effect, existing laws, judicial decisions, administrative
rulings, regulations and proposed regulations, all of which are subject to
change. Moreover, the preceding summary relates only to United States income
taxation and optionees subject to taxation in other jurisdictions may have
different tax consequences, either more or less favorable, from those
described above.
In view of the comprehensive summary of this Plan presented above, the
Company believes that including the full text of the Plan as a part of this
Proxy Statement will not substantially further enhance the shareholders'
understanding of it and therefore has elected not to include it herein. Any
shareholder who wishes a copy of this Plan may request one by writing to the
Office of the Vice President--Human Resources and Corporate Communications,
ACC Corp., 400 West Avenue, Rochester, New York 14611.
The Board of Directors recommends a vote FOR approval of the Directors'
Stock Option Plan. Proxies solicited by the Board of Directors will be voted
FOR the foregoing Proposal unless otherwise indicated. The affirmative vote
of the holders of a majority of the outstanding shares of Class A Common Stock
present, in person or by proxy, and entitled to vote at the Annual Meeting is
required for approval of this Proposal.
PROPOSAL 4
RATIFICATION OF SELECTION OF AUDITORS
Arthur Andersen LLP, independent certified public accountants, has been
selected by the Board of Directors to serve as the auditors of the Company's
books and financial records for its current fiscal year. This firm has no
material financial interest in the Company, and its only connection with the
Company during the past fiscal year has been in its role as the Company's
independent auditors. Representatives of Arthur Andersen LLP are expected to
be present at the Annual Meeting of Shareholders to make a statement if they
wish, and to respond to appropriate questions from shareholders.
The Board of Directors recommends that the shareholders vote FOR this
Proposal to ratify the selection of Arthur Andersen LLP to serve as the
Company's independent auditors for the Company's fiscal year ending December
31, 1996. Proxies solicited by the Board of Directors will be voted FOR this
Proposal unless otherwise indicated.
PRINCIPAL HOLDERS OF COMMON STOCK
The following table reflects the security ownership of those persons who
are known to the Company to have been the beneficial owners of more than 5%
(401,970 shares) of the Company's outstanding Class A Common Stock as of March
1, 1996:
<PAGE>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
Richard T. Aab 927,554 (1) 11.5
400 West Avenue
Rochester, New York 14611
Robert M. Van Degna 725,000 (2) 8.3
c/o Fleet Venture Resources, Inc.
111 Westminster Street
Providence, Rhode Island 02903
Fleet Venture Resources, Inc. 456,750 (3) 5.4
111 Westminster Street
Providence, Rhode Island 02903
Montgomery Asset Management, L.P. 445,760 (4) 5.5
600 Montgomery Street
San Francisco, California 94111
(1)This number includes 139,500 shares that are owned by Melrich Associates,
L.P., a family partnership of which Mr. Aab is a general partner and therefore
shares investment and voting power with respect to such shares, and options to
purchase 12,322 shares that are currently exercisable by Mr. Aab. Does not
include 29,722 shares issuable upon the exercise of options that are not
deemed to be presently exercisable.
(2) Includes (i) 456,750 shares of Class A Common Stock beneficially owned by
Fleet Venture Resources, Inc. ("Fleet Venture Resources"), of which 393,750
shares are issuable upon the conversion of Series A Preferred Stock and 63,000
shares are issuable upon the exercise of warrants; (ii) 195,750 shares of
Class A Common Stock beneficially owned by Fleet Equity Partners VI, L.P.
("Fleet Equity Partners"), of which 168,750 shares are issuable upon the
conversion of Series A Preferred Stock and 27,000 shares are issuable upon the
exercise of warrants; and (iii) 72,500 shares of Class A Common Stock
beneficially owned by Chisholm Partners II, L.P. (''Chisholm''), of which
62,500 shares are issuable upon the conversion of Series A Preferred Stock and
10,000 shares are issuable upon the exercise of warrants. As of March 1, 1996,
the conversion price for the Series A Preferred Stock and the exercise price
of such warrants was $16.00 per share. Does not include a total of 625,000
shares of Class A Common Stock issuable to Fleet Venture Resources, Fleet
Equity Partners and Chisholm upon the exercise of warrants, which warrants
would become exercisable upon an optional redemption of the Series A Preferred
Stock by the Company or an option to purchase 5,000 shares granted to him,
subject to shareholder approval, under the Non-Employee Directors' Stock
Option Plan. Mr. Van Degna is the Chairman and Chief Executive Officer of
Fleet Venture Resources and the Chairman and Chief Executive Officer or
President of each general partner of Fleet Equity Partners and Chisholm. Mr.
Van Degna disclaims beneficial ownership of the shares held by these entities,
except for his limited partnership interest in Fleet Equity Partners and in
the general partner of Chisholm.
(3) Does not include shares beneficially owned by Fleet Equity Partners or
Chisholm (see note (2) above).
(4)These shares are held for investment purposes by Montgomery Asset
Management, L.P., a registered Investment Advisor, as reported in a Schedule
13G that was filed with the SEC in January 1996, a copy of which was received
by the Company.
OTHER MATTERS
At present, the Board of Directors knows of no other matters which are
likely to come before the Annual Meeting. However, if any other matters are
presented, it is the intention of the persons named in the proxy to vote such
proxy in accordance with their best judgment on any such matters.
In accordance with relevant SEC rules, any proposal which a shareholder
wishes to be presented at the 1997 Annual Meeting of Shareholders must be
received by the Secretary of the Company at its principal executive offices,
400 West Avenue, Rochester, New York 14611, no later than December 31, 1996.
The cost of solicitation of proxies will be borne by the Company. In
addition to this solicitation by mail, Directors, officers and employees of
the Company may solicit proxies by telephone, fax, mail or personal
interviews, and arrangements will be made with banks, brokerage firms and
others to forward proxy material to their principals. The Company will bear
the expense of any such additional solicitations. In addition, MacKenzie
Partners, Inc. has been retained to aid in the solicitation of proxies at an
estimated fee of $6,500, plus out-of-pocket expenses.
A copy of the Company's 1995 Annual Report containing financial
statements for the fiscal year ended December 31, 1995, is enclosed with these
proxy materials. Additional copies may be obtained from the Office of the
Vice President--Human Resources and Corporate Communications, ACC Corp., 400
West Avenue, Rochester, New York 14611.
Shareholders are urged to mark, date, sign and return promptly the
enclosed proxy in the accompanying envelope, which requires no postage if
mailed in the United States.
By Order of the Board of Directors
David K. Laniak,
Chief Executive Officer
April 29, 1996
<PAGE>
[FORM OF PROXY CARD]
THIS PROXY IS SOLICITED BY
THE BOARD OF DIRECTORS OF
ACC CORP.
Proxy for Annual Meeting of Shareholders - June 14, 1996
The undersigned hereby appoints Richard T. Aab, David K. Laniak and Arunas A.
Chesonis, and each of them, attorneys and proxies, each with full power of
substitution, to represent the undersigned at the Annual Meeting of
Shareholders of the Company to be held on June 14, 1996, and at all
adjournments thereof, to vote as authorized below all of the shares of Class A
Common Stock which the undersigned may be entitled to vote at said Meeting, as
designated below, and in accordance with their best judgment in connection
with such other business as may come before the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR Proposals 1, 2, 3 and 4. To
vote in accordance with the Board of Directors' recommendations, just sign
where indicated on the reverse side; no boxes need be checked. Unless
otherwise marked, this proxy will be voted in accordance with the Board of
Directors' recommendations.
1. Nominees for Directors:
Richard T. Aab David K. Laniak
Hugh F. Bennett Arunas A. Chesonis
Willard Z. Estey Daniel D. Tessoni
[ ] VOTE FOR ALL NOMINEES LISTED ABOVE.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE NAMED
ABOVE, DRAW A LINE THROUGH THAT NAME.
[ ] VOTE WITHHELD FROM ALL NOMINEES.
2. Proposal to Amend the Company's Employee Long Term Incentive Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Proposal to Approve the Company's Non-Employee Directors' Stock Option
Plan
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Proposal to ratify the selection of Arthur Andersen LLP as the
Company's independent auditors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Date:________________________, 1996 _______________________________________
Date:________________________, 1996 _______________________________________
Signature(s)
Note: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
ACC CORP.
EMPLOYEE LONG TERM INCENTIVE PLAN
As Amended through February 5, 1996
1. PURPOSE. The ACC CORP. EMPLOYEE LONG TERM INCENTIVE PLAN
(hereinafter referred to as the "Plan") is designed to furnish additional
incentive to key employees of ACC Corp., a Delaware corporation
(hereinafter referred to as the "Company"), and its parents or
subsidiaries, upon whose judgment, initiative and efforts the successful
conduct of the business of the Company largely depends, by encouraging such
key employees to acquire a proprietary interest in the Company or to
increase the same, and to strengthen the ability of the Company to attract
and retain in its employ persons of training, experience and ability. Such
purposes will be effected through the ability to grant two types of awards
hereunder: (a) stock options, as herein provided, which may be of two
types: (i) "incentive stock options" ("ISOs") within the meaning of Section
422 of the Internal Revenue Code of 1986, as the same has been and shall be
amended (hereinafter referred to as the "Code"); or (ii) non-qualified
stock options ("NQSOs"); and (b) stock incentive rights ("SIRs").
Collectively, options and SIRs may sometimes be referred to as "awards,"
and if not otherwise specified hereinafter, any reference to "options"
shall be deemed to refer to both ISOs and NQSOs.
2. ELIGIBILITY.
(a) GENERAL. The persons who shall be eligible to receive awards
under the Plan shall be those employees of the Company, or of any of its
parents or subsidiaries within the meaning of Section 424(e) and (f) of the
Code, who are exempt from the overtime provisions of the Fair Labor
Standards Act of 1938, as amended, by reason of employment in an executive,
administrative or professional capacity under 29 U.S.C. Section 213(a)(1).
(b) SPECIAL PROVISIONS REGARDING ISOS. With respect to the granting
of ISOs, no ISOs shall be granted to a person who would, at the time of the
grant of such option, own, or be deemed to own for purposes of Section
422(b)(6) of the Code, more than 10% of the total combined voting power of
all classes of shares of stock of the Company or its parents or
subsidiaries unless at the time of the grant of the ISO both of the
following conditions are met:
(i) the ISO option price is at least 110% of the fair market
value of the shares of stock subject to the ISO, as defined in
paragraph 4(a) hereof, and
(ii) the ISO is, by its terms, not exercisable after the
expiration of five years from the date it is granted.
3. SHARES AUTHORIZED FOR AWARDS.
(a) SHARES AUTHORIZED FOR ISSUANCE. Subject to the provisions of
paragraph 3(b) hereof, the maximum number of shares of the Company's Class
A Common Stock, par value $.015 per share, ("Common Stock"), that may be
issued under the Plan is 2,500,000 shares of the Company or of its parent
or subsidiaries (hereinafter referred to as the "Shares"), which Shares
may, in the discretion of the Executive Compensation Committee of the Board
of Directors of the Company (the "Committee") consist either in whole or in
part of authorized but unissued Shares or Shares held in the treasury of
the Company. Any Shares subject to an award which for any reason expires,
is terminated unexercised or is forfeited for any reason shall continue to
be available for awards under the Plan. For purposes of complying with
Code Section 162(m), for each fiscal year of the Company during which this
Plan is in effect, no person who is for that year determined to be a
"covered employee" for purposes of Code Section 162(m)(3) shall be eligible
to be granted options to purchase more than the number of shares authorized
for issuance under the Plan.
(b) ANTI-DILUTION PROVISIONS. The aggregate number and kind of
Shares available for awards under the Plan, and the number and kind of
Shares subject to outstanding awards, and the option price of each
outstanding option, shall be proportionately adjusted by the Committee for
any increase, decrease or change in the total outstanding shares of the
Company resulting from a stock dividend, recapitalization, merger,
consolidation, split-up, combination, exchange of shares or similar
transaction (but not by reason of the issuance or purchase of shares by the
Company in consideration for money, services or property).
(c) GENERAL. The Committee may, prospectively or retroactively,
amend the terms of any option granted hereunder, except that anything in
this Plan to the contrary notwithstanding: (i) no such amendment or other
action by the Committee shall impair the rights of any person holding any
award under this Plan without his or her consent; and (ii) no term of this
Plan relating to ISOs shall be interpreted, amended or altered, nor shall
any discretion or authority granted hereunder be so exercised, so as to
disqualify this Plan under Section 422 of the Code, or, without the consent
of the optionee(s) affected, to disqualify under said Section 422 any
option granted as an ISO. However, for all purposes hereunder, should any
option granted as an ISO fail to qualify as an ISO, it shall be treated as
an NQSO hereunder.
4. TERMS AND CONDITIONS OF OPTIONS. Options shall be granted by the
Committee pursuant to the Plan and shall be subject to the following terms
and conditions:
(a) PRICE. Each option grant shall state the number of Shares
subject to the option and the option exercise price, which shall be not
less than the fair market value of the Shares with respect to which the
option is granted at the time of the granting of the option; provided,
however, that the option exercise price with respect to ISOs shall be at
least 110% of fair market value in the case of a grant of an ISO to a
person who would at the time of the grant own, or be deemed to own for
purposes of Section 422(b)(6) of the Code, more than 10% of the total
combined voting power of all classes of shares of the Company, its parents
or subsidiaries. For purposes of this paragraph, "fair market value" shall
mean:
(i) the Closing Price quoted for the Company's Common Stock
in the National Association of Securities Dealers Automated
Quotation System on the last business day immediately preceding
the date of the grant of the option, or
(ii) the most recent sale price for the Company's Common
Stock as of the date of the grant of the option, or
(iii) such price as shall be determined by the Committee in
an attempt made in good faith to meet the requirements of Section
422(b)(4) of the Code.
(b) TERM. The term of each option grant shall be determined by the
Committee subject to the following:
(i) With respect to ISOs, in no event shall an ISO be
exercisable either in whole or in part after the expiration of
ten years from the date on which it is granted; except that such
term shall not exceed five years with respect to any ISO grant
made to a person who would own, or be deemed to own for purposes
of Section 422(b)(6) of the Code, more than 10% of the total
combined voting power of all classes of shares of the Company's
stock, or that of its parents or subsidiaries, at the time of
such grant.
(ii) With respect to NQSOs, in no event shall an NQSO be
exercisable either in whole or in part after the expiration of
ten years and one day from the date on which it is granted.
Notwithstanding the foregoing, the Committee and an optionee may, by
mutual agreement, terminate any option granted to such optionee under the
Plan.
(c) EXERCISABILITY.
(i) GENERAL. Any options granted hereunder in excess of 2,250
Shares shall only be exercisable with respect to 25% of the number of such
optioned Shares on the first anniversary of the date of grant, and with
respect to an additional 25% of such Shares on each of the second, third
and fourth anniversaries of the date of grant. Any options granted
hereunder for 2,250 Shares or less shall only be exercisable with respect
to 50% of the number of such optioned Shares on the first anniversary of
the date of grant, and with respect to an additional 50% of such Shares on
the second anniversary of the date of grant. The Committee shall have the
right, however, at any time to waive or modify these exercisability
requirements in its sole discretion, subject to the provisions of Section
422 of the Code with respect to ISOs.
(ii) ACCELERATION OF EXERCISABILITY IN THE EVENT OF A CHANGE IN
CONTROL. Notwithstanding subparagraph 4(c)(i) above, all options then
outstanding under this Plan shall automatically become exercisable in full
upon the occurrence of any of the following events, each of which shall be
deemed a "change in control" of the Company: (1) a merger or other
business combination approved by the Company's shareholders; (2) the
acquisition by a third party of more than 50% of the total outstanding
shares of the Company's Common Stock; or (3) a change in the composition of
the Company's Board of Directors such that a majority of the Board consists
of Directors other than the incumbent Directors and the nominees of the
incumbent Directors; PROVIDED, HOWEVER, that in all events the Committee
shall have the discretion to determine that a particular transaction does
not constitute a "change in control" for purposes of this subparagraph.
(d) NON-ASSIGNMENT DURING LIFE. During the lifetime of the optionee,
options granted hereunder shall be exercisable only by him/her and shall
not be assignable or transferable by him/her, whether voluntarily or by
operation of law or otherwise, and no other person shall acquire any rights
therein.
(e) DEATH OF OPTIONEE. In the event that an optionee shall die prior
to the complete exercise of options granted to him/her under the Plan, such
remaining options may be exercised in whole or in part after the date of
the optionee's death only: (i) by the optionee's estate or by or on behalf
of such person or persons to whom the optionee's rights under the option
pass under the optionee's Will or the laws of descent and distribution,
(ii) to the extent that the optionee was entitled to exercise the option at
the date of his/her death, and (iii) prior to the expiration of the term of
the option.
(f) PRIOR OUTSTANDING ISOS.
(i) ISOS GRANTED PRIOR TO JANUARY 1, 1987. With respect to ISOs
granted prior to January 1, 1987, no ISO shall be exercisable in whole or
in part while there is outstanding any ISO to purchase Shares in the
Company or any of its parents or subsidiaries, or in any predecessor
corporation of the Company or parent or subsidiary of such predecessor.
For purposes of this subparagraph (i), an ISO shall be deemed to be
outstanding until it is exercised in full or expires by reason of the lapse
of time.
(ii) ISOS GRANTED AFTER DECEMBER 31, 1986. With respect to ISOs
granted after December 31, 1986, the sequential exercise rule stated in
subparagraph (i) above is eliminated in all respects. ISOs thus granted
need not be exercised in the order granted, and any ISOs granted prior to
January 1, 1987 shall not prevent the exercise, in any order, of any ISOs
granted after December 31, 1986.
(g) GRANT LIMITATION. With respect to ISOs granted under this Plan,
the Company may grant any eligible employee ISOs under all incentive stock
option plans of the Company or in any corporation which is a parent or
subsidiary of the Company, in any amount; PROVIDED, however, that the value
of such options, as determined on their date of grant, that shall first
become exercisable by an optionee in any calendar year cannot exceed
$100,000.
(h) TERMINATION OF EMPLOYMENT. An option shall be exercisable during
the lifetime of the optionee to whom it is granted only if, at all times
during the period beginning on the grant date of the option and ending on
the day 30 days before the date of such exercise, he or she is an employee
of the Company or its parent or any of its subsidiaries, or an employee of
a corporation or a parent or subsidiary of such corporation issuing or
assuming an option granted hereunder in a transaction to which Section
424(a) of the Code applies, subject to the following exceptions: (i) in the
case of an optionee who is disabled within the meaning of Section 22(e)(3)
of the Code, the 30-day period after cessation of employment during which
an option shall be exercisable shall be one year; and (ii) with respect to
NQSOs, the Committee shall have the discretion to extend from 30 days to
one year the period following an optionee's termination of employment
during which time the optionee may exercise his or her NQSOs that are
otherwise exercisable as of the date of such termination. However,
notwithstanding the foregoing, no option shall be exercisable after the
expiration of its term. For purposes of this subsection, an employment
relationship will be treated as continuing intact while the optionee is on
military duty, sick leave or other BONA FIDE leave of absence, such as
temporary employment by the government, if the period of such leave does
not exceed 30 days, or, if longer, so long as a statute or contract
guarantees the optionee's right to re-employment with the Company, its
parent or any of its subsidiaries, or another corporation issuing or
assuming an option granted hereunder in a transaction to which Section
424(a) of the Code applies. When the period of leave exceeds 30 days and
the individual's right to re-employment is not guaranteed either by statute
or by contract, the employment relationship will be deemed to have
terminated on the 31st day of such leave.
(i) POWER TO ESTABLISH OTHER PROVISIONS. Options granted under the
Plan shall contain such other terms and conditions as the Committee shall
deem advisable, subject, in the case of ISOs, to the provisions of Section
422 of the Code and the regulations promulgated thereunder.
5. EXERCISE OF OPTION. Options shall be exercised as follows:
(a) NOTICE AND PAYMENT. Each option, or any installment thereof,
shall be exercised, whether in whole or in part, by giving written notice
to the Company at its principal office, specifying the number of Shares
purchased and the option price being paid, and accompanied by the payment
of the applicable option price in cash, by certified or bank check payable
to the order of the Company, or, at the discretion of the Committee, by
tendering shares of the Company's Common Stock already owned by the
optionee (provided, however, that the optionee shall have owned such shares
for at least six months). To the extent that the Committee permits payment
of the option price through the tender of Common Stock already owned by the
optionee, the fair market value of the shares of Common Stock tendered
shall be determined by reference to the Closing Price quoted for the
Company's Common Stock as of the close of business on the date on which the
Company receives notice of the optionee's exercise of an option. Each such
notice shall also contain representations on behalf of the optionee that he
or she acknowledges that the Company is selling the Shares to him or her
under a claim of exemption from registration under the Securities Act of
1933, as amended (hereinafter referred to as the "Act"), as a transaction
not involving any public offering; that he or she represents and warrants
that he or she is acquiring such Shares with a view to "investment" and not
with a view to distribution or resale; and that he or she agrees not to
transfer, encumber or dispose of the Shares unless: (i) a registration
statement with respect to the Shares shall be effective under the Act,
together with proof satisfactory to the Company that there has been
compliance with applicable state law; or (ii) the Company shall have
received an opinion of counsel in form and content satisfactory to the
Company to the effect that the transfer qualifies under Rule 144 or some
other disclosure exemption from registration and that no violation of the
Act or applicable state laws will be involved in such transfer, and/or such
other documentation in connection therewith as the Company's counsel may in
its sole discretion require.
(b) ISSUANCE OF CERTIFICATES. Certificates representing the Shares
purchased by an optionee shall be issued as soon as practicable after the
optionee has complied with the provisions of paragraph 5(a) hereof.
(c) RIGHTS AS A SHAREHOLDER. The optionee shall have no rights as a
shareholder with respect to the Shares purchased until the date of the
issuance to him or her of a certificate(s) representing such Shares.
(d) DISPOSITION OF SHARES RECEIVED PURSUANT TO EXERCISE OF AN ISO.
Subject to the provisions of paragraph 5(a) hereof, to obtain ISO tax
treatment under the Code, an optionee can make no disposition, within the
meaning of Section 424(c) of the Code, of Shares acquired by the exercise
of an ISO within two years from the date of the grant of the ISO or within
one year following the optionee's exercise of the ISO; PROVIDED, however,
that the foregoing holding periods shall not apply to the disposition of
Shares after the death of the optionee by the estate of the optionee, or by
a person who acquired the Shares by bequest or inheritance or otherwise by
reason of the death of the optionee. For purposes of the preceding
sentence, in the case of a transfer of Shares by an insolvent optionee to a
trustee, receiver or similar fiduciary in any proceeding under Title 11 of
the United States Code or any similar insolvency proceeding, neither the
transfer, nor any other transfer of such Shares for the benefit of his or
her creditors in such proceeding, shall constitute a disposition.
(e) TAX WITHHOLDING MATTERS. With respect to the exercise of an NQSO
hereunder, no later than the date as of which any amount first becomes
includible in an optionee's gross income for income tax purposes, the
optionee shall pay to the Company, or make arrangements satisfactory to the
Company regarding the payment of, any federal, state or local taxes of any
kind required by law to be withheld or paid with respect to such income.
The Company's obligations under this Plan shall be conditional on such
payment or arrangements and the Company shall, to the extent permitted by
law, have the right to deduct the amount of any such tax obligations from
any payment of any kind otherwise due the optionee.
6. STOCK INCENTIVE RIGHTS.
(a) AWARD OF SIRS. The Committee may from time to time, and subject
to the provisions of the Plan and such other terms and conditions as the
Committee may prescribe, award one or more SIRs to any eligible employee.
SIR grants shall be evidenced by written Stock Incentive Agreements in such
form as the Committee may from time to time determine on the advice of
counsel to the Company. Each Stock Incentive Agreement shall set forth the
number of Shares of Common Stock issuable under the SIRs awarded. Subject
to the provisions of Sections 6(c) and 6(e) below, a recipient of an SIR
grant shall be entitled to receive that number of Shares of the Company's
Common Stock issuable thereunder, without payment, upon the expiration of
the incentive period established in the Stock Incentive Agreement with
respect to those Shares.
(b) INCENTIVE PERIOD. Each Stock Incentive Agreement shall set forth
the incentive period which shall be applicable to the Shares of Common
Stock issuable thereunder, which shall in no event be less than three years
from the date of award. Subject to the foregoing, the Committee may, in
its sole discretion, establish any vesting schedule with respect to the
grant of a SIR that it deems appropriate.
(c) TERMINATION OF EMPLOYMENT. Except as provided in Section 6(e)
below, all SIRs awarded to a grantee shall terminate upon termination of
the grantee's employment with the Company prior to the end of the incentive
period applicable to his/her SIRs, and in such event, the grantee shall not
be entitled to receive any Shares in respect of such award.
(d) NON-ASSIGNMENT DURING LIFE. During the lifetime of the grantee,
SIRs shall not be assignable or transferable by him/her, whether
voluntarily or by operation of law or otherwise, and no other person shall
acquire any rights therein.
(e) DEATH, DISABILITY OR RETIREMENT. In the event that the
employment of a grantee holding SIRs is terminated during an incentive
period by reason of death, permanent disability (as determined by the
Committee), or normal retirement, such grantee shall be entitled to
receive, as of the date of any such event, that number of Shares equal to:
(1) the product of (i) the total number of Shares that the grantee would
have been entitled to receive pursuant to the SIR award upon the expiration
of the incentive period had his/her employment not terminated as a result
of death, disability or retirement, and (ii) a fraction, the numerator of
which shall be the number of full calendar months between the date of award
of the SIRs and the date that his/her employment terminated, and the
denominator of which shall be the number of full calendar months in the
incentive period, less (2) the number of Shares already issued, if any, to
the grantee under that SIR award.
(f) ACCELERATION OF VESTING IN THE EVENT OF A CHANGE IN CONTROL.
Notwithstanding the foregoing, all SIRs shall automatically become fully
vested and issuable upon the occurrence of a "change in control" of the
Company as defined in Paragraph 4(c)(ii) above; PROVIDED, HOWEVER, that in
all events the Committee shall have the discretion to determine that a
particular transaction does not constitute a "change in control" for
purposes of this subparagraph and FURTHER PROVIDED that the grantee is an
employee of the Company on the date that such a "change in control" occurs.
(g) DIVIDEND EQUIVALENT PAYMENTS. During an incentive period, should
the Company declare and pay any cash dividends on its Common Stock, each
grantee of an SIR shall be entitled to receive from the Company an amount
equal to such cash dividend that the Company would have paid to such
grantee had he/she, on the record date for the payment of such dividend,
owned of record the shares of Common Stock that are covered by the SIR as
of the close of business on such record date. Each such dividend
equivalent payment shall be made by the Company on the payment date of the
cash dividend in respect of which it is to be made.
(h) ISSUANCE OF CERTIFICATES. Certificates representing the Shares
issued to a grantee at the end of an incentive period shall be issued as
soon as practicable after the end of the relevant incentive period, subject
to the grantee's complying with any conditions to the issuance of such
Shares as the Company's counsel shall require in order that the issuance of
such Shares will be in compliance with the Act and any other laws
applicable thereto, and the Company shall be entitled to receive such other
information, assurances, documents, representations or warranties as it or
its counsel may reasonably require with respect to such compliance.
Additionally, if deemed necessary by Company counsel, appropriate
restrictive legends may be placed on any certificates for Shares issued to
a grantee and the Company may cause stop transfer orders to be placed
against such certificate(s).
(i) RIGHTS AS A SHAREHOLDER. A grantee shall have no rights as a
shareholder with respect to the Shares subject to outstanding SIRs until
the date of the issuance to him/her of a certificate(s) representing such
Shares.
7. TERM OF PLAN. Awards may be granted pursuant to this Plan from
time to time within a period of ten years after the date it is adopted by
the Board of Directors of the Company or the date it is approved by the
holders of a majority of the outstanding shares of the Company, whichever
date is earlier. However, the Plan shall not take effect until approved by
the holders of a majority of the outstanding shares of the Company, at a
duly constituted meeting thereof, held within 12 months before or after the
date the Plan is adopted by the Board of Directors.
8. AMENDMENT AND TERMINATION OF PLAN. Without further approval of
the shareholders of the Company, the Board of Directors or the Committee
may at any time suspend or terminate the Plan, or, subject to the terms
hereof, may amend it from time to time in any manner; provided, however,
that no amendment shall be effective without the prior approval of the
shareholders of the Company that would: (i) except as provided in
paragraph 3(b) hereof, increase the maximum number of Shares for which
awards may be granted under the Plan; (ii) change the eligibility
requirements for individuals entitled to receive awards under the Plan;
(iii) cause options granted or to be granted under the Plan as ISOs to fail
to qualify as ISOs under Section 422 of the Code and the regulations
promulgated thereunder; or (iv) materially increase the benefits accruing
to participants under the Plan.
9. ADMINISTRATION. The Plan shall be administered by the Committee,
and decisions of the Committee concerning the interpretation and
construction of any provisions of the Plan or of any award granted pursuant
to the Plan shall be final. The Company shall effect the grant of awards
under the Plan in accordance with the decisions of the Committee, which
may, from time to time, adopt rules and regulations for the carrying out of
the Plan. For purposes of the Plan, an option shall be deemed to be
granted when a written Stock Option Contract is signed on behalf of the
Company by its duly authorized officer or representative, and a grant of
SIRs shall be deemed to be made as of the date a written Stock Incentive
Agreement is signed on behalf of the Company by its duly authorized officer
or representative. Subject to the express provisions of the Plan, the
Committee shall have the authority, in its discretion and without
limitation: to determine the individuals to receive awards; the timing and
amount of such awards; the incentive period applicable to each SIR award;
the term of each option; the date(s) on which each option shall become
exercisable; whether an option shall be exercisable in whole, in part, or
in installments; the option exercise price of each option; the terms of
payment for Shares purchased by the exercise of each option; to accelerate
the date of exercise of any installment; and to make all other
determinations necessary or advisable for administering the Plan. Whenever
the Company issues Shares with respect to SIRs awarded under this Plan, it
shall withhold an amount sufficient to satisfy any Federal, state and/or
local income tax withholding requirements prior to the delivery of any
certificate(s) representing such Shares. Such withholding shall be
accomplished by withholding that number of Shares from the total to be so
issued as equals the amount of such withholding requirements to be
satisfied, such Shares to be valued at their then-current fair market value
(as determined by the closing price quoted for the Company's Common Stock
on the last business day on which it traded immediately preceding the end
of the relevant incentive period). Any fractional Shares resulting from
such tax withholding shall be paid to the participant in cash. The Plan,
all awards granted and all actions taken hereunder shall be governed by and
construed in accordance with the laws of the State of Delaware.
10. RESERVATION OF SHARES. The Company shall be under no obligation
to reserve Shares to fill awards. Likewise, because of the substantial
nature of the conditions which must be met to entitle eligible employees to
deliveries of reserved Shares, the Company shall be under no obligation to
reserve Shares against such deliveries. The optioning or awarding and
reservation of Shares for employees hereunder shall not be construed to
constitute the establishment of a trust of the Shares so optioned or
awarded and reserved, and no particular Shares shall be identified as
optioned or awarded and reserved for employees hereunder. The Company
shall be deemed to have complied with the terms of the Plan if, at the time
of the issuance and delivery pursuant to the exercise of an option, or
expiration of an incentive period with respect to an SIR, or reservation,
as the case may be, it has a sufficient number of Shares authorized and
unissued or held in its treasury for the purposes of the Plan, irrespective
of the date when such Shares were authorized.
11. APPLICATION OF PROCEEDS. The proceeds of the sale of Shares by
the Company under the Plan will constitute general funds of the Company and
may be used by the Company for any purpose.
ACC CORP.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
As Adopted on January 19, 1996
1. PURPOSE. The purpose of this Non-Employee Directors' Stock
Option Plan (the "Plan") is to secure for ACC CORP., a Delaware corporation
(the "Company"), and its shareholders the benefits of the incentive
inherent in increased stock ownership by members of the Company's Board of
Directors (the "Board") who are not also employees of the Company or any of
its subsidiaries (a "Non-Employee Director"). Options to purchase shares
of the Company's Class A Common Stock, $.015 par value, or such other
shares as are substituted pursuant to Paragraphs 5(e) or 5(f) below (the
"Common Stock"), shall be granted to Non-Employee Directors of the Company
pursuant to the terms of this Plan.
2. ELIGIBILITY. Each Non-Employee Director shall be eligible to
receive grants of non-qualified stock options in accordance with the
specific provisions of Paragraph 4 below ("Options"). The adoption of this
Plan shall not be deemed to give any Director any right to be granted an
Option to purchase Common Stock except to the extent and upon such terms
and conditions consistent with this Plan as may be determined by the
Executive Compensation Committee of the Board (the "Committee").
3. LIMITATION ON AGGREGATE SHARES. The maximum number of shares of
Common Stock with respect to which Options may be granted under this Plan
and which may be issued upon the exercise thereof shall not exceed, in the
aggregate, 250,000 shares, subject to adjustment pursuant to Paragraph 5(e)
below; provided, however, that if any Options granted under this Plan
expire unexercised or are cancelled, terminated or forfeited in any manner
without the issuance of Common Stock thereunder, the shares with respect to
which such Options were granted shall resume the status of being available
for issuance under this Plan. Such shares of Common Stock may be either
authorized and unissued shares, treasury shares or a combination thereof,
as the Committee shall determine.
4. TERMS AND CONDITIONS OF OPTIONS. Options granted under this Plan
shall be subject to such terms and conditions and evidenced by written
agreements in such form as shall be determined from time to time by the
Committee and shall in any event be subject to the terms and conditions set
forth in this Plan. In the event of any conflict between a written
agreement and the Plan, the terms of the Plan shall govern.
(a) OPTIONS TO CURRENT DIRECTORS. Each Non-Employee Director as
of January 19, 1996 shall receive, as of such date, an Option (an
"Initial Option") to purchase 5,000 shares of Common Stock.
(b) ANNUAL OPTIONS. Each year on the date of the Annual Meeting
of the Company's Shareholders (the "Annual Meeting"), commencing with
the 1996 Annual Meeting, each Non-Employee Director elected at such
meeting shall automatically receive an Option to purchase 5,000 shares
of Common Stock.
(c) OPTION PRICE. The Option price per share of Common Stock shall
be 100% of the "Fair Market Value" of a share of Common Stock as of the
date of grant (the "Option Price"). The Fair Market Value of the Common
Stock on any given date means (i) the Closing Price quoted for the
Company's Common Stock in the National Association of Securities Dealers
Automated Quotation System ("Nasdaq System") National Market List on the
last business day immediately preceding the date of grant of the Option; or
(ii) if there are no reported sales on such date, then the mean between the
closing high bid and low asked prices as reported by the Nasdaq System for
such date (or, if not so reported, then as reported for that date by the
system then regarded as the most reliable source of such quotations); or
(iii) if there are no reported sales or quotations, as the case may be, on
the given date, the value determined pursuant to (i) or (ii) using the
reported sale prices or quotations on the last previous date on which so
reported; or (iv) if none of the foregoing clauses apply, the fair market
value as determined in good faith by the Committee.
(d) TERM OF OPTIONS. Each Option shall be exercisable for ten years
and one day after its date of grant.
(e) EXERCISE OF OPTIONS. Options shall be exercised by written
notice to the Company (to the attention of the Treasurer of the Company)
accompanied by payment in full of the Option Price with respect to the
number of Options being exercised. Payment of the Option Price may be
made, at the discretion of the Non-Employee Director: (i) in cash
(including check, bank draft or money order); (ii) by delivery of Common
Stock already owned for at least six months by the Non-Employee Director,
which shall be valued at the Fair Market Value thereof on the date of
exercise; or (iii) by delivery of a combination of cash and Common Stock;
provided, however, that the Committee may, in the exercise of its
discretion, require the Option Price to be paid in cash.
(f) RIGHTS AS A SHAREHOLDER. No Non-Employee Director shall have any
rights as a shareholder with respect to any shares covered by an Option
until the date a stock certificate for such shares is issued to him or her.
Except as otherwise provided herein, no adjustments shall be made for
dividends or distributions of other rights for which the record date is
prior to the date such stock certificate is issued.
5. ADDITIONAL PROVISIONS.
(a) CONDITIONS AND LIMITATIONS ON EXERCISE. The Initial Options
granted hereunder shall be exercisable in full immediately upon their date
of grant. All other Options granted hereunder shall be exercisable in full
("vest") on the first anniversary of their date of grant. Notwithstanding
the foregoing, (i) no Option shall be exercisable prior to the adoption of
the Plan by the Company's shareholders at the Company's 1996 Annual
Meeting, as provided in Paragraph 9 below, and (ii) no shares of Common
Stock issuable upon the exercise of an Option may be sold, assigned,
pledged or otherwise transferred for a period of six months after the later
to occur of (x) the adoption of the Plan by the Company's shareholders and
(y) the grant of the Option, as specified in Rule 16b-3 (or other period of
time specified in such rule as it may be amended from time to time) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
(b) TERMINATION OF SERVICE AS A DIRECTOR. Any vested Option shall be
exercisable during the holder's term as a Director of the Company in
accordance with its terms and, except if the Director is removed from
office for cause, shall remain exercisable for one year following the date
of his/her termination of service as a Director regardless of the reason
therefor, including, but not limited to, his/her resignation or retirement
from the Board, disability as defined in Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended (the "Code"), or death, subject to the
earlier expiration of the term of such Option as defined in Paragraph 4(d)
above.
(c) REGISTRATION AND COMPLIANCE WITH LAWS AND REGULATIONS. It shall
be a further condition to any exercise of an Option and the purchase of
shares of Common Stock pursuant thereto that the Company's counsel be
satisfied that the issuance of such shares will be in compliance with the
Securities Act of 1933, as amended, and any other laws applicable thereto,
and the Company shall be entitled to receive such other information,
assurances, documents, representations or warranties as it or its counsel
may reasonably require with respect to such compliance. Additionally, if
deemed necessary by Company counsel, appropriate restrictive legends may be
placed on any certificate for shares received by an optionee pursuant to
the exercise of an Option and the Company may cause stop transfer orders to
be placed against such certificate(s). The Committee may at any time
impose any limitations upon the exercise of an Option or the sale of the
Common Stock issued upon exercise of an Option that, in the Committee's
discretion, are necessary or desirable in order to comply with Section 16
of the Exchange Act and the rules and regulations thereunder.
(d) NONTRANSFERABILITY OF OPTIONS. Options may not be transferred,
assigned, pledged or hypothecated (whether by operation of law or
otherwise) other than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order, as defined by Section
414(p) of the Code, Section 206(d)(3)(B) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or the rules thereunder, and,
during the lifetime of the person to whom they are granted, may be
exercised only by such person (or his or her guardian or legal
representative).
(e) ADJUSTMENT FOR CHANGE IN COMMON STOCK. If the outstanding Common
Stock is hereafter changed by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock split-up,
combination, exchange of shares, or the like, or dividends payable in
shares of the Common Stock or other securities or assets, an appropriate
adjustment shall be made by the Committee in the aggregate number of shares
available under the Plan, in the number of shares subject to Options to be
granted thereafter pursuant to Paragraphs 4(a) and 4(b), and in the number
of shares and price per share subject to outstanding Options. Any
adjustment in the number of shares shall apply proportionately to only the
unexercised portion of any Option granted hereunder. If fractions of a
share would result from any such adjustment, the adjustment shall be
revised to the next higher whole number of shares.
(f) CHANGE IN CONTROL OF THE COMPANY. All unvested Options then
outstanding under this Plan shall automatically become exercisable in full
upon the occurrence of any of the following events, each of which shall be
deemed a "change in control" of the Company: (1) a merger or other
business combination approved by the Company's shareholders; (2) the
acquisition by a third party of more than 50% of the total outstanding
shares of the Company's Common Stock; or (3) a change in the composition of
the Company's Board of Directors such that a majority of the Board consists
of Directors other than the incumbent Directors and the nominees of the
incumbent Directors; PROVIDED, however, that in all events the Committee
shall have the discretion to determine that a particular transaction does
not constitute a "change in control" for purposes of this subparagraph. In
the event of a change in control of the Company, the Options may be assumed
by the successor corporation or a parent of such successor corporation or
substantially equivalent options may be substituted by the successor
corporation or a parent of such successor corporation. However, if the
successor corporation does not assume the Options or substitute options,
then, if not exercised prior to the effective date of the change in control
of the Company, the value of each unexercised Option, as measured by (i)
the difference between the Fair Market Value of the Company's Common Stock
as of the date that is five trading days prior to the effective date of the
change in control less the Option Price of each Option, multiplied by (ii)
the number of shares of Common Stock covered by each such Option, shall be
paid in cash to the Option holder no later than the effective date of the
change in control of the Company, and each such Option shall thereupon be
cancelled.
(g) LIQUIDATION OR DISSOLUTION. In the event of the liquidation or
dissolution of the Company, the Options shall terminate immediately prior
to the liquidation or dissolution if not exercised prior to such date.
(h) TAXES. The Company shall, to the extent it is required to do so
under applicable federal, state or local rules or regulations, withhold (or
secure payment from the Non-Employee Director in lieu of withholding) the
amount of all withholding and other taxes due with respect to the exercise
of any Options under this Plan, and the Company may defer such issuance
unless indemnified to its satisfaction. To satisfy such obligations, the
Company shall withhold that number of shares issuable pursuant to the
exercise of any Option hereunder as shall have a Fair Market Value (as of
the date of exercise) equal to the amounts required to be withheld, unless
the Non-Employee Director shall first pay the Company the amount of such
obligations in cash or by surrendering to the Company previously-acquired
shares of Common Stock that have such a Fair Market Value.
6. ADMINISTRATION. This Plan shall be administered by the
Committee. It is intended that the Plan will constitute a "formula plan"
within the meaning of Rule 16b-3 under the Exchange Act. The provisions of
the Plan and of any Option agreement made pursuant to the Plan will be
interpreted and applied accordingly.
The Committee shall have full power to construe and interpret this
Plan and Options granted hereunder, to establish and amend rules for its
administration and to correct any defect or omission and to reconcile any
inconsistency in this Plan or in any Option granted hereunder to the extent
the Committee deems desirable to carry this Plan or any Option granted
hereunder into effect. All actions taken and interpretations and
determinations made by the Committee in good faith shall be final and
binding upon the Company, all Non-Employee Directors who have received
grants under the Plan and all other interested parties.
7. TERMINATION AND AMENDMENT OF PLAN. At any time the Committee may
suspend or terminate this Plan and make such changes or amendments as it
deems advisable; PROVIDED, however, that all such changes and amendments
are made in compliance with Rule 16b-3 of the Exchange Act (as such rule
may be amended from time to time); that no such change or amendment shall
be effective without the prior approval of the shareholders of the Company
that would: (i) except as provided in Paragraph 5(e) hereof, increase the
maximum number of Shares for which Options may be granted under this Plan;
(ii) change the eligibility requirements for those entitled to participate
in this Plan; or (iii) materially increase the benefits accruing to
participants in this Plan; and FURTHER PROVIDED, that Paragraphs 4, 5(a)
and 5(b) shall not be amended more than once every six months (other than
to comply with the federal securities laws, the Code, or ERISA). No
Options shall be granted hereunder after January 19, 2006.
Notwithstanding any termination of the Plan, the terms of the Plan shall
continue to apply to Options granted prior to any such termination.
8. NOTICES. Notices required or permitted to be made under the Plan
shall be sufficiently made if personally delivered to the Non-Employee
Director or sent by regular mail addressed (a) to the Non-Employee
Director's address as set forth in the books and records of the Company, or
(b) to the Company or the Committee at the principal office of the Company
clearly marked "Attention: Executive Compensation Committee."
9. EFFECTIVE DATE OF PLAN. The Plan shall be effective as of
January 19, 1996, provided that the adoption of the Plan shall have been
approved by the Company's shareholders at the Company's 1996 Annual
Meeting. If the Plan is not so approved by the Company's shareholders, the
Plan and all Options granted hereunder shall automatically terminate.
10. GOVERNING LAW. The Plan, all Options granted hereunder and all
actions taken hereunder shall be governed by and construed in accordance
with the laws of the State of Delaware.
