-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D+/phzOu0UkQhKovuA5tEk+4/tnGoUb5R/U1j41H1BpsLeltSa06KFRn4PG2tLTf ZMGXIsIktA10GAk1kri1bg== 0000927550-95-000050.txt : 19951119 0000927550-95-000050.hdr.sgml : 19951119 ACCESSION NUMBER: 0000927550-95-000050 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACC CORP CENTRAL INDEX KEY: 0000783233 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 161175232 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14567 FILM NUMBER: 95592668 BUSINESS ADDRESS: STREET 1: 400 W AVE CITY: ROCHESTER STATE: NY ZIP: 14611 BUSINESS PHONE: 7169873000 MAIL ADDRESS: STREET 1: 400 WEST AVE CITY: NEW YORK STATE: NY ZIP: 14611 FORMER COMPANY: FORMER CONFORMED NAME: AC TELECONNECT CORP DATE OF NAME CHANGE: 19870129 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-14567 ACC CORP. (exact name of registrant as specified in its charter) Delaware 16-1175232 State of other jurisdiction of I.R.S. Employer incorporation or organization Identification No. 400 West Avenue, Rochester, New York 14611 (Address of principal executive offices) (716) 987-3000 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO CORPORATE ISSUERS: As of November 8, 1995, the Registrant had issued and outstanding, 7,855,062 shares of its $.015 par value Class A Common Stock, and 10,000 shares of its Series A Preferred Stock. The Index of Exhibits filed with the Report is found at Page 19. ACC CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Amounts in 000's, except per share data) Three months ended Nine months ended September 30, September 30, 1995 1994 1995 1994 Revenue: Toll revenue $42,322 $26,584 $119,268 $83,817 Leased lines and other 3,589 1,825 7,973 5,735 45,911 28,409 127,241 89,552 Operating expenses: Network costs 28,105 17,749 79,163 56,988 Depreciation and amortization 3,011 2,259 8,405 6,314 Selling, general and administrative 15,159 11,943 41,345 30,632 Equal access costs - 2,463 - 2,463 46,275 34,414 128,913 96,397 Loss from operations (364) (6,005) (1,672) (6,845) Other income (expense): Interest (1,340) (644) (3,666) (1,143) Terminated merger costs - - - (200) Foreign exchange gain (loss) (14) (62) (109) 106 (1,354) (706) (3,775) (1,237) Loss before provision for income taxes and minority interest (1,718) (6,711) (5,447) (8,082) Provision for income taxes 249 3,988 538 3,417 Loss before minority interest (1,967) (10,699) (5,985) (11,499) Minority interest in loss of consolidated subsidiary 118 2,243 225 2,367 Net loss ($1,849) ($8,456) ($5,760) ($9,132) Net loss per common & common equivalent share: ($0.24) ($1.20) ($0.77) ($1.29) Average number of common and common equivalent shares 7,978,225 7,047,071 7,643,174 7,060,731
ACC CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in 000's except share data) September 30, December 31, 1995 1994 (Unaudited) (Audited) Current assets: Cash and cash equivalents $1,672 $1,021 Restricted cash - 272 Accounts receivable, net of allowance for doubtful accounts of $2,659 in 1995 and $1,035 in 1994 31,867 20,499 Other receivables 5,504 5,433 Prepaid and other assets 1,859 1,124 Total current assets 40,902 28,349 Property, plant and equipment: At cost 75,781 62,618 Less-accumulated depreciation and amortization (24,789) (18,537) 50,992 44,081 Other assets: Restricted cash - 157 Goodwill and customer base 14,602 6,884 Deferred installation costs, net 1,801 1,639 Other 4,777 3,642 21,180 12,322 Total assets $113,074 $84,752 Current liabilities: Notes payable $2,966 $ - Current maturities of long-term debt 2,573 1,613 Accounts payable 6,386 10,498 Accrued network costs 25,651 10,443 Other accrued expenses 13,200 8,053 Dividends payable - 208 Total current liabilities 50,776 30,815 Deferred income taxes 4,088 3,675 Long-term debt 23,445 29,914 Redeemable preferred stock 8,997 - Minority interest 1,092 1,262 Shareholders' equity: Class A Common stock, $.015 par value Authorized-50,000,000 shares Issued- 8,498,580 in 1995 and 7,652,601 in 1994 127 115 Capital in excess of par value 31,515 20,070 Cumulative translation adjustment (888) (1,013) Retained earnings (4,468) 1,524 26,286 20,696 Less- Treasury stock, at cost (726,589 shares) (1,610) (1,610) Total shareholders' equity 24,676 19,086 Total liabilities and shareholders' equity $113,074 $84,752
ACC CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Amounts in 000's, except per share data) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 1994 Cash flows from operating activities: Net loss ($5,760) ($9,132) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,405 6,314 Deferred income taxes 515 2,932 Minority interest in income of consolidated subsidiary (225) (2,367) Unrealized foreign exchange loss 430 (50) Amortization of deferred financing costs 165 - Loss on disposal of equipment 193 - (Increase) decrease in assets: Restricted cash - - Accounts receivable, net (10,040) (2,350) Other receivables 252 184 Prepaid and other assets (329) 712 Deferred installation costs (1,160) (835) Other 415 (827) Increase (decrease) in liabilities: Accounts payable (8,217) (991) Accrued network costs 15,041 1,762 Other accrued expenses 3,305 2,021 Total adjustments 8,750 6,505 Net cash provided by (used in) operating activities 2,990 (2,627) Cash flows from investing activities: Capital expenditures, net (8,709) (21,525) Payment for purchase of subsidiary, net of cash acquired (1,386) - Acquisition of customer base (229) (2,077) Net cash used in investing activities (10,324) (23,602) Cash flows from financing activities: Net borrowings (repayments) under lines of credit (7,602) 30,378 Repayment of long-term debt (1,734) (1,320) Proceeds from issuance of common stock 11,395 87 Proceeds from issuance of preferred stock 10,000 Repurchase of minority interest - (215) Financing costs (2,807) - Dividends paid (440) (4,033) Net cash provided by financing activities 8,812 24,897 Effect of exchange rate changes on cash (827) (135) Net increase (decrease) in cash from continuing operations 651 (1,467) Cash and cash equivalents at beginning of period 1,021 1,467 Cash and cash equivalents at end of period $1,672 - Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $2,831 $1,010 Income taxes $103 $280 Supplemental schedule of noncash investing activities: Equipment purchased through capital leases $2,995 $942 Purchase of subsidiary with short-term notes payable $2,966 - Supplemental schedule of noncash financing activities: Exchange of treasury shares for common shares - $327
ACC CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements September 30, 1995 1. Statement of Management The condensed financial statements of ACC Corp. and subsidiaries ("The Company") included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest Annual Report on Form 10-K. The interim financial statements contained herein reflect all adjustments of a normal recurring nature which are, in the opinion of management, necessary to a fair statement of the results of operations for the interim periods presented. 2. Form 10-K Reference is made to the following footnotes included in the Company's 1994 Annual Report on Form 10-K: Principles of Consolidation Sale of Subsidiary Stock Revenue Property, Plant and Equipment Deferred Installation Costs Goodwill and Customer Base Common and Common Equivalent Shares Foreign Currency Translation Income Taxes Cash Equivalents and Restricted Cash Currency Forward Contracts Reclassifications Operating Information Discontinued Operations Asset Write-down Equal access costs Merger of local exchange subsidiary Acquisition Long-Term Debt, Lines of Credit and Financing Arrangements Class A Common Stock Treasury Stock Commitments and Contingencies Geographic Area Information Related Party Transactions Subsequent Event 3. Net Income Per Share Net Income per common and common equivalent share is computed on the basis of the weighted average number of common and common equivalent shares outstanding during the period and net income reduced by preferred dividends. For the three and nine month periods in 1995, preferred dividends were $98,630. There were no preferred dividends in 1994. The average number of shares outstanding is computed as follows: For the Nine Months For the Three Months Ended September 30: Ended September 30: Average Number Outstanding: 1995 1994 1995 1994 Common Shares 7,478,161 6,909,012 7,763,949 6,910,883 Common Equivalent Shares 165,013 151,719 214,276 136,188 Total 7,643,174 7,060,731 7,978,225 7,047,071
Fully diluted income per share amounts are not presented for the three and nine month periods ended September 30, 1995, because inclusion of these amounts would be anti-dilutive. 4. Reclassification Certain reclassifications have been made to previously reported prior year balances to conform to the September 30, 1995 presentation. 5. Sale of Class A Common Stock During 1995, the Company made an offshore offering of 825,000 shares of its Class A Common Stock at an average price of $14.53 per share, pursuant to SEC Regulation S, to foreign investors through a placement agent. The offering raised net proceeds of $11.1 million, after deduction of fees and expenses of $0.9 million. In conjunction with this transaction, warrants to purchase 82,500 shares of Class A Common Stock at an exercise price of $14.40 were issued. These warrants were exercised subsequent to September 30, 1995. 6. Private Placement On May 22, 1995, the Company completed a $10 million private placement of 12% convertible subordinated debt to a group of private investors led by Fleet Equity Partners. The notes were converted into 10,000 shares of cumulative, convertible Series A Preferred Stock on September 1, 1995. The Series A preferred shares have a liquidation value of $1,000 per share, accrue cumulative dividends of 12% annually, payable upon redemption, and are convertible into Class A Common Stock at an initial conversion price of $16 per share, or 625,000 shares, subject to certain adjustments. All of the outstanding Series A preferred shares will be repaid in cash, or partly in cash and partly in Class A Common Stock, on the seventh anniversary of the closing at the greater of i) the principal amount plus all accrued and unpaid interest and dividends or ii) the fair market value of the underlying Class A Common Stock into which the preferred shares are convertible. Optional repayments are permitted at any time. The preferred shares will be automatically converted into Class A Common Stock if, after the second anniversary of the closing, i) the daily trading volume of the Class A Common Stock exceeds 5% of the number of shares of Class A Common Stock issuable upon conversion of the preferred shares for 45 consecutive trading days, ii) the holders of the preferred shares are not subject to any underwriters lock up agreement and iii) the average closing price of the Class A Common Stock for 15 consecutive trading days exceeds the price set forth in the investment agreement (ranging from $32.00 to $57.33, depending on the period of time that the preferred shares have been outstanding). At closing, warrants for 100,000 shares of the Company's Class A Common Stock were issued at an initial exercise price of $16 per share. Also at closing, the Company issued warrants to purchase Class A Common Stock that will become exercisable upon one or more optional repayments of the Series A preferred shares at an exercise price of $16.00, subject to adjustments as defined in the Agreement, and will permit each holder to acquire initially the same number of shares of Class A Common Stock into which the preferred shares were convertible as of the relevant repayment date. The Series A preferred stock is senior to all classes and series of preferred stock and Class A Common Stock as to the payment of dividends and redemptions, and upon liquidation at liquidation value, senior to all other classes of the Company's capital stock. In certain circumstances, the holders of the Series A Preferred Stock will have preemptive rights to purchase, on an as-converted basis, a pro rata portion of certain Class A Common Stock issuances by the Company. The Fleet Equity investors are entitled to elect one director to the Company's Board of Directors, so long as more than 33% of the Series A Preferred Stock is outstanding. They also have the right to approve certain transactions as listed in the agreement. At September 30, 1995, the Series A preferred stock is reflected on the accompanying balance sheet as redeemable preferred stock, and is shown inclusive of cumulative unpaid dividends, and net of unamortized issuance costs. The carrying value of the redeemable preferred stock will be accreted to the liquidation value, as defined, over the seven year term. 7. Long-Term Debt On June 7, 1995, the Company entered into a commitment for a $35 million five year senior credit facility with two financial institutions. On July 21, 1995, the transaction was closed and $15 million was borrowed under the new agreement, which was used to pay down and terminate the Company's previously existing lines of credit and to pay fees related to the transaction. The agreement contains certain financial covenants, one of which limits the amount that may be borrowed against this facility, based on the Company's operating cash flow. The facility will be reduced in quarterly increments commencing 24 months after closing. Borrowings under the facility are secured by certain of the Company's assets, and will bear interest at either LIBOR or prime interest rates, with additional percentage points added based on a ratio of debt to operating cash flow, as defined in the loan agreement. The Company is obligated to pay the managing agent banks a contingent interest payment based on the appreciation in value of 140,000 shares of the Company's Class A Common Stock over the 18 month period following the date of closing. The payment will range from $750,000 to $2,100,000. In addition to repaying the Company's previously existing lines of credit, proceeds from the facility will be used to finance capital expenditures and provide working capital. In conjunction with the closing the Company issued to a financing agent warrants to purchase 30,000 shares of the Company's Class A Common Stock at an exercise price of $16.00 per share. 8. Purchase As of August 1, 1995, the Company acquired Metrowide Communications (Metrowide) in a business combination accounted for as a purchase. Metrowide is based in Toronto, Canada, and provides local and long distance services to Ontario based customers. The results of operations of Metrowide are included in the accompanying financial statements since the date of acquisition. The total cost of the acquisition was CDN $6 million (US $4.4 million), of which CDN $2 million (US $1.5 million) was paid at the date of purchase, with the remaining CDN $4 million (US $2.9 million) due in installments through August 1, 1996. The fair value of assets acquired, including goodwill and customer base, was CDN $14.7 million (US $10.8 million), and liabilities assumed totaled CDN $8.7 million (US $6.4 million). Goodwill of CDN $7.0 million (US $5.0 million) is being amortized over twenty years, and customer base of CDN $4.2 million (US $3.1 million) is being amortized over five years. 9. Subsequent Event In October, 1995, the Company's former Chief Executive Officer resigned his position, but remains an employee and Chairman of the Company's Board of Directors. A new Chief Executive Officer was hired. In conjunction with the management changes, the Company entered into agreements with both executives. The contract with the Chief Executive Officer has a two year term and provides for continuation of salary and benefits for the term of the agreement, in the event of a change in control of the Company. The contract with the Chairman of the Board provides for a payment of $1,000,000, payable over a three year term, in the event that he resigns or is terminated. Payments under this agreement are accelerated and are due in full within 30 days following a change in control of the Company. The Company has also entered into a non-competition agreement with the Chairman of the Board, for which $750,000 was paid in October, 1995. ITEM 2. Management's Discussion and Analysis of Financial Condition and the Results of Operations RESULTS OF OPERATIONS The following chart shows the total revenue contribution from each of the Company's operating units as well as billable long distance minutes (in 000's): Revenue and minutes are shown net of revenue and minutes from affiliates. Three months ended September 30, Percent of Percent of Revenue 1995 Total 1994 Total United States $15,204 33.1% $12,698 44.7% Canada 20,547 44.8% 14,907 52.5% United Kingdom 10,073 21.9% 804 2.8% Local Exchange 87 .2% - - $45,911 100.0% $28,409 100.0% Billable Minutes United States 119,400 41.7% 107,607 52.0% Canada 120,585 42.2% 96,276 46.6% United Kingdom 46,118 16.1% 2,938 1.4% 286,103 100.0% 206,821 100.0% Nine months ended September 30, Percent of Percent of Revenue 1995 Total 1994 Total United States $43,693 34.3% $38,910 43.5% Canada 59,737 47.0% 49,289 55.0% United Kingdom 23,641 18.6% 1,353 1.5% Local Exchange 170 .1% - - $127,241 100.0% $89,552 100.0% Billable Minutes United States 343,813 41.6% 321,623 51.2% Canada 376,829 45.5% 301,646 48.0% United Kingdom 106,605 12.9% 4,920 .8% 827,247 100.0% 628,189 100.0% For the three months ended September 30, 1995, toll revenue increased by 59.0% to $42.3 million from $26.6 million for the three months ended September 30, 1994. In the United States, toll revenue increased 18.2%, due to both volume and price increases. The volume increases are a result of increased carrier revenue, university business, and an increased focus on small to medium commercial customers in the Company's service region. The price increases are a result of general price increases in the industry. In Canada, toll revenue increased 32.2% primarily as a result of a 25.3% increase in billable minutes, with a 5.7% increase in prices. These increases reflect growth in the Company's successful 800 service program in student and residential traffic. In the United Kingdom (U.K.), toll revenue increased 1,156% due to substantial volume increases, offset slightly by lower prices, as a result of entering into commercial and residential markets, as compared to 1994 when ACC's U.K. customers were primarily university students. Exchange rate changes did not have a significant impact on Canadian or U.K. toll revenue for the three month period. For the nine months ended September 30, 1995, toll revenue increased by 42.3% to $119.3 million from $83.8 million for the nine months ended September 30, 1994. In the United States, toll revenue increased 11.0%, and was fairly evenly split between volume and price increases. In Canada, toll revenue increased 20.0%, largely attributable to volume increases, with slight price decreases compared to the same nine months in 1994. The price decreases were a result of competition that resulted in decreased revenue per minute in the second quarter of 1994, but which has stabilized since June 30, 1994. Exchange rate changes were not a significant percentage of the increase in Canada. The U.K. had a 1,665% toll revenue increase, due to significant volume increases offset by price declines as discussed in the preceding paragraph. In the U.K., favorable exchange rate changes accounted for approximately 3.0% of the increase. Leased lines and other revenue increased 96.7% to $3.6 million for the quarter ended September 30, 1995 from $1.8 million for the same period in 1994. For the nine month period ended September 30, 1995, leased lines and other revenue increased 39% to $8.0 million from $5.7 million for the same period in 1994. These increases primarily related to increased local revenue generated by the University Program in the U.S., the start up of local exchange operations in upstate New York, and the Metrowide acquisition as of August 1, 1995. The Metrowide acquisition accounted for approximately $1.5 million of leased lines and other revenue, for both the three and the nine month periods in 1995. OPERATING EXPENSES Network costs increased to $28.1 million and $79.2 million for the three and nine month periods ended September 30, 1995, respectively, from $17.7 million and $57.0 million for the same periods in 1994. Expressed as a percentage of revenue, network costs decreased to 61% for the three months ended September 30, 1995 from 63% for the same period in 1994, and decreased to 62% for the nine month period ended September 30, 1995 from 64% for the same period in 1994. The decreases, as a percentage of revenue, were mainly due to lower Canadian contribution rates and volume related efficiencies in Canada. These decreases were partially offset by increased per minute costs in the United Kingdom where the Company's network is still being developed. Depreciation and amortization increased to $3.0 million and $8.4 million for the three and nine month periods ended September 30, 1995, respectively, from $2.3 million and $6.3 million for the same periods in 1994. These increases were primarily due to assets placed in service since September 30, 1994, particularly equipment at U.S. university sites, the London switching center and billing system, the local switching center in Syracuse, New York and also a Rochester switching center upgrade in the third quarter of 1995. The Company anticipates that depreciation and amortization will increase during the fourth quarter of 1995, as a result of switching center upgrades scheduled in Toronto and in Manchester, U.K., and the customer base and goodwill associated with the Metrowide acquisition. Selling, general and administrative expenses increased to $15.2 million and $41.3 million for the three and nine month periods ended September 30, 1995, respectively, from $11.9 million and $30.6 million for the same periods in 1994. These increases were primarily attributable to increased payroll and related costs, increased marketing, sales and customer acquisition costs associated with the rapid growth of the Company's operations in the U.K. and Canada, and increased facility costs due to the Company's expanding operations and headquarters in Rochester, New York. Costs incurred in the operations of the local service business decreased to $0.4 million and $1.3 million, respectively, for the three and nine month periods ended September 30, 1995 from $0.8 million and $2.0 million for the same periods in 1994, related to the Company's decision to decrease expenditures in an effort to take a controlled approach to this market opportunity. Expressed as a percentage of revenue, selling, general and administrative expenses declined to 33% for the three months ended September 30, 1995 compared to 42% for the same period in 1994, primarily as a result of significant revenue increases in the U.K. For the nine month periods ended September 30, 1995 and 1994, selling, general and administrative expenses as a percentage of revenue were 32% and 34%, respectively. The improvement in the percentages for the first nine months of 1995 is a result of the significant increases in U.K. revenue. Worldwide, the Company had 700 employees at September 30, 1995, compared to 532 at September 30, 1994. OTHER INCOME (EXPENSE) Net interest expense increased to $1.3 million and $3.7 million, respectively, for the three and nine month periods ended September 30, 1995 from $0.6 million and $1.1 million for the same periods in 1994. These increases were due to increased borrowing on the Company's lines of credit related to financing of university projects in the U.S., start up of the U.K. and the local service businesses during 1994, write-off of deferred financing costs related to the Company's lines of credit which were terminated in July, 1995, and debt service costs associated with the subordinated 12% notes issued in May, 1995. On September 1, 1995, the subordinated notes were converted to preferred stock, and there will be no further interest expense associated with that transaction. The provision for income taxes for the quarter was $.3 million compared to $4.0 million for the third quarter of 1994. The income tax provision that was recorded at September 30, 1995 is relative to the U.S. operations only. No income tax benefits have been recorded for the 1995 operating losses in the U.K. and Canada, due to the uncertainty of the Company's ability to utilize these losses to reduce future taxable income in those countries. In the third quarter of 1994, the Company recorded a valuation allowance for all previously recorded benefits in the U.K. and in Canada. Minority interest in income of consolidated subsidiary reflects the portion of the Company's Canadian subsidiary's income attributable to the approximately 30% of the shares of that subsidiary that are publicly traded in Canada. For the three months ended September 30, 1995, minority interest in loss of consolidated subsidiary was $0.1 million compared to $2.2 million for the same period in 1994 due to the improvement in the Canadian subsidiary's operating results in 1995, and the reserve for tax benefits that was recorded in the third quarter of 1994. The Company's net loss for the three and nine month periods ended September 30, 1995 was $1.8 million and $5.8 million, respectively, versus $8.5 million and $9.1 million for the same periods in 1994. The 1995 losses were primarily due to continued start-up losses in the U.K. and in the local exchange business, debt restructuring costs, and non-recognition of income tax benefits in foreign subsidiaries. The 1994 losses include costs to implement equal ease of access in Canada. The Company anticipates a net loss for at least the next quarter as it continues to make investments in all subsidiaries, particularly the U.K. SEASONALITY As the percentage of the Company's revenue generated by its university customers has increased, especially in the U.S., the Company's business has become more seasonal. Revenue generally increases during the school year, which runs from September through May in the U.S. and Canada, and from October through May in the U.K. During the summer months while university customer revenue is low, selling and administrative expenses, as a percent of revenue, generally increase due to the sales and marketing efforts related to generating new university customers for the following fall semester. CAPITAL RESOURCES AND LIQUIDITY To date, the bulk of the Company's working capital needs have been met through funds generated from operations, from the Company's lines of credit, and from the equity placements discussed in the Notes to Consolidated Financial Statements. In addition, the Company has used the proceeds from the sale of ACC TelEnterprises Ltd.'s Common Stock and the sale of its cellular operations, both in 1993, to fund the expansion of its operations in Canada and the U.K. The Company's principal need for working capital is to meet its selling, general and administrative expenses as its business expands. In addition, the Company's resources have been used for the Metrowide acquisition, asset additions, various customer base acquisitions and payments of dividends to its shareholders. At September 30, 1995, the Company had a working capital deficit of approximately $9.8 million. This related to 1) short term debt associated with the Metrowide acquisition and 2) delays in billing from certain network vendors. The Company believes its cash flow from operations, vendor financing agreements and its new credit facility are sufficient to meet the cash requirements of its current operations for the foreseeable future. During 1995, the Company has been focused on strengthening its balance sheet, as well as obtaining debt and equity financing to continue to finance the growth of the business. In the second quarter, the Company discontinued paying regular dividends on its Class A Common Stock as part of its plan to retain funds to support its growth and operations. During the second quarter and subsequently, three transactions were completed to accomplish its financing goals. In April, the Company completed an offshore offering of 825,000 shares of its Class A Common Stock at an average price of $14.53 per share, pursuant to SEC Regulation S, to foreign investors through a placement agent, raising net proceeds of $11.1 million, after fees of $0.9 million. In May, the Company completed a $10 million private placement of 12% convertible subordinated debt to a group of private investors led by Fleet Equity Partners. The notes were converted into 10,000 shares of cumulative, convertible Series A Preferred Stock on September 1, 1995. The Series A preferred shares have a liquidation value of $1,000 per share, accrue cumulative dividends of 12% annually, and will be convertible into Class A Common Stock at an initial conversion price of $16 per share, or 625,000 shares, subject to certain adjustments. All of the outstanding Series A preferred shares will be repaid in cash, or partly in cash and partly in Class A Common Stock, on the seventh anniversary of the closing at the greater of i) the principal amount plus all accrued and unpaid interest and dividends or ii) the fair market value of the underlying Class A Common Stock into which the preferred shares are convertible. The preferred shares are automatically converted to Class A Common Stock if certain conditions are met. The Company used the proceeds from the two private placements mentioned above to reduce its previously existing lines of credit. The third phase of the Company's financing plan was to restructure existing debt. On June 7, 1995, the Company entered into a commitment for a $35 million five year senior credit facility with two leading telecommunications lending financial institutions. On July 21, 1995, the transaction was closed and $15 million was borrowed under the new agreement which was used to pay down and terminate the Company's previously existing lines of credit and to pay fees related to the transaction. In addition to paying off the Company's previously existing lines of credit, proceeds from the facility will be used to finance capital expenditures and provide working capital for all business segments, and pay the remaining amounts due for the Metrowide acquisition. The agreement contains certain financial covenants, one of which limits the amount that may be borrowed against this facility, based on the Company's operating cash flow. The facility will be reduced in quarterly increments commencing 24 months after closing. At September 30, 1995, the available facility was approximately $30 million, of which $11 million was unused. Borrowings bear interest based on either LIBOR or prime interest rates, with additional percentage points added based on a ratio of debt to operating cash flow, as defined in the loan agreement. The Company is obligated to pay the lenders a contingent interest payment based on the appreciation in market value of 140,000 shares of the Company's Class A Common Stock from $14.92 per share. The payment will range from $750,000 to $2,100,000 and is due upon the earlier of i) 18 months following the closing date, ii) any subsequent refinancing of the facility, iii) the signing of a letter of intent to sell the Company or any material subsidiary, or iv) the cessation of active trading of the Company's Class A Common Stock on other than a temporary basis. The Company believes that it will have adequate cash flow from operations or available bank lines to make this payment and is accruing this obligation over the 18 month period following the closing date. PART II OTHER INFORMATION Item 1. Legal Proceedings. 1) Yankee Microwave, Inc. v. ACC Corp., et al. This matter was concluded substantially in favor of the Company during the second quarter of 1995. For further information concerning this matter, reference is made to the discussion of this matter found at Part II, Item 1 of the Company's Report on Form 10-Q for its Quarter ended June 30, 1995, as filed with the SEC. 2) Matters Involving Vivian Warner. There were no developments in these matters during the quarter for which this Report is being filed. For additional information concerning these matters, reference is made to the discussions found at Part II, Item 1 of the Company's Report on Form 10-Q for its Quarter ended June 30, 1995, as filed with the SEC. Item 2. Changes in Securities. (b) As disclosed in a Form 8-K filed on June 22, 1995 with respect to this matter, on May 22, 1995, an investment group composed of Fleet Venture Resources, Inc., Fleet Equity Partners VI, L.P., and Chisholm Partners II, L.P. (collectively the "Fleet Investors") completed a $10,000,000 investment in the Company by purchasing $10,000,000 in principal amount of the Company's 12% subordinated convertible notes (the "Notes") and certain warrants to acquire shares of the Company's Common Stock. Thereafter, at their 1995 Annual Meeting held on July 19, 1995, and as more fully described under Proposal 4 of the Company's Proxy Statement prepared and circulated with respect to this meeting, the Company's shareholders approved an amendment to the Company's Certificate of Incorporation that (1) authorized the creation of 2,000,000 shares of "blank check" Preferred Stock, par value $1.00 per share, (2) authorized the creation of 25,000,000 shares of Class B non-voting Common Stock, par value $.015 per share, and (3) redesignated the 50,000,000 shares of Common Stock, par value $.015 per share, that were previously authorized for issuance as 50,000,000 shares of Class A Common Stock. Thereafter, pursuant to the terms of the Note and Warrant Purchase Agreement under which the Notes were purchased (the "Purchase Agreement"), the Notes were automatically converted into 10,000 shares of Series A Preferred Stock, par value $1.00 per share, effective August 31, 1995, the date on which the Company filed with the Delaware Secretary of State of a Certificate of Designation authorizing the issuance of this series of Preferred Stock. This Series A Preferred Stock has the following rights and preferences: (1) a liquidation value of $1,000 per share; (2) convertible into shares of Class A Common Stock at an initial conversion price of $16.00 per share, subject to certain antidilution adjustments; (3) dividends payable at the rate of 12% per annum, cumulative and compounded quarterly and extinguished upon conversion into shares of Class A Common Stock; (4) senior to all other classes and series of Preferred Stock and Common Stock as to the payment of dividends and redemptions, and upon liquidation at liquidation value, senior to all other classes of the Company's capital stock; (5) subject to mandatory redemption on the seventh anniversary of the closing of the transaction at the greater of liquidation value (plus all accrued but unpaid dividends) or the then-fair market value of the underlying Class A Common Stock into which the Series A Preferred Stock is convertible, and subject to redemption at the greater of such amounts at the request of the holders of the Series A Preferred Stock in the event of a change in control of the Company; (6) mandatory conversion of the Series A Preferred Stock into shares of Class A Common Stock upon the occurrence of certain events; (7) the Series A Preferred Stock will vote on an as-converted basis with the shares of Class A Common Stock outstanding on all matters to be voted on by the Company's shareholders, including the election of Directors, and the holders of the Series A Preferred Stock, voting as a separate class, shall be entitled to elect one Director so long as more than 33% of the Series A Preferred shares issued in this transaction remain issued and outstanding; (8) so long as any shares of the Series A Preferred Stock remain outstanding, the Company will not be able to take any of the following actions without obtaining the prior written consent of the holders of a majority of the Series A Preferred Stock: (a) declare dividends on any class of capital stock other than the Series A Preferred Stock; (b) redeem any capital stock other than Series A Preferred Stock; (c) make any amendment to the Company's Certificate of Incorporation or Bylaws that would include or make any changes to any anti-takeover provisions in the Company's Certificate of Incorporation or Bylaws; (d) make any amendment to the Company's Certificate of Incorporation or Bylaws that would have an adverse effect on or impair the rights or relative priority of the Series A Preferred Stock; (e) make any changes in the nature of the Company's business beyond the telecommunications field; or (f) engage in any transactions with affiliates (other than subsidiaries) (except for compensation and benefit matters approved by the Executive Compensation Committee of the Company's Board or other transactions approved by an independent committee of the Board); and (9) preemptive rights to purchase, on an as-converted basis, a pro-rata portion of any issuance by the Company of any Class A Common Stock or securities containing options or rights to acquire shares of Class A Common Stock, except for issuances of Class A Common Stock in connection with any of the following matters, in which events such preemptive rights would not apply: (a) option exercises under any stock option plans of the Company; (b) conversion of the Notes or the Series A Preferred Stock into shares of Class A Common Stock; (c) exercise of the warrants issued in this transaction; (d) an acquisition of another business or company; (e) a public offering of securities registered under the Securities Act of 1933; (f) the provision or extension of senior debt financing to the Company; or (g) strategic investments by other entities in the telecommunications field. Also, pursuant to the terms of the Purchase Agreement, Robert M. Van Degna was elected a Director of the Company at its 1995 Annual Meeting as the representative of the Series A Preferred shareholders on the Company's Board. Subject to all of the preferences and rights of both the Preferred Stock or any series thereof and of the Class B Common Stock at any time outstanding, all of which may be fixed by resolution of the Company's Board of Directors: (1) dividends can continue to be paid on the Class A Common Stock as and when declared by the Company's Board of Directors out of funds legally available for the payment of such dividends; and (2) each share of Class A Common Stock continues to have one vote on all matters with respect to which such stock is entitled to vote. Subject to the foregoing, the vote of the holders of a majority of the shares of Class A Common Stock represented at a meeting at which a quorum is present will be the act of the shareholders' meeting unless the vote of a greater number is required by law and except that the vote of a plurality of the shares of Class A Common Stock represented at a meeting at which a quorum is present is sufficient to elect members of the Board of Directors (other than the representative of the Series A Preferred shareholders). Cumulative voting in the election of Directors is not permitted. Holders of the Company's Class A Common Stock have no preemptive rights, nor are there any redemption rights provisions with respect to the Company's Class A Common Stock. Subject to all of the preferences and rights of both the Preferred Stock or any series thereof and of the Class B Common Stock at any time outstanding, all of which may be fixed by resolution of the Company's Board of Directors, holders of the Company's Class A Common Stock shall be entitled to participate pro rata in any distribution of the Company's assets upon liquidation. For additional information concerning this matter, reference is made to the discussion under Proposal 4 in the Company's Proxy Statement for its 1995 Annual Meeting, as filed with the SEC. Item 4. Submission of Matters to a Vote of Security Holders. The Company held its Annual Meeting of Shareholders on July 19, 1995. At that Meeting, there were four Proposals acted upon. The first was the election of the Company's Board of Directors. Richard T. Aab, Hugh F. Bennett, Arunas A. Chesonis, Willard Z. Estey, David K. Laniak, Robert F. Sykes and Daniel D. Tessoni were each elected as Directors of the Company for a one-year term. The detail concerning the votes cast for and withheld from voting with respect to each such Director is as follows: Votes: Name: For Withheld R. T. Aab 6,724,168 409,015 H. F. Bennett 5,855,469 1,277,714 A. A. Chesonis 6,730,562 402,621 W. Z. Estey 6,727,065 406,118 D. K. Laniak 6,730,093 403,090 R. F. Sykes 6,584,589 548,594 D. D. Tessoni 5,856,769 1,276,414 R.M. Van Degna 5,989,719 1,143,464 There were no other Directors whose terms of office continued after this Meeting. Also at this Meeting, the Company's shareholders ratified the selection of Arthur Andersen LLP as the Company's independent auditors for its 1995 fiscal year. The detail concerning the votes cast for, against, and abstaining from voting with respect to this Proposal is as follows: Votes: For Against Abstaining 7,069,994 37,447 25,742 There were no broker non-votes with respect to this Proposal. Also at this Meeting, the Company's shareholders approved an amendment to the Company's Employee Stock Option Plan to increase the number of shares of the Company's Class A Common Stock authorized for issuance thereunder by 500,000 shares, to add the ability to grant stock incentive rights ("SIRs") to the Plan, to require the mandatory withholding of income taxes against the issuance of shares in respect of SIR awards by withholding a number of shares equal to the amount of all required tax withholdings, and to change the name of the Plan to the "Employee Long-Term Incentive Plan." The detail concerning the votes cast for, against and abstaining from voting with respect to this Proposal is as follows: Votes: For Against Abstaining 4,421,983 393,943 171,604 There were 2,145,653 broker non-votes with respect to this Proposal. Also at this Meeting, the Company's shareholders approved a proposal to amend the Company's Certificate of Incorporation to: (a) authorize the creation of 2,000,000 shares of "blank check" Preferred Stock, par value $1.00 per share; and (b) to authorize the creation of 25,000,000 shares of Class B non-voting Common Stock, par value $.015 per share, and to redesignate the 50,000,000 shares of Common Stock, par value $.015 per share, that were previously authorized for issuance as 50,000,000 shares of Class A Common Stock. The detail concerning the votes cast for, against and abstaining from voting with respect to this Proposal is as follows: Votes: For Against Abstaining (a) 3,883,914 981,869 81,747 (b) 5,423,084 947,775 85,412 There were 2,185,653 broker non-votes with respect to part (a) of this Proposal, and 676,912 broker non-votes with respect to part (b) of this Proposal. Subsequent to the 1995 Annual Meeting, at the end of July, 1995, Robert F. Sykes resigned as a Director of the Company for personal reasons and to pursue other interests. Item 5. Other Information. Effective October 6, 1995, Richard T. 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. Effective the same date, the Board of Directors named David K. Laniak, a Company Director since 1989, to succeed Mr. Aab as the Company's Chief Executive Officer. In connection with these management changes, the Company entered into an Employment Agreement with Mr. Laniak and into both a Non-Competition Agreement and a Salary Continuation and Deferred Compensation Agreement with Mr. Aab. Under the terms of Mr. Laniak's two-year Employment Agreement, 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. 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. 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. Item 7. Exhibits and Reports on Form 8-K. (a) Exhibits. See Exhibit Index. (b) Reports on Form 8-K. On October 27, 1995, the Company filed a Report on Form 8-K to report, under the heading of Item 2, Acquisition or Disposition of Assets, on the August 14, 1995 acquisition by the Company's 70% owned Canadian subsidiary, ACC TelEnterprises Ltd., of four affiliated privately-held Canadian corporations operating under the business name of Metrowide Communications. No financial statements have yet been filed with this Report. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ACC CORP. (Registrant) Dated: November 14, 1995 /s/ Michael R. Daley Michael R. Daley Executive Vice President & Chief Financial Officer Dated: November 14, 1995 /s/ Sharon L. Barnes Sharon L. Barnes Controller EXHIBIT INDEX Exhibit Number Description Location 3 First Restated Certificate of Incorporation Filed herewith of ACC Corp. 4-1 Certificate of Designations of 10,000 Shares Filed herewith of Series A Preferred Stock, par value $1.00 per share, of ACC Corp. 4-2 Form of Class A Common Stock Purchase Filed herewith Warrant Issued to Columbia Capital Corp., dated as of July 21, 1995 10-1 Credit Agreement, dated as of July 21, 1995, Filed herewith by and among ACC Corp. and certain Subsidiaries as Borrowers, ACC Corp. as Guarantor, and First Union National Bank of North Carolina, as Managing Agent and Administrative Agent, and Shawmut Bank Connecticut, N.A., as Managing Agent 10-2 Employment Agreement between ACC Corp. Filed herewith and David K. Laniak, dated October 6, 1995 10-3 Salary Continuation and Deferred Compensation Filed herewith Agreement between ACC Corp. and Richard T. Aab, dated October 6, 1995 10-4 Non-Competition Agreement between ACC Corp. Filed herewith and Richard T. Aab, dated October 6, 1995 11 Statement re Computation of Per Share Earnings See Note 3 to the Notes to Consolidated Financial Statements filed herewith 27 Financial Data Schedule Filed only with EDGAR filing, per Reg. S-K, Rule 601(c) (1)(v) EX-3 2 Exhibit 3 FIRST RESTATED CERTIFICATE OF INCORPORATION OF ACC CORP. ACC CORP., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. The name of the corporation is ACC Corp. ACC Corp. was originally incorporated under the same name, and the original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on April 9, 1987. 2. Pursuant to Section 245 of the General Corporation Law of the State of Delaware, this First Restated Certificate of Incorporation only restates and integrates and does not further amend the provisions of the Certificate of Incorporation of this Corporation as heretofore amended or supplemented, and there is no discrepancy between those provisions and the provisions of this First Restated Certificate of Incorporation. 3. This First Restated Certificate of Incorporation was duly adopted by the Board of Directors of this Corporation at a meeting held on August 17, 1995, in accordance with the provisions of Section 245 of the General Corporation Law of the State of Delaware. 4. The text of the First Restated Certificate of Incorporation is as follows: FIRST RESTATED CERTIFICATE OF INCORPORATION OF ACC CORP. (a Delaware corporation) ARTICLE ONE The name of the Corporation is ACC CORP. ARTICLE TWO The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street in the City of Wilmington, County of New Castle. The name of the registered agent of the Corporation at such address is The Corporation Trust Company. ARTICLE THREE The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE FOUR The total number of shares of stock which the Corporation shall have authority to issue is 77,000,000 shares, divided into the following classes: (1) 50,000,000 shares shall be Class A Common Stock having a par value of $.015 per share; (2) 25,000,000 shares shall be Class B Common Stock having a par value of $.015 per share; and (3) 2,000,000 shares shall be Preferred Stock having a par value of $1.00 per share. The following is a statement of the designations of the authorized classes of stock or any series thereof, and the powers, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof, or of the authority of the Board of Directors to fix by resolution(s) such designations and other terms: CLASS A COMMON STOCK Subject to all of the preferences and rights of both the Preferred Stock or a series thereof and of the Class B Common Stock, all of which may be fixed by resolution(s) of the Board of Directors, (i) dividends may be paid on the Class A Common Stock of the Corporation as and when declared by the Board of Directors, out of funds of the Corporation legally available for the payment of such dividends, and (ii) each share of Class A Common Stock shall be entitled to one vote on all matters on which such stock is entitled to vote. The 50,000,000 shares of Common Stock, par value $.015 per share, previously authorized for issuance hereunder are hereby redesignated as 50,000,000 shares of Class A Common Stock, and all references in this Certificate of Incorporation to Common Stock are hereby changed to refer to Class A Common Stock. CLASS B COMMON STOCK Subject to all of the preferences and rights of the Preferred Stock or a series thereof that may be fixed by resolution(s) of the Board of Directors, the Class B Common Stock shall have such preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, as shall be established in the resolution(s) providing for the issuance of such stock adopted by the Board of Directors, EXCEPT THAT the shares of Class B Common Stock shall not be entitled to vote on any matters brought before the stockholders of the Corporation, nor shall the holders of the Class B Common Stock be entitled to vote as a class upon any proposed increase or decrease in the aggregate number of authorized shares of Class B Common Stock. PREFERRED STOCK The shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors is expressly authorized to fix by resolution(s) the designation of each series of Preferred Stock and the powers, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof, including, without limitation, such provisions as may be desired concerning the dividend rights, the dividend rate, conversion rate, conversion rights, voting rights, rights in terms of redemption (including sinking fund provisions), the redemption price or prices, the liquidation preferences and such other subjects or matters as may be fixed by resolution(s) of the Board of Directors under the General Corporation Law of Delaware; and to fix the number of shares constituting any such series, and to increase or decrease the number of shares of any such series (but not below the number of shares of any such series then outstanding). In the event that the number of shares of any such series shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution(s) originally fixing the number of shares of such series. All Preferred Stock of the same series shall be identical in all respects, except for the dates from which dividends, if any, shall be cumulative. ARTICLE FIVE The business and affairs of the Corporation shall be managed by its Board of Directors which shall consist of not less than three persons. The exact number of Directors shall be fixed from time to time by, or in the manner provided in, the By-laws of the Corporation and may be increased or decreased as therein provided. Directors of the Corporation need not be elected by ballot unless required by the By-laws. The Board of Directors is authorized to adopt, alter, amend or repeal the By-laws, subject to the right of the stockholders to adopt, alter, amend or repeal By-laws made by the Board of Directors; PROVIDED, HOWEVER, that By-laws shall not be adopted, altered, amended or repealed by the stockholders except by the affirmative vote of the holders of at least 80% of the issued and outstanding Class A Common Stock of the Corporation. ARTICLE SIX Action shall be taken by stockholders of the Corporation only at duly called annual or special meetings of stockholders and stockholders may not act by written consent. Special meetings of stockholders of the Corporation may be called only by the Chairman of the Board, the President, or the Board of Directors pursuant to a resolution approved by a majority of the entire Board. ARTICLE SEVEN SECTION 1 A Director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, except for liability (i) for any breach of the Director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the Director derived any improper personal benefit. If the Delaware General Corporation Law is amended after approval by the stockholders of this Article to authorize corporate action further eliminating or limiting the personal liability of Directors, then the liability of a Director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a Director of the Corporation existing at the time of such repeal or modification. SECTION 2 (a) RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she is or was a Director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a Director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans (hereinafter an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a Director, officer, employee or agent or in any other capacity while serving as a Director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss, including without limitation attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement, reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the indemnitee's heirs, executors and administrators; PROVIDED, HOWEVER, that, except as provided in Paragraph (b) hereof with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding, or part thereof, initiated by such indemnitee only if such proceeding, or part thereof, was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); PROVIDED, HOWEVER, that, if the Delaware General Corporation Law requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a Director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by the Court of Chancery of the State of Delaware or the court in which such proceeding is brought, that such indemnitee is not entitled to be indemnified for such expenses under this Section or otherwise (hereinafter an "undertaking'). (b) RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Paragraph (a) of this Section is not paid in full by the Corporation within sixty days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense, and (ii) in any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon an adjudication by the Court of Chancery of the State of Delaware or the court in which such suit is brought, that the indemnitee has not met the applicable standard of conduct set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified or to such advancement of expenses under this Section or otherwise shall be on the Corporation. (c) NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and the advancement of expenses conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, this Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested Directors or otherwise. (d) INSURANCE. The Corporation may maintain insurance, at its expense, to protect itself and any Director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. (e) INDEMNIFICATION OF AGENTS OF THE CORPORATION. The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and to the advancement of expenses, to any agent of the Corporation to the fullest extent of the provisions of this Section with respect to the indemnification and advancement of expenses of Directors, officers and employees of the Corporation. ARTICLE EIGHT SECTION 1 Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80% of the issued and outstanding Class A Common Stock of the Corporation shall be required to alter, amend, adopt any provision inconsistent with or repeal Articles Five, Six, Seven and this Section 1 of Article Eight of this Certificate of Incorporation in any respect. SECTION 2 Except as otherwise provided in this Certificate of Incorporation, the Corporation reserves the right at any time and from time to time to amend, alter or repeal any provision contained in this Certificate of Incorporation in the manner now or as hereafter prescribed by law, and all rights, preferences and privileges conferred upon stockholders, Directors and officers by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are subject to the right reserved in this Section. IN WITNESS WHEREOF, this Corporation has caused this First Restated Certificate of Incorporation to be duly executed by Arunas A. Chesonis, its President and Chief Operating Officer, and attested by Francis D. R. Coleman, its Secretary, this 28th day of August,1995. ACC CORP. By:__/s/ Arunas A. Chesonis Arunas A. Chesonis President and Chief Operating Officer Attest: /s/ Francis D.R. Coleman ___________________________________ Francis D. R. Coleman, Secretary EX-4 3 Exhibit 4-1 CERTIFICATE OF DESIGNATIONS, POWERS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF OF THE SERIES A PREFERRED STOCK OF ACC CORP. Pursuant to Section 151 of the General Corporation Law of the State of Delaware, ACC Corp., a Delaware corporation ( the "Corporation") certifies that, pursuant to the authority contained in Article FOUR of its Certificate of Incorporation, and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, its Board of Directors has adopted the following resolutions creating a series of its Series A Preferred Stock, par value $1.00 per share, designated as Series A Preferred Stock: RESOLVED, that a series of the authorized $1.00 par value Preferred Stock of this Corporation be hereby created, and that the shares of such series shall be designated as "Series A Preferred Stock" and the number of shares constituting such series shall be 10,000, and that the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as set forth in full as follows: Section 1. DIVIDENDS. A. GENERAL OBLIGATION. When and as declared by the Corporation's Board of Directors and to the extent permitted under the General Corporation Law of Delaware, the Corporation shall pay preferential dividends in cash to the holders of the Series A Preferred Stock (the "Series A Preferred") as provided in this Section 1. Except as otherwise provided herein, dividends on each share of the Series A Preferred (a "Share") shall accrue on a daily basis at the rate of 12% per annum of the sum of the Liquidation Value thereof plus all accumulated and unpaid dividends thereon from and including the date of issuance of such Share to and including the first to occur of (i) the date on which the Liquidation Value of such Share (plus all accrued and unpaid dividends thereon) is paid to the holder thereof in connection with the liquidation of the Corporation or the redemption of such Share by the Corporation, (ii) the date on which such Share is converted into shares of Conversion Stock hereunder or (iii) the date on which such share is otherwise acquired by the Corporation. Such dividends shall accrue whether or not they have been declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. The date on which the Corporation initially issues any Share shall be deemed to be its "date of issuance" regardless of the number of times transfer of such Share is made on the stock records maintained by or for the Corporation and regardless of the number of certificates which may be issued to evidence such Share. B. DIVIDEND REFERENCE DATES. To the extent not paid on March 31, June 30, September 30 and December 31 of each year, beginning June 30, 1995 (the "Dividend Reference Dates"), all dividends which have accrued on each Share outstanding during the three-month period (or other period in the case of the initial Dividend Reference Date) ending upon each such Dividend Reference Date shall be accumulated and shall remain accumulated dividends with respect to such Share until paid to the holder thereof. C. DISTRIBUTION OF PARTIAL DIVIDEND PAYMENTS. Except as otherwise provided herein, if at any time the Corporation pays less than the total amount of dividends then accrued with respect to the Series A Preferred, such payment shall be distributed pro rata among the holders thereof based upon the number of Shares held by each such holder. Section 2. LIQUIDATION. Upon any liquidation, dissolution or winding up of the Corporation (whether voluntary or involuntary), each holder of Series A Preferred shall be entitled to be paid, before any distribution or payment is made upon any Junior Securities, an amount in cash equal to the aggregate Liquidation Value of all Shares held by such holder (plus all accrued and unpaid dividends thereon), and the holders of Series A Preferred shall not be entitled to any further payment. If upon any such liquidation, dissolution or winding up of the Corporation the Corporation's assets to be distributed among the holders of the Series A Preferred are insufficient to permit payment to such holders of the aggregate amount which they are entitled to be paid under this Section 2, then the entire assets available to be distributed to the Corporation's stockholders shall be distributed pro rata among such holders based upon the aggregate Liquidation Value (plus all accrued and unpaid dividends) of the Series A Preferred held by each such holder. Prior to the liquidation, dissolution or winding up of the Corporation, the Corporation shall declare for payment all accrued and unpaid dividends with respect to the Series A Preferred, but only to the extent of funds of the Corporation legally available for the payment of dividends. Not less than 60 days prior to the payment date stated therein, the Corporation shall mail written notice of any such liquidation, dissolution or winding up to each record holder of Series A Preferred, setting forth in reasonable detail the amount of proceeds to be paid with resect to each Share and each share of Common Stock in connection with such liquidation, dissolution or winding up. Neither the consolidation or merger of the Corporation into or with any other entity or entities (whether or not the Corporation is the surviving entity), nor the sale or transfer by the Corporation of all or any part of its assets, nor the reduction of the capital stock of the Corporation nor any other form of recapitalization or reorganization affecting the Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 2. Section 3. PRIORITY OF SERIES A PREFERRED ON DIVIDENDS AND REDEMPTIONS. So long as any Series A Preferred remains outstanding, without the prior written consent of the holders of a majority of the outstanding shares of Series A Preferred, the Corporation shall not, nor shall it permit any Subsidiary to, redeem, purchase or otherwise acquire directly or indirectly any Junior Securities, nor shall the Corporation directly or indirectly pay or declare any dividend or make any distribution upon any Junior Securities. Section 4. REDEMPTIONS. A. SCHEDULED REDEMPTION. On May 19, 2002 (the "Scheduled Redemption Date"), the Corporation shall redeem all outstanding Shares of Series A Preferred at a price per Share equal to the greater of (i) the Liquidation Value thereof (plus accrued and unpaid dividends thereon) or (ii) the Market Price of the Common Stock into which such Shares of Series A Preferred (on the date which is five days prior to the Scheduled Redemption Date) are convertible on the Schedule Redemption Date. B. OPTIONAL REDEMPTIONS. The Corporation may at any time and from time to time redeem all or any portion of the Shares of Series A Preferred then outstanding; provided that the minimum number of shares subject to such redemption shall be the lesser of 100 shares or the number of shares outstanding as of such redemption. Upon any such redemption, the Corporation shall pay a price per Share equal to the Liquidation Value thereof (plus all accrued and unpaid dividends thereon). C. REDEMPTION PAYMENTS. For each Share which is to be redeemed hereunder, the Corporation shall be obligated on the Redemption Date to pay to the holder thereof (upon surrender by such holder at the Corporation's principal office of the certificate representing such Share) an amount in cash equal to the Liquidation Value of such Share (plus all accrued and unpaid dividends thereon); provided that, in the case of a redemption pursuant to paragraph 4A, to the extent the amount in subparagraph 4A(ii) exceeds the amount in subparagraph 4A(i), all or a portion of such excess may, at the option of the Corporation's Board of Directors, be paid in the form of Common Stock (valued at the Market Price of the Common Stock on the date which is five trading days prior to the Scheduled Redemption Date) up to and not exceeding a number of shares of Common Stock equal to 20 multiplied by the average daily trading volume of the Common Stock in the public markets for a period of 45 consecutive trading days ending five days prior to the Scheduled Redemption Date and the remainder shall be paid in cash. Such shares of Common Stock shall be applied first to the repayment of Liquidation Value, then to accrued but unpaid dividends. If the funds of the Corporation legally available for redemption of Shares on the Scheduled Redemption Date are insufficient to redeem the total number of Shares to be redeemed on such date, those funds which are legally available shall be used to redeem the maximum possible number of Shares pro rata among the holders of the Shares to be redeemed based upon the aggregate Liquidation Value of such Shares held by each such holder (plus all accrued and unpaid dividends thereon). At any time thereafter when additional funds of the Corporation are legally available for the redemption of Shares, such funds shall immediately be used to redeem the balance of the Shares which the Corporation has become obligated to redeem on the Scheduled Redemption Date but which it has not redeemed. Prior to any redemption of Series A Preferred, the Corporation shall declare for payment all accrued and unpaid dividends with respect to the Shares which are to be redeemed, but only to the extent of funds of the Corporation legally available for the payment of dividends. D. NOTICE OF REDEMPTION. Except as otherwise provided herein, the Corporation shall mail written notice of each redemption of any Series A Preferred (other than a redemption at the request of a holder or holders of Series A Preferred) to each record holder thereof not more than 60 nor less than 30 days prior to the date on which such redemption is to be made. Upon mailing any notice of redemption which relates to a redemption at the Corporation's option, the Corporation shall become obligated to redeem the total number of Shares specified in such notice at the time of redemption specified therein. In case fewer than the total number of Shares represented by any certificate are redeemed, a new certificate representing the number of unredeemed Shares shall be issued to the holder thereof without cost to such holder within five business days after surrender of the certificate representing the redeemed Shares. E. DETERMINATION OF THE NUMBER OF EACH HOLDER'S SHARES TO BE REDEEMED. Except as otherwise provided herein, the number of Shares of Series A Preferred to be redeemed from each holder thereof in redemptions hereunder shall be the number of Shares determined by multiplying the total number of Shares to be redeemed times a fraction, the numerator of which shall be the total number of Shares then held by such holder and the denominator of which shall be the total number of Shares then outstanding. F. DIVIDENDS AFTER REDEMPTION DATE. No Share shall be entitled to any dividends accruing after the date on which the Liquidation Value of such Share (plus all accrued and unpaid dividends thereon) is paid to the holder of such Share. On such date, all rights of the holder of such Share shall cease, and such Share shall no longer be deemed to be issued and outstanding. G. REDEEMED OR OTHERWISE ACQUIRED SHARES. Any Shares which are redeemed or otherwise acquired by the Corporation shall be canceled and retired to authorized but unissued shares and shall not be reissued, sold or transferred. H. OTHER REDEMPTIONS OR ACQUISITIONS. The Corporation shall not, nor shall it permit any Subsidiary to, redeem or otherwise acquire any Shares of Series A Preferred, except as expressly authorized herein or pursuant to a purchase offer made pro rata to all holders of Series A Preferred on the basis of the number of Shares owned by each such holder. I. PAYMENT OF ACCRUED DIVIDENDS. Except as provided in paragraph 4J, the Corporation may not redeem any Series A Preferred, unless all dividends accrued on the outstanding Series A Preferred through the immediately preceding Dividend Reference Date have been declared and paid in full. J. SPECIAL REDEMPTIONS. (i) If a Change in Control has occurred or the Corporation obtains knowledge that a Change in Control is proposed to occur, the Corporation shall give prompt written notice of such Change in Control describing in reasonable detail the material terms and date of consummation thereof to each holder of Series A Preferred, but in any event such notice shall not be given later than five days after the occurrence of such Change in Control, and the Corporation shall give each holder of Series A Preferred prompt written notice of any material change in the terms or timing of such transaction. Any holder of Series A Preferred may require the Corporation to redeem all or any portion of the Series A Preferred owned by such holder or holders at a price per Share equal to the greater of (1) the Liquidation Value thereof (plus all accrued and unpaid dividends thereon), (2) the Market Price (as of the date which is five trading days prior to the occurrence of such Change in Control) of the Common Stock into which such Shares of Series A Preferred are convertible on such date or (3) the value of the Common Stock into which such Shares of Series A Preferred are convertible as of the consummation of the Change in Control reflected by the Change in Control transaction, by giving written notice to the Corporation of such election prior to the later of (a) 21 days after receipt of the Corporation's notice and (b) five days prior to the consummation of the Change in Control (the "Expiration Date"). The Corporation shall give prompt written notice of any such election to all other holders of Series A Preferred within five days after the receipt thereof, and each such holder shall have until the later of (a) the Expiration Date or (b) ten days after receipt of such second notice to request redemption hereunder (by giving written notice to the Corporation) of all or any portion of the Series A Preferred owned by such holder. (ii) Upon receipt of such election(s), the Corporation shall be obligated to redeem the aggregate number of Shares specified therein on the occurrence of the Change in Control. If any proposed Change in Control does not occur, all requests for redemption in connection therewith shall be automatically rescinded, or if there has been a material change in the terms or the timing of the transaction, any holder of Series A Preferred may rescind such holder's request for redemption by giving written notice of such rescission to the Corporation. (iii) A "Change in Control" shall be deemed to have occurred at such time as any of the following events shall occur: (a) any sale, transfer or issuance or series of sales, transfers and/or issuances of Common Stock by the Corporation or any holders thereof which results in any Person or group of Persons (as the term "group" is used under the Securities Exchange Act of 1934) owning more than 40% of the Common Stock outstanding immediately after such sale, transfer or issuance or series of sales, transfers and/or issuances or (b) during any 12-month period, individuals who at the beginning of such period constituted the Corporation's Board of Directors (together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Corporation was approved by a majority vote of the directors who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Corporation's Board of Directors then in office. (iv) If a Fundamental Change is proposed to occur, the Corporation shall give written notice of such Fundamental Change describing in reasonable detail the material terms and date of consummation thereof to each holder of Series A Preferred not more than 45 days nor less than 20 days prior to the consummation of such Fundamental Change, and the Corporation shall give each holder of Series A Preferred prompt written notice of any material change in the terms or timing of such transaction. Any holder of Series A Preferred may require the Corporation to redeem all or any portion of the Series A Preferred owned by such holder at a price per Share equal to the greater of (1) Liquidation Value thereof (plus all accrued and unpaid dividends thereon), (2) the Market Price (as of the date which is five trading days prior to the occurrence of such Fundamental Change) of the Common Stock into which such Shares of Series A Preferred are convertible on such date or (3) the value of the Common Stock into which such Shares of Series A Preferred are convertible as of the consummation of the Fundamental Change reflected by the Fundamental Change transaction, by giving written notice to the Corporation of such election prior to the later of (a) ten days prior to the consummation of the Fundamental Change or (b) ten days after receipt of notice from the Corporation. The Corporation shall give prompt written notice of such election to all other holders of Series A Preferred (but in any event within five days prior to the consummation of the Fundamental Change), and each such holder shall have until two days after the receipt of such notice to request redemption (by written notice given to the Corporation) of all or any portion of the Series A Preferred owned by such holder. (v) Upon receipt of such election(s), the Corporation shall be obligated to redeem the aggregate number of Shares specified therein upon the consummation of such Fundamental Change. If any proposed Fundamental Change does not occur, all requests for redemption in connection therewith shall be automatically rescinded, or if there has been a material change in the terms or the timing of the transaction, any holder of Series A Preferred may rescind such holder's request for redemption by delivering written notice thereof to the Corporation prior to the consummation of the transaction. (vi) The term "Fundamental Change" means (a) any sale or transfer of more than 50% of the assets of the Corporation and its Subsidiaries on a consolidated basis (measured either by book value in accordance with generally accepted accounting principles consistently applied or by fair market value determined in the reasonable good faith judgment of the Corporation's Board of Directors) in any transaction or series of transactions (other than sales in the ordinary course of business) and (b) any merger or consolidation to which the Corporation is a party, except for a merger in which the Corporation is the surviving corporation, the terms of the Series A Preferred are not changed and the Series A Preferred is not exchanged for cash, securities or other property, and after giving effect to such merger, no Person or group of Persons (as the term "group" is used under the Securities Act of 1934) owns more than 40% of the Common Stock outstanding immediately after such merger. Section 5. VOTING RIGHTS. A. ELECTION OF DIRECTORS. So long as at least 3,300 Shares of the Series A Preferred remain outstanding, in the election of directors of the Corporation, the holders of the Series A Preferred, voting separately as a single class to the exclusion of all other classes of the Corporation's capital stock and with each Share of Series A Preferred entitled to one vote, shall be entitled to elect one director to serve on the Corporation's Board of Directors until his successor is duly elected by the holders of the Series A Preferred or he is removed from office by the holders of the Series A Preferred. If the holders of the Series A Preferred for any reason fail to elect anyone to fill any such directorship, such position shall remain vacant until such time as the holders of the Series A Preferred elect a director to fill such position and shall not be filled by resolution or vote of the Corporation's Board of Directors or the Corporation's other stockholders. B. OTHER VOTING RIGHTS. The holders of the Series A Preferred shall be entitled to notice of all stockholders meetings in accordance with the Corporation's bylaws, and the holders of the Series A Preferred shall be entitled to vote on all matters submitted to the stockholders for a vote together with the holders of the Common Stock voting together as a single class with each share of Common Stock entitled to one vote per share and each Share of Series A Preferred entitled to one vote for each share of Common Stock issuable upon conversion of the Series A Preferred as of the record date for such vote or, if no record date is specified, as of the date of such vote. Section 6. CONVERSION. A. CONVERSION PROCEDURE. (i) At any time and from time to time, any holder of Series A Preferred may convert all or any portion of the Series A Preferred (including any fraction of a Share) held by such holder into a number of shares of Conversion Stock computed by multiplying the number of Shares to be converted by $1,000 and dividing the result by the Conversion Price then in effect. (ii) Except as otherwise provided herein, each conversion of Series A Preferred shall be deemed to have been effected as of the close of business on the date on which the certificate or certificates representing the Series A Preferred to be converted have been surrendered for conversion at the principal office of the Corporation. At the time any such conversion has been effected, the rights of the holder of the Shares converted as a holder of Series A Preferred shall cease and the Person or Persons in whose name or names any certificate or certificates for shares of Conversion Stock are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the shares of Conversion Stock represented thereby. (iii) The conversion rights of any Share subject to redemption hereunder shall terminate on the Redemption Date for such Share unless the Corporation has failed to pay to the holder thereof the Liquidation Value of such Share (plus all accrued and unpaid dividends thereon). (iv) Notwithstanding any other provision hereof, if a conversion of Series A Preferred is to be made in connection with a Public Offering, a Change in Control, a Fundamental Change or other transaction affecting the Corporation, the conversion of any Shares of Series A Preferred may, at the election of the holder thereof, be conditioned upon the consummation of such transaction, in which case such conversion shall not be deemed to be effective until such transaction has been consummated. (v) As soon as possible after a conversion has been effected (but in any event within five business days in the case of subparagraph (a) below), the Corporation shall deliver to the converting holder: (a) a certificate or certificates representing the number of shares of Conversion Stock issuable by reason of such conversion in such name or names and such denomination or denominations as the converting holder has specified; and (b) a certificate representing any Shares of Series A Preferred which were represented by the certificate or certificates delivered to the Corporation in connection with such conversion but which were not converted. (vi) Upon conversion, the accrued and unpaid dividends on the Series A Preferred being converted shall be extinguished and shall no longer be deemed payable. (vii) The issuance of certificates for shares of Conversion Stock upon conversion of Series A Preferred shall be made without charge to the holders of such Series A Preferred for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such conversion and the related issuance of shares of Conversion Stock. Upon conversion of each Share of Series A Preferred, the Corporation shall take all such actions as are necessary in order to insure that the Conversion Stock issuable with respect to such conversion shall be validly issued, fully paid and nonassessable, free and clear of all taxes, liens, charges and encumbrances with respect to the issuance thereof. (viii) The Corporation shall not close its books against the transfer of Series A Preferred or of Conversion Stock issued or issuable upon conversion of Series A Preferred in any manner which interferes with the timely conversion of Series A Preferred. The Corporation shall assist and cooperate with any holder of Shares required to make any governmental filings or obtain any governmental approval prior to or in connection with any conversion of Shares hereunder (including, without limitation, making any filings required to be made by the Corporation). (ix) The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Conversion Stock, solely for the purpose of issuance upon the conversion of the Series A Preferred, such number of shares of Conversion Stock issuable upon the conversion of all outstanding Series A Preferred. All shares of Conversion Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges. The Corporation shall take all such actions as may be necessary to assure that all such shares of Conversion Stock may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Conversion Stock may be listed (except for official notice of issuance which shall be immediately delivered by the Corporation upon each such issuance). The Corporation shall not take any action which would cause the number of authorized but unissued shares of Conversion Stock to be less than the number of such shares required to be reserved hereunder for issuance upon conversion of the Series A Preferred. (x) If any fractional interest in a share of Conversion Stock would, except for the provisions of this subparagraph, be delivered upon any conversion of the Series A Preferred, the Corporation, in lieu of delivering the fractional share therefor, shall pay an amount to the holder thereof equal to the Market Price of such fractional interest as of the date of conversion. B. CONVERSION PRICE. (i) The initial Conversion Price shall be $16.00. In order to prevent dilution of the conversion rights granted under this Section 6, the Conversion Price shall be subject to adjustment from time to time pursuant to this paragraph 6B. (ii) If and whenever the Corporation issues or sells, or in accordance with paragraph 6C is deemed to have issued or sold, any share of Common Stock for a consideration per share less than the Conversion Price in effect immediately prior to such time, then immediately upon such issue or sale or deemed issue or sale the Conversion Price shall be reduced to the lowest net price per share (as determined pursuant to paragraph 6C(v) below) at which any such share of Common Stock has been issued or sold or is deemed to have been issued or sold. (iii) Notwithstanding the foregoing, there shall be no adjustment to the Conversion Price hereunder with respect to the granting of stock options to employees or directors of the Corporation and its Subsidiaries or the exercise thereof or the granting of stock appreciation rights, phantom stock rights or other similar rights to employees or directors of the Corporation for (or rights relating to) an aggregate of 1,596,702 shares of Common Stock (976,594 options being currently outstanding) (as such number of shares is equitably adjusted for subsequent stock splits, stock combinations, stock dividends and recapitalizations and such number shall include all stock options outstanding as of the date of the Purchase Agreement). C. EFFECT ON CONVERSION PRICE OF CERTAIN EVENTS. For purposes of determining the adjusted Conversion Price under paragraph 6B, the following shall be applicable: (i) ISSUANCE OF RIGHTS OR OPTIONS. If the Corporation in any manner grants or sells any Option and the lowest price per share for which any one share of Common Stock is issuable upon the exercise of any such Option, or upon conversion or exchange of any Convertible Security issuable upon exercise of any such Option, is less than the Conversion Price in effect immediately prior to the time of the granting or sale of such Option, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Corporation at the time of the granting or sale of such Option for such price per share. For purposes of this paragraph, the "lowest price per share for which any one share of Common Stock is issuable" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Corporation with respect to any one share of Common Stock upon the granting or sale of the Option, upon exercise of the Option and upon conversion or exchange of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Conversion Price shall be made upon the actual issue of such Common Stock or such Convertible Security upon the exercise of such Options or upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Security. (ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Corporation in any manner issues or sells any Convertible Security and the lowest price per share for which any one share of Common Stock is issuable upon conversion or exchange thereof is less than the Conversion Price in effect immediately prior to the time of such issue or sale, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Corporation at the time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this paragraph, the "lowest price per share for which any one share of Common Stock is issuable" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Corporation with respect to any one share of Common Stock upon the issuance or sale of the Convertible Security and upon the conversion or exchange of such Convertible Security. No further adjustment of the Conversion Price shall be made upon the actual issue of such Common Stock upon conversion or exchange of any Convertible Security, and if any such issue or sale of such Convertible Security is made upon exercise of any Options for which adjustments of the Conversion Price had been or are to be made pursuant to other provisions of this Section 6, no further adjustment of the Conversion Price shall be made by reason of such issue or sale. (iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the purchase price provided for in any Option, the additional consideration (if any) payable upon the issue, conversion or exchange of any Convertible Security or the rate at which any Convertible Security is convertible into or exchangeable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted immediately to the Conversion Price which would have been in effect at such time had such Option or Convertible Security originally provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of paragraph 6C, if the terms of any Option or Convertible Security which was outstanding as of May 19, 1995 are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change; provided that no such change shall at any time cause the Conversion Price hereunder to be increased. (iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE SECURITIES. Upon the expiration of any Option or the termination of any right to convert or exchange any Convertible Security without the exercise of any such Option or right, the Conversion Price then in effect hereunder shall be adjusted immediately to the Conversion Price which would have been in effect at the time of such expiration or termination had such Option or Convertible Security, to the extent outstanding immediately prior to such expiration or termination, never been issued; provided that if such expiration or termination would result in an increase in the Conversion Price then in effect, such increase shall not be effective until 30 days after written notice thereof has been given to all holders of the Series A Preferred. For purposes of paragraph 6C, the expiration or termination of any Option or Convertible Security which was outstanding as of May 19, 1995 shall not cause the Conversion Price hereunder to be adjusted unless, and only to the extent that, a change in the terms of such Option or Convertible Security caused it to be deemed to have been issued after such date. (v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock, Option or Convertible Security is issued or sold or deemed to have been issued or sold for cash, the consideration received therefor shall be deemed to be the amount received by the Corporation therefor (net of discounts, commissions and related expenses). If any Common Stock, Option or Convertible Security is issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Corporation shall be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Corporation shall be the Market Price thereof as of the date of receipt. If any Common Stock, Option or Convertible Security is issued to the owners of the non-surviving entity in connection with any merger in which the Corporation is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Option or Convertible Security, as the case may be. The fair value of any consideration other than cash and securities shall be determined jointly by the Corporation and the holders of a majority of the outstanding Series A Preferred. If such parties are unable to reach agreement within a reasonable period of time, the fair value of such consideration shall be determined by an independent appraiser experienced in valuing such type of consideration jointly selected by the Corporation and the holders of a majority of the outstanding Series A Preferred. The determination of such appraiser shall be final and binding upon the parties, and the fees and expenses of such appraiser shall be borne by the Corporation. (vi) INTEGRATED TRANSACTIONS. In case any Option is issued in connection with the issue or sale of other securities of the Corporation, together comprising one integrated transaction in which no specific consideration is allocated to such Option by the parties thereto, the Option shall be deemed to have been issued for a consideration of $.01. (vii) TREASURY SHARES. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Corporation or any Subsidiary, and the disposition of any shares so owned or held shall be considered an issue or sale of Common Stock. (viii) RECORD DATE. If the Corporation takes a record of the holders of Common Stock for the purpose of entitling them (a) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (b) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or upon the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. D. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Corporation at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced, and if the Corporation at any time combines (by reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased. E. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. Any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Corporation's assets or other transaction, in each case which is effected in such a manner that the holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, is referred to herein as an "Organic Change". Prior to the consummation of any Organic Change, the Corporation shall make appropriate provisions (in form and substance satisfactory to the holders of a majority of the Series A Preferred then outstanding) to insure that each of the holders of Series A Preferred shall thereafter have the right to acquire and receive, in lieu of or in addition to (as the case may be) the shares of Conversion Stock immediately theretofore acquirable and receivable upon the conversion of such holder's Series A Preferred, such shares of stock, securities or assets as such holder would have received in connection with such Organic Change if such holder had converted its Series A Preferred immediately prior to such Organic Change. In each such case, the Corporation shall also make appropriate provisions (in form and substance satisfactory to the holders of a majority of the Series A Preferred then outstanding) to insure that the provisions of this Section 6 and Sections 7 and 8 hereof shall thereafter be applicable to the Series A Preferred (including, in the case of any such consolidation, merger or sale in which the successor entity or purchasing entity is other than the Corporation, an immediate adjustment of the Conversion Price to the value for the Common Stock reflected by the terms of such consolidation, merger or sale, and a corresponding immediate adjustment in the number of shares of Conversion Stock acquirable and receivable upon conversion of Series A Preferred, if the value so reflected is less than the Conversion Price in effect immediately prior to such consolidation, merger or sale). The Corporation shall not effect any such consolidation, merger or sale, unless prior to the consummation thereof, the successor entity (if other than the Corporation) resulting from consolidation or merger or the entity purchasing such assets assumes by written instrument (in form and substance satisfactory to the holders of a majority of the Series A Preferred then outstanding), the obligation to deliver to each such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire. F. CERTAIN EVENTS. If any event occurs of the type contemplated by the provisions of this Section 6 but not expressly provided for by such provisions (including the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Corporation's Board of Directors shall make an appropriate adjustment in the Conversion Price so as to protect the rights of the holders of Series A Preferred; provided that no such adjustment shall increase the Conversion Price as otherwise determined pursuant to this Section 6 or decrease the number of shares of Conversion Stock issuable upon conversion of each Share of Series A Preferred. G. NOTICES. (i) Immediately upon any adjustment of the Conversion Price, the Corporation shall give written notice thereof to all holders of Series A Preferred, setting forth in reasonable detail and certifying the calculation of such adjustment. (ii) The Corporation shall give written notice to all holders of Series A Preferred at least 20 days prior to the date on which the Corporation closes its books or takes a record (a) with respect to any dividend or distribution upon Common Stock, (b) with respect to any pro rata subscription offer to holders of Common Stock or (c) for determining rights to vote with respect to any Organic Change, dissolution or liquidation. (iii) The Corporation shall also give written notice to the holders of Series A Preferred at least 20 days prior to the date on which any Organic Change shall take place. H. MANDATORY CONVERSION. All of the Shares of issued and outstanding Series A Preferred will be automatically converted to Common Stock at the Conversion Price then in effect without any further action on the part of the Corporation or the holders thereof if, at any time after May 19, 1997, (i) the daily trading volume of the Common Stock in the public markets exceeds 5% of the number of shares of Common Stock issuable upon conversion of all Shares of Series A Preferred for each of 45 consecutive trading days, (ii) no holder of Series A Preferred is subject to any underwriters lockup agreement restricting the transferability of the shares of Conversion Stock issuable upon conversion of such Series A Preferred and (iii) the Market Price of the Common Stock on any of the anniversary dates of the issuance of the Notes set forth below equals or exceeds the corresponding price set forth below (subject to adjustment for stock splits, stock consolidations and stock dividends): 2nd Anniversary $32.00 3rd Anniversary $32.00 4th Anniversary $39.06 5th Anniversary $39.81 6th Anniversary $47.78 7th Anniversary $57.33 In the event that any measurement of the market price of the Common Stock is to occur on a date between two anniversary dates, the share price amounts above shall be prorated (based upon the number of days elapsed between such anniversary dates). Section 7. LIQUIDATING DIVIDENDS. If the Corporation declares or pays a dividend upon the Common Stock payable otherwise than in cash out of earnings or earned surplus (determined in accordance with generally accepted accounting principles, consistently applied) except for a stock dividend payable in shares of Common Stock (a "Liquidating Dividend"), then the Corporation shall pay to the holders of Series A Preferred at the time of payment thereof the Liquidating Dividends which would have been paid on the shares of Conversion Stock had such Series A Preferred been converted immediately prior to the date on which a record is taken for such Liquidating Dividend, or, if no record is taken, the date as of which the record holders of Common Stock entitled to such dividends are to be determined. Section 8. PURCHASE RIGHTS. If at any time the Corporation grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the "Purchase Rights"), then each holder of Series A Preferred shall be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such holder could have acquired if such holder had held the number of shares of Conversion Stock acquirable upon conversion of such holder's Series A Preferred immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. Section 9. EVENTS OF NONCOMPLIANCE. A. DEFINITION. An Event of Noncompliance shall have occurred if: (i) the Corporation fails to make any redemption payment with respect to the Series A Preferred which it is required to make hereunder, whether or not such payment is legally permissible or is prohibited by any agreement to which the Corporation is subject, and such failure is not cured within 5 days after the occurrence thereof; (ii) the Corporation breaches or otherwise fails to perform or observe any other material covenant or agreement set forth herein or in the Purchase Agreement, and such failure is not cured within 30 days after the earlier of (A) the receipt of notice thereof by the holders of the Series A Preferred or (B) the discovery thereof by the Corporation; (iii) any representation or warranty contained in the Purchase Agreement or required to be furnished to any holder of Series A Preferred pursuant to the Purchase Agreement, is false or misleading in any material respect on the date made or furnished and such false or misleading representation, warranty or information relates to a material adverse effect on the Corporation and its Subsidiaries, taken as a whole, or fails to disclose a material adverse change on the Corporation and its Subsidiaries, taken as a whole; provided that, notwithstanding the foregoing, in the case of paragraph 5J of the Purchase Agreement, any occurrence, event, transaction or claim which results in any loss, damage or injury to the Corporation and its Subsidiaries in excess of $4,000,000 shall conclusively be deemed to have material adverse effect and be a material adverse change hereunder; (iv) the Corporation or any Subsidiary makes an assignment for the benefit of creditors or admits in writing its inability to pay its debts generally as they become due; or an order, judgment or decree is entered adjudicating the Corporation or any Material Subsidiary bankrupt or insolvent; or any order for relief with respect to the Corporation or any Material Subsidiary is entered under the Federal Bankruptcy Code; or the Corporation or any Material Subsidiary petitions or applies to any tribunal for the appointment of a custodian, trustee, receiver or liquidator of the Corporation or any Material Subsidiary or of any substantial part of the assets of the Corporation or any Material Subsidiary, or commences any proceeding (other than a proceeding for the voluntary liquidation and dissolution of a Subsidiary) relating to the Corporation or any Material Subsidiary under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction; or any such petition or application is filed, or any such proceeding is commenced, against the Corporation or any Material Subsidiary and either (a) the Corporation or any such Material Subsidiary by any act indicates its approval thereof, consent thereto or acquiescence therein or (b) such petition, application or proceeding is not dismissed within 60 days; (v) a judgment in excess of $500,000 is rendered against the Corporation or any Material Subsidiary and, within 60 days after entry thereof, such judgment is not discharged or execution thereof stayed pending appeal, or within 60 days after the expiration of any such stay, such judgment is not discharged; or (vi) the Corporation or any Material Subsidiary defaults in the performance of any obligation or agreement if the effect of such default is to cause an amount exceeding $500,000 to become due prior to its stated maturity or to permit the holder or holders of any obligation to cause an amount exceeding $500,000 to become due prior to its stated maturity. The foregoing shall constitute Events of Noncompliance whatever the reason or cause for any such Event of Noncompliance and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. B. CONSEQUENCES OF EVENTS OF NONCOMPLIANCE. (i) If an Event of Noncompliance of the type described in subparagraph 9A(i), 9A(ii) or 9A(iii) (with respect to paragraphs 5J and 5X of the Purchase agreement only) has occurred and is continuing, the dividend rate on the Series A Preferred shall increase immediately to 15%. Any increase of the dividend rate resulting from the operation of this subparagraph shall terminate as of the close of business on the date on which no Event of Noncompliance of the type described in subparagraph 9A(i) or 9A(ii) exists, subject to subsequent increases pursuant to this paragraph. (ii) If any Event of Noncompliance of the type described in subparagraph 9A(i), 9A(ii) or 9A(iii) (with respect to paragraphs 5J and 5X of the Purchase Agreement only) has occurred, the Conversion Price on the Series A Preferred shall be reduced immediately by 1/3 of the Conversion Price in effect immediately prior to such adjustment. In no event shall such Conversion Price adjustment be rescinded, and in no event shall there be more than one adjustment pursuant to this subparagraph. (iii) If an Event of Noncompliance (other than an Event of Noncompliance of the type described in subparagraph 9A(iv)) has occurred and is continuing, the holder or holders of a majority of the Series A Preferred then outstanding may demand (by written notice delivered to the Corporation) immediate redemption of all or any portion of the Series A Preferred owned by such holder or holders at a price per Share equal to the Liquidation Value thereof (plus all accrued and unpaid dividends thereon). The Corporation shall give prompt written notice of such election to the other holders of Series A Preferred (but in any event within five days after receipt of the initial demand for redemption), and each such other holder may demand immediate redemption of all or any portion of such holder's Series A Preferred by giving written notice thereof to the Corporation within seven days after receipt of the Corporation's notice. The Corporation shall redeem all Series A Preferred as to which rights under this paragraph have been exercised within 15 days after receipt of the initial demand for redemption. The amounts payable hereunder with respect to the Series A Preferred shall be the greater of (1) the Liquidation Value of such Series A Preferred and (2) the Market Price (on the date which is five trading days prior to the date of payment) of the Common Stock into which such Series A Preferred is convertible; provided that to the extent the amount in clause (2) above exceeds the amount in clause (1) above, all or a portion of such excess may, at the option of the Corporation's Board of Directors, be paid in the form of Common Stock (valued at the Market Price of the Common Stock on such date) up to and not exceeding a number of shares of Common Stock equal to 20 multiplied by the average daily trading volume of the Common Stock in the public markets for a period of 45 consecutive trading days ending on such date and the remainder shall be paid in cash. (iv) If an Event of Noncompliance of the type described in subparagraph 9A(iv) has occurred, all of the Series A Preferred then outstanding shall be subject to immediate redemption by the Corporation (without any action on the part of the holders of the Series A Preferred) at a price per Share equal to the Liquidation Value thereof (plus all accrued and unpaid dividends thereon). The Corporation shall immediately redeem all Series A Preferred upon the occurrence of such Event of Noncompliance. (v) If any Event of Noncompliance exists, each holder of Series A Preferred shall also have any other rights which such holder is entitled to under any contract or agreement at any time and any other rights which such holder may have pursuant to applicable law. Section 10. REGISTRATION OF TRANSFER. The Corporation shall keep at its principal office a register for the registration of Series A Preferred. Upon the surrender of any certificate representing Series A Preferred at such place, the Corporation shall, at the request of the record holder of such certificate, execute and deliver (at the Corporation's expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of Shares represented by the surrendered certificate. Each such new certificate shall be registered in such name and shall represent such number of Shares as is requested by the holder of the surrendered certificate and shall be substantially identical in form to the surrendered certificate, and dividends shall accrue on the Series A Preferred represented by such new certificate from the date to which dividends have been fully paid on such Series A Preferred represented by the surrendered certificate. Section 11. REPLACEMENT. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing Shares of Series A Preferred, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation (provided that if the holder is a financial institution or other institutional investor its own agreement shall be satisfactory), or, in the case of any such mutilation upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of Shares of such class represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate, and dividends shall accrue on the Series A Preferred represented by such new certificate from the date to which dividends have been fully paid on such lost, stolen, destroyed or mutilated certificate. Section 12. DEFINITIONS. "CHANGE IN CONTROL" has the meaning set forth in paragraph 4J hereof. "COMMON STOCK" means, collectively, the Corporation's Common Stock, par value $.015, and any capital stock of any class of the Corporation which is not limited to a fixed sum or percentage of par or stated value in respect to the rights of the holders thereof to participate in dividends or in the distribution of assets upon any liquidation, dissolution or winding up of the Corporation. "CONVERSION STOCK" means shares of the Corporation's Common Stock, par value $.015 per share; provided that if there is a change such that the securities issuable upon conversion of the Series A Preferred are issued by an entity other than the Corporation or there is a change in the type or class of securities so issuable, then the term "Conversion Stock" shall mean one share of the security issuable upon conversion of the Series A Preferred if such security is issuable in shares, or shall mean the smallest unit in which such security is issuable if such security is not issuable in shares. "CONVERTIBLE SECURITIES" means any stock or securities (other than Options) directly or indirectly convertible into or exchangeable for Common Stock. "FUNDAMENTAL CHANGE" has the meaning set forth in paragraph 4J hereof. "JUNIOR SECURITIES" means any capital stock or other equity securities of the Corporation, except for the Series A Preferred. "LIQUIDATION VALUE" of any Share as of any particular date shall be equal to $1,000. "MARKET PRICE" of any publicly traded security means the average of the closing prices of such security's sales on all securities exchanges on which such security may at the time be listed, or, if there has been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security is not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization, in each such case averaged over a period of 15 days consisting of the day as of which "Market Price" is being determined and the 14 consecutive business days prior to such day. "MARKET PRICE" of any security which is not publicly traded means the fair value of such security determined jointly by the Corporation and the holders of a majority of the Series A Preferred; provided that if such parties are unable to reach agreement within a reasonable period of time, such fair value shall be determined by an independent appraiser experienced in valuing securities jointly selected by the Corporation and the holders of a majority of the Series A Preferred without application of any minority or blockage discounts. The determination of such appraiser shall be final and binding upon the parties, and the Corporation shall pay the fees and expenses of such appraiser. "OPTIONS" means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities. "PERSON" means an individual, a partnership, a corporation, a limited liability company, a limited liability, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "PUBLIC OFFERING" means any offering by the Corporation of its capital stock or equity securities to the public pursuant to an effective registration statement under the Securities Act of 1933, as then in effect, or any comparable statement under any similar federal statute then in force. "PURCHASE AGREEMENT" means the Note and Warrant Purchase Agreement, dated as of May 19, 1995 by and among the Corporation and certain investors, as such agreement may from time to time be amended in accordance with its terms. "REDEMPTION DATE" as to any Share means the date specified in the notice of any redemption at the Corporation's option or the applicable date specified herein in the case of any other redemption; provided that no such date shall be a Redemption Date unless the Liquidation Value of such Share (plus all accrued and unpaid dividends thereon and any required premium with respect thereto) is actually paid in full on such date, and if not so paid in full, the Redemption Date shall be the date on which such amount is fully paid. "SUBSIDIARY" means, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control any managing director or general partner of such limited liability company, partnership, association or other business entity. Section 13. AMENDMENT AND WAIVER. No amendment, modification or waiver shall be binding or effective with respect to any provision of Sections 1 to 14 hereof without the prior written consent of the holders of a majority of the Series A Preferred outstanding at the time such action is taken; provided that no such action shall change (a) the rate at which or the manner in which dividends on the Series A Preferred accrue or the times at which such dividends become payable or the amount payable on redemption of the Series A Preferred or the times at which redemption of Series A Preferred is to occur, without the prior written consent of the holders of at least 66% of the Series A Preferred then outstanding, (b) the Conversion Price of the Series A Preferred or the number of shares or class of stock into which the Series A Preferred is convertible, without the prior written consent of the holders of at least 66% of the Series A Preferred then outstanding or (c) the percentage required to approve any change described in clauses (a) and (b) above, without the prior written consent of the holders of at least 66% of the Series A Preferred then outstanding; and provided further that no change in the terms hereof may be accomplished by merger or consolidation of the Corporation with another corporation or entity unless the Corporation has obtained the prior written consent of the holders of the applicable percentage of the Series A Preferred then outstanding. Section 14. NOTICES. Except as otherwise provided hereunder, all notices referred to herein shall be in writing and shall be deemed to have been given when delivered personally to the recipient, sent to the recipient by reputable overnight carrier service (charges prepaid) or five days after being mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications shall be sent (i) to the Corporation, at its principal executive offices and (ii) to any stockholder, at such holder's address as it appears in the stock records of the Corporation (unless otherwise indicated by any such holder). Be it further RESOLVED, that the Chairman and Chief Executive Officer, the President and Chief Operating Officer, the Executive Vice President and Chief Financial Officer, the Vice President-Finance, the Treasurer and the Secretary of this Corporation be, and they each hereby are, authorized and directed to execute and file this Certificate of Designations with respect to this Corporation's Series A Preferred Stock with the Secretary of State of the State of Delaware, and to take such further actions and to execute, deliver, certify and file such additional documents in the name of and on behalf of this Corporation as the officers executing the same shall deem necessary or advisable to effectuate the intent of these resolutions in the exercise of their best judgment. IN WITNESS WHEREOF, ACC Corp. has caused this Certificate of Designations, Powers, Preferences and Relative, Participating, Optional or Other Special Rights, and the Qualifications, Limitations or Restrictions thereof of its Series A Preferred Stock to be duly executed by Arunas A. Chesonis, its President and Chief Operating Officer, and attested by Francis D.R. Coleman, its Secretary, this 28th day of August, 1995. ACC CORP. By: /s/ Arunas A. Chesonis Arunas A. Chesonis President and Chief Operating Officer ATTEST: /s/ Francis D.R. Coleman Francis D. R. Coleman, Secretary EX-4 4 Exhibit 4-2 WARRANT NO. PW/A-12 PURCHASE WARRANT 30,000 SHARES OF ACC CORP. $.015 PAR VALUE CLASS A COMMON STOCK FOR VALUE RECEIVED, ACC Corp., a Delaware corporation (the "Company"), hereby grants to Columbia Capital Corporation (the "Holder"), with an address of 201 North Main Street, Suite 300, Alexandria, Virginia 22314, the right, subject to the further terms and conditions set forth herein, to purchase from the Company 30,000 whole, fully paid and nonassessable shares (the "Shares") of its $.015 par value Class A Common Stock at a purchase price per Share of $16.00 (the "Purchase Price"). This Warrant shall be fully exercisable on its date of issuance and in all events shall expire and be of no further force or effect at the earlier of the time when it has been exercised with respect to all Shares which the Holder is entitled to purchase hereunder or 11:59 P.M., New York City time, on the date which is three and one-half years from the issuance date hereof (the "Expiration Date"). The number and character of the Shares and the Purchase Price are subject to adjustment as hereinafter provided. As used herein, this "Warrant" means and includes this Warrant and any Common Stock purchase warrant of the Company hereafter issued in substitution for or in replacement of this Warrant or to evidence the continuing effect of any part of this Warrant after any partial exercise hereof. 1. EXERCISE. This Warrant may be exercised in whole, or in part from time to time, by the Holder by delivering this Warrant together with an executed Subscription Agreement in the form annexed hereto as Exhibit A to the Company or such person as the Company may have appointed as warrant agent, at its principal office (or at the office of the agency maintained for such purpose), accompanied by payment by certified or bank check or wire transfer of funds payable to the order of the Company, in an aggregate amount equal to the per share Purchase Price as then adjusted multiplied by the number of Shares as to which this Warrant is then being exercised. The Company or such agent shall cancel this Warrant on any such exercise and, if such exercise is partial, shall issue and deliver to the Holder a new Warrant upon the same terms as contained herein with respect to the unexercised portion of this Warrant. Anything in this Warrant to the contrary notwithstanding, this Warrant may not be exercised after the Expiration Date and may be exercised only with respect to whole Shares. The Company will, or will direct its transfer agent to, issue a certificate or certificates for the number of fully paid and nonassessable Shares as to which this Warrant is so exercised, and in lieu of any fractional shares to which the Holder would otherwise be entitled, pay cash equal to such fraction multiplied by the Purchase Price as then adjusted, as soon as practicable after any exercise of this Warrant, and in any event within five business days thereafter, at the Company's expense (including the payment by it of any applicable issue taxes), in the name of, and deliver the same to, the Holder (on payment by the Holder of any applicable transfer taxes). Notwithstanding the preceding paragraph, any Shares as to which this Warrant is exercised shall be deemed issued on and as of the date of such exercise in accordance with the first paragraph of this Section and the Holder shall thereupon be deemed to be the owner of record thereof. All shares issued pursuant to any exercise of this Warrant shall be "restricted securities" within the meaning of the Securities Act of 1933, as amended (the "Act") and the rules and regulations thereunder, and shall bear the standard restrictive legend under the Act. Upon any exercise of this Warrant, the Holder shall also execute the form of representation letter attached as Exhibit B hereto making the representations regarding the status of the Shares contained therein. 2. ADJUSTMENTS. (a) STOCK DIVIDENDS, SPLITS, ETC. The number of Shares that may be purchased on exercise of this Warrant and the Purchase Price therefor shall be proportionately increased or decreased, as the case may be, for any stock dividend, stock split, combination, subdivision or other changes made with respect to the Class A Common Stock of the Company at any time prior to the Expiration Date. An adjustment made pursuant to this paragraph shall, in the case of a stock dividend or distribution, be made as of the record date therefor and, in the case of a subdivision or combination, be made as of the effective date thereof. (b) REORGANIZATION, RECAPITALIZATION, CONSOLIDATION, MERGER OR SALE OF ASSETS. In the event of any reorganization or recapitalization of the Company or in the event the Company consolidates with or merges into another corporation or transfers all or substantially all of its assets to another entity, the Holder, at any time after the consummation of such event, upon the exercise of this Warrant and payment of the Purchase Price as provided herein, shall be entitled to receive the stock to which the Holder would have been entitled on such consummation if the Holder had exercised this Warrant immediately prior thereto. In such case, the terms of this Warrant shall survive the consummation of any such event and shall be applicable to the shares of stock receivable on the exercise of this Warrant after such consummation. 3. NOTICES OF RECORD DATES, ETC. The Company shall mail or cause to be mailed to the Holder, at the same time it mails such notices to its shareholders of Class A Common Stock, all notices specifying any record date for shareholders of its Class A Common Stock with respect to any dividend, distribution or right, or with respect to any shareholder meeting to be held at which a vote is to be taken for the purpose of approving any reorganization, recapitalization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding up of the affairs of the Company. The Company also shall provide to the Holder all notices and reports that it provides to its shareholders generally. 4. TRANSFER OF WARRANT OR SHARES. (a) TRANSFER OF WARRANT. Neither this Warrant, nor any part or right with respect to it, shall be sold, transferred, assigned or hypothecated other than in accordance with Section 6 hereof. Before selling or otherwise disposing of this Warrant or any part thereof (in any case in accordance with the terms hereof) the Holder agrees to give 10 days' prior written notice to the Company of its intention to do so. The notice shall describe with particularity the proposed transfer. If, in the reasonable opinion of counsel to the Company, such transaction may lawfully be effected under the Act and under any other applicable Federal or state law or regulation, the Company shall then permit the Holder to sell or otherwise dispose of this Warrant or portion thereof in the manner described in the notice given to the Company. (b) TRANSFER OF SHARES. Should the Holder desire to sell or otherwise dispose of any Shares acquired upon the exercise of this Warrant, the Holder shall notify the Company of the terms of such transaction and shall comply with the requirements contained in the form of investment letter attached as Exhibit B hereto. If, in the opinion of counsel to the Company, such transaction may lawfully be effected under the Act and under any other applicable Federal or state law or regulation, the Holder shall be entitled to sell or otherwise dispose of such Shares in the manner described in the notice given to the Company. 5. REPLACEMENT OF WARRANT. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and, in the case of any such loss, theft or destruction, on delivery of a bond or other indemnity reasonably satisfactory to the Company, or, in the case of any such mutilation, on surrender and cancellation of this Warrant, the Company shall issue a new Warrant, of like tenor in lieu of such lost, stolen, destroyed or mutilated Warrant. 6. TRANSFERS. The Holder represents by its acceptance hereof that this Warrant is being acquired for investment and not with a view to the distribution thereof. The Holder shall not transfer or assign this Warrant except (a) in a transaction which is permitted under applicable securities laws, or (b) by will or pursuant to laws of descent and distribution. Any attempted or purported assignment or transfer of this Warrant not in compliance with this Section shall be void. The Company shall cause to be kept a register of the Holder(s) of this Warrant (the "Warrant Register"). In the event of any transfer permitted by this Section, the Company shall or shall cause its agent to register the transfer or assignment on its Warrant Register on surrender of this Warrant, duly endorsed, or accompanied by a written instrument or instruments of transfer in form reasonably satisfactory to the Company, duly executed by the Holder or by the duly appointed legal representative or attorney-in-fact thereof. On any such registration of transfer, the Company shall issue a new Warrant or Warrants, of like tenor, in lieu of the transferred or assigned Warrant. Notwithstanding the foregoing provisions of this Section, this Warrant may be surrendered to the Company, together with a written request for exchange, and thereupon the Company shall issue and exchange therefor one or more new Warrants, of like tenor as requested by the Holder, and the Company shall cancel this Warrant on such surrender for exchange. In no event, however, will the Company be required to effect any registration of transfer, assignment or exchange that would result in the issuance of a fraction of a share. For purposes of this Warrant, the term "Holder" shall refer to all persons who at any time are listed in the Warrant Register as holding a Warrant representing any portion of the rights hereunder. 7. REGISTRATION OF SHARES UNDER THE ACT. At any time prior to the Expiration Date of this Warrant, and subject to the further limitations contained in this Section, the Holder(s) shall be entitled to demand and receive one registration, under the Act and the laws of the State of New York, of all but not less than all of the Shares acquired or acquirable pursuant to the exercise of this Warrant in full, as follows: (a) To initiate the registration, the Company must receive written requests for such registration from the Holder(s) of all of the Shares. (b) Upon receipt of such request(s), the Company shall: (i) Use its best efforts to promptly cause to be prepared and filed with the Securities and Exchange Commission (the "SEC") under the Act and also filed with the applicable New York State authorities, within 45 days following receipt of such request(s), a registration statement (the "Registration Statement") and prospectus or post-effective amendment (the "Amendment") to the Registration Statement relating to the distribution of such Shares; (ii) Use its best efforts, through its officers and Directors, auditors and counsel to cause the Registration Statement or Amendment to become effective at the earliest practicable date after the filing thereof; (iii) Deliver to the Holder(s) such number of copies of such prospectuses in preliminary and definitive form, and amendments thereto, as such Holder(s) may reasonably request; and (iv) Keep effective such Registration Statement, make such other filings related to it, and do such other acts and things as may be reasonably necessary in the opinion of counsel for the Company to permit the public sale or other disposition of such Shares for a period of 90 days after the effective date of such Registration Statement or Amendment as the case may be. The Company's obligation to commence such a demand registration set forth in subparagraph (b)(i) above is subject to deferral for a period not to exceed 90 days if such deferral is deemed necessary or appropriate by counsel to the Company. In lieu of accepting such deferral, however, the Holder(s) may elect to cancel their registration demand and exercise such right at a later date, but in no event later than the Expiration Date of this Warrant. The Company will also cooperate with the Holder(s) and their respective counsel with respect to any registration or other qualification of the Shares by the Holder(s) for sale under the securities or "blue sky" laws of up to five jurisdictions, in addition to New York State, as such Holder(s) shall reasonably designate and continue its cooperation with respect to such state registrations or qualifications so long as reasonably required for the purpose of sale of the Shares. The Holder(s) likewise shall cooperate fully with the Company in effecting such registration. The Company shall pay all fees, taxes, and expenses pertaining to filing a Registration Statement or Amendment with the SEC and with New York State, including but not limited to, Federal and New York State registration and filing fees, fees and expenses of the Company's counsel and auditors, and printing, mailing and other distribution expenses incident to such Registration Statement or Amendment. The Holder(s) selling Shares in such registration shall be responsible for all state "blue sky" expenses in all states other than New York State, all underwriting fees and expenses and all fees of their counsel and accountants. In the event that the registration shall for any reason other than an act(s) of the Holder(s) not become effective, or if the Company shall fail to keep such registration effective for the period of time set forth above, then such attempted registration shall not be deemed a registration hereunder and the Holder(s) shall continue to be entitled to a registration pursuant to this Section. The Company shall indemnify and hold harmless each Holder and each "underwriter" within the meaning of the Act who may purchase from or sell for any such Holder any portion of the Shares (and each person, if any, who controls any such Holder or underwriter) from and against any and all such losses, claims, damages, liabilities and expenses (including reasonable costs of investigation) joint and several to which they or any of them may become subject under the Act or otherwise and, except as hereinafter provided, will reimburse each such Holder and each such underwriter for any legal or other expenses incurred by any of them in connection with investigating or defending any claims or actions, insofar as such losses, claims, damages, expenses, liabilities or actions arise out of or are based upon any misstatement or alleged misstatement of a material fact contained in any registration statement under the Act or any prospectus included therein, or any amendments or supplements thereto, which is filed or furnished by reason of this Section or arise out of or are based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, expenses, liabilities or actions are caused by any such misstatement or omission made in reliance upon and in conformity with information furnished to the Company by or on behalf of any such Holder or underwriter expressly for use in connection therewith. The indemnity agreement in this paragraph shall be in addition to any liability which the Company may otherwise have. In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in this Section is unavailable to any Holder or underwriter under the Act or any person who controls any such Holder or underwriter (collectively, "Indemnified Parties"), the Company and Indemnified Parties shall contribute to the aggregate losses, claims, damages, and liabilities of the nature contemplated by said indemnification in proportion to the relative fault of the Company and the Indemnified Parties in connection with the statement or omission that resulted in such damages and other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether in the case of an untrue statement or alleged omission to state a material fact, such statement or omission relates to information supplied by the Company or the Indemnified Parties and the party's relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities referred to in this paragraph shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending against or appearing as a third party witness in any such action or claim. No person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the Act shall be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation. The Company's agreements with respect to this Warrant or the Shares as stated in this Section shall continue in effect regardless of the exercise and surrender of this Warrant. 8. RESERVATION OF SHARES. The Company shall at all times reserve, for the purpose of issuance on exercise of this Warrant, such number of its duly authorized and unissued and/or treasury shares of Class A Common Stock or such class or classes of capital stock or other securities as shall from time to time be sufficient to comply with this Warrant. If, at any time, the authorized and unissued and/or treasury shares of Class A Common Stock or such other class or classes of capital stock or other securities are not sufficient for the exercise of this Warrant, the Company shall take such corporate action as may in the opinion of its counsel be necessary to increase its authorized and unissued and/or treasury shares of Class A Common Stock or such other class or classes of capital stock or other securities to such number as shall be sufficient for that purpose. 9. SURVIVAL. All agreements, covenants, representations and warranties herein shall survive the execution and delivery of this Warrant and any investigation at any time made by or on behalf of any party hereto and the exercise, sale and purchase of this Warrant and the Class A Common Stock issuable on exercise hereof. 10. SHAREHOLDER RIGHTS. This Warrant shall not entitle the Holder, as such, to any voting rights or other rights as a shareholder of the Company, or to any other rights except the rights stated herein. 11. NOTICES. All demands, notices, consents and other communications to be given hereunder shall be in writing and shall be deemed duly given when delivered personally or three days after being mailed by certified first class mail, postage prepaid, return receipt requested, properly addressed, if to the Company at: 400 West Avenue, Rochester, New York 14611, or if to the Holder, at its address set forth above. The Company and the Holder may change their respective addresses at any time or times by notice given hereunder to the other. 12. AMENDMENTS; WAIVERS; TERMINATIONS; GOVERNING LAW; HEADINGS. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change waiver, discharge or termination is sought. The corporation laws of the State of Delaware shall govern all issues concerning the relative rights of the Company and its shareholders. All other questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and interpreted in accordance with the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule of any jurisdiction. The headings of this Warrant are for convenience of reference only and are not part of this Warrant. Dated: July 21, 1995 ACC CORP. Witness: By: Michael R. Daley /s/ Francis D.R. Coleman Secretary Title: EVP & CFO EXHIBIT A SUBSCRIPTION (To be completed and signed only on an exercise of the Warrant.) TO: ACC CORP.: The undersigned, the Holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, _______ shares of the Class A Common Stock of ACC CORP. to which such Holder is entitled thereunder, and herewith makes payment of $_________ therefor in cash or by certified or official bank check. The undersigned hereby requests that the Certificate(s) for such shares be issued in his name and delivered to the following address: If the foregoing Subscription evidences an exercise of the within Warrant to purchase fewer than all of the Shares to which the undersigned is entitled under such Warrant, please issue a new warrant, of like tenor, for the remaining Shares in his name, and deliver the same to the same address as set forth above. Dated: ______________, 19___. ______________________________ (Name of Holder) ______________________________ (Signature of Holder or Authorized Signatory) EXHIBIT B TO: ACC CORP. 400 West Avenue Rochester, New York 14611 Gentlemen: In connection with the issuance to the undersigned of _______ shares of the Class A Common Stock (the "Shares") of ACC CORP. (the "Company"), I understand that the Shares have not been registered under the Securities Act of 1933, as amended, (the "Act") by reason of a specific exemption under the provisions of the Act which depends upon my representations contained in this letter and that you are relying on such representations as a condition precedent to permitting the issuance of the Shares to me. I also understand that any sales made by me publicly under Rule 144 can only be made after I have held the Shares for two years, and then only in limited quantities and only under the terms and conditions of said Rule; and that any other public resale of the Shares may require registration under the Act or compliance with an exemption from the registration requirements of the Act. I agree that the Shares may not be transferred unless and until the Company shall have been informed of the proposed transfer and: 1. A registration statement with respect to the Shares shall be effective under the Act, and I shall have furnished satisfactory proof of compliance with any other applicable law; or 2. I have obtained an opinion of counsel, in form and content satisfactory to the Company and its counsel, that no violation of the Act or any other applicable law will be involved in such transfer, and/or such other documentation in connection therewith as counsel for the Company may in its reasonable discretion require as a condition precedent in order to make a determination that the transfer will involve no such violation. I agree that appropriate legends may be placed on any certificates delivered to me representing the Shares in order to give notice of the transfer restrictions set forth in this letter and that the Company may cause stop transfer orders to be placed on my account. I further acknowledge and agree that neither the Company nor any of its agents, officers or directors have made any representations concerning the Company or its prospects and that I have based my decision to acquire the Company's stock upon information furnished to me by persons other than the Company, its officers, directors or agents. In consideration of the transfer of the Shares to me, I hereby agree to indemnify and hold harmless the Company, its officers, directors, employees and agents, from and against any and all liability, losses, damages, expenses and attorneys' fees which any of them may hereafter incur, suffer or be required to pay by reason of the falsity of, or my failure to comply with, any representations contained in this letter. Very truly yours, ______________________________ (Signature of Holder) ______________________________ (Date) EX-10 5 Exhibit 10-1 CREDIT AGREEMENT dated as of July 21, 1995 by and among ACC CORP., and certain Subsidiaries thereof designated herein, as Borrowers, ACC CORP., as Guarantor, the Lenders referred to herein, FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as Managing Agent and Administrative Agent, and SHAWMUT BANK CONNECTICUT, N.A., as Managing Agent TABLE OF CONTENTS PAGE ARTICLE I DEFINITIONS............................... 1 SECTION 1.1. DEFINITIONS............................................. 1 SECTION 1.2. GENERAL................................................. 19 SECTION 1.3. OTHER DEFINITIONS AND PROVISIONS........................ 19 ARTICLE II REVOLVING CREDIT FACILITY........................ 19 SECTION 2.1. REVOLVING CREDIT LOANS.................................. 19 SECTION 2.2. PROCEDURE FOR ADVANCES OF LOANS......................... 20 SECTION 2.3. REPAYMENT OF LOANS...................................... 21 SECTION 2.4. REVOLVING CREDIT NOTES.................................. 22 SECTION 2.5. PERMANENT REDUCTIONS OF THE AGGREGATE COMMITMENT........ 22 SECTION 2.6. TERMINATION OF CREDIT FACILITY.......................... 23 SECTION 2.7. USE OF PROCEEDS......................................... 24 ARTICLE III GENERAL LOAN PROVISIONS......................... 24 SECTION 3.1 INTEREST................................................. 24 SECTION 3.2 NOTICE AND MANNER OF CONVERSION OR CONTINUATION OF LOANS. 27 SECTION 3.3 FEES..................................................... 28 SECTION 3.4 MANNER OF PAYMENT........................................ 28 SECTION 3.5 CREDITING OF PAYMENTS AND PROCEEDS....................... 29 SECTION 3.6 NATURE OF OBLIGATIONS OF LENDERS REGARDING EXTENSIONS OF CREDIT; ASSUMPTION BY ADMINISTRATIVE AGENT...................... 30 SECTION 3.7 MANDATORY REDENOMINATION OF STERLING LOANS............... 31 SECTION 3.8 CURRENCY APPRECIATION; SUBLIMITS; MANDATORY REDUCTIONS... 31 SECTION 3.9 REGULATORY LIMITATION.................................... 31 SECTION 3.10 CHANGED CIRCUMSTANCES................................... 32 SECTION 3.11 INDEMNITY............................................... 34 SECTION 3.12 CAPITAL REQUIREMENTS.................................... 34 SECTION 3.13 TAXES................................................... 35 ARTICLE IV CLOSING; CONDITIONS OF CLOSING AND BORROWING............... 37 SECTION 4.1 CLOSING............................................ 37 SECTION 4.2 CONDITIONS TO CLOSING AND INITIAL EXTENSIONS OF CREDIT 37 SECTION 4.3 CONDITIONS TO ALL LOANS.................................. 41 ARTICLE V REPRESENTATIONS AND WARRANTIES OF BORROWERS............... 41 SECTION 5.1 REPRESENTATIONS AND WARRANTIES........................... 41 SECTION 5.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC.......... 50 ARTICLE VI FINANCIAL INFORMATION AND NOTICES.................... 50 SECTION 6.1 FINANCIAL STATEMENTS AND PROJECTIONS..................... 50 SECTION 6.2 OFFICER'S COMPLIANCE CERTIFICATE......................... 51 SECTION 6.3 ACCOUNTANTS' CERTIFICATE................................. 52 SECTION 6.4 OTHER REPORTS............................................ 52 SECTION 6.5 NOTICE OF LITIGATION AND OTHER MATTERS................... 52 SECTION 6.6 ACCURACY OF INFORMATION.................................. 54 SECTION 6.7 REVISIONS OR UPDATES TO SCHEDULES........................ 54 ARTICLE VII AFFIRMATIVE COVENANTS.......................... 54 SECTION 7.1 PRESERVATION OF CORPORATE EXISTENCE AND RELATED MATTERS.. 54 SECTION 7.2 MAINTENANCE OF PROPERTY.................................. 54 SECTION 7.3 INSURANCE................................................ 55 SECTION 7.4 ACCOUNTING METHODS AND FINANCIAL RECORDS................. 55 SECTION 7.5 PAYMENT AND PERFORMANCE OF OBLIGATIONS................... 55 SECTION 7.6 COMPLIANCE WITH LAWS AND APPROVALS....................... 55 SECTION 7.7 ENVIRONMENTAL LAWS....................................... 55 SECTION 7.8 COMPLIANCE WITH ERISA.................................... 56 SECTION 7.9 COMPLIANCE WITH AGREEMENTS............................... 56 SECTION 7.10 CONDUCT OF BUSINESS..................................... 56 SECTION 7.11 VISITS AND INSPECTIONS.................................. 56 SECTION 7.12 MATERIAL SUBSIDIARIES; ADDITIONAL COLLATERAL............ 57 SECTION 7.13 HEDGING AGREEMENT....................................... 57 SECTION 7.14 FURTHER ASSURANCES...................................... 58 ARTICLE VIII FINANCIAL COVENANTS........................... 58 SECTION 8.1 MAXIMUM LEVERAGE RATIO................................... 58 SECTION 8.2 MINIMUM PRO FORMA DEBT SERVICE COVERAGE RATIO............ 59 SECTION 8.3 FIXED CHARGE COVERAGE RATIO.............................. 59 SECTION 8.4 MINIMUM NET WORTH........................................ 60 ARTICLE IX NEGATIVE COVENANTS............................ 60 SECTION 9.1 LIMITATIONS ON DEBT...................................... 60 SECTION 9.2 LIMITATIONS ON CONTINGENT OBLIGATIONS.................... 61 SECTION 9.3 LIMITATIONS ON LIENS..................................... 61 SECTION 9.4 LIMITATIONS ON LOANS, ADVANCES, INVESTMENTS AND ACQUISITIONS 62 SECTION 9.5 LIMITATIONS ON MERGERS AND LIQUIDATION................... 63 SECTION 9.6 LIMITATIONS ON SALE OF ASSETS............................ 63 SECTION 9.7 LIMITATIONS ON DIVIDENDS AND DISTRIBUTIONS............... 64 SECTION 9.8 LIMITATIONS ON EXCHANGE AND ISSUANCE OF CAPITAL STOCK.... 64 SECTION 9.9 TRANSACTIONS WITH AFFILIATES............................. 65 SECTION 9.10 CERTAIN ACCOUNTING CHANGES.............................. 65 SECTION 9.11 AMENDMENTS; PAYMENTS AND PREPAYMENTS OF SUBORDINATED DEBT 65 SECTION 9.12 LICENSES................................................ 65 SECTION 9.13 RESTRICTIVE AGREEMENTS.................................. 65 ARTICLE X UNCONDITIONAL GUARANTY.......................... 65 SECTION 10.1 GUARANTY OF OBLIGATIONS................................. 65 SECTION 10.2 NATURE OF GUARANTY...................................... 66 SECTION 10.3 DEMAND BY THE ADMINISTRATIVE AGENT...................... 67 SECTION 10.4 WAIVERS................................................. 67 SECTION 10.5 MODIFICATION OF LOAN DOCUMENTS ETC...................... 68 SECTION 10.6 REINSTATEMENT........................................... 68 SECTION 10.7 NO SUBROGATION.......................................... 69 ARTICLE XI DEFAULT AND REMEDIES........................... 69 SECTION 11.1 EVENTS OF DEFAULT....................................... 69 SECTION 11.2 REMEDIES................................................ 72 SECTION 11.3 RIGHTS AND REMEDIES CUMULATIVE; NON-WAIVER; ETC......... 73 SECTION 11.4 CONSENTS................................................ 73 SECTION 11.5 JUDGMENT CURRENCY....................................... 74 ARTICLE XII THE AGENTS................................ 75 SECTION 12.1 APPOINTMENT............................................. 75 SECTION 12.2 DELEGATION OF DUTIES.................................... 75 SECTION 12.3 EXCULPATORY PROVISIONS.................................. 75 SECTION 12.4 RELIANCE BY AGENTS...................................... 76 SECTION 12.5 NOTICE OF DEFAULT....................................... 76 SECTION 12.6 NON-RELIANCE ON SUCH AGENTS AND OTHER LENDERS........... 77 SECTION 12.7 INDEMNIFICATION......................................... 77 SECTION 12.8 EACH OF THE AGENTS IN ITS INDIVIDUAL CAPACITY........... 78 SECTION 12.9 RESIGNATION OF AGENTS; SUCCESSOR AGENTS................. 78 ARTICLE XIII MISCELLANEOUS.............................. 79 SECTION 13.1 NOTICES................................................. 79 SECTION 13.2 EXPENSES................................................ 80 SECTION 13.3 SET-OFF................................................. 81 SECTION 13.4 GOVERNING LAW........................................... 81 SECTION 13.5 CONSENT TO JURISDICTION................................. 81 SECTION 13.6 WAIVER OF JURY TRIAL. ................................. 82 SECTION 13.7 REVERSAL OF PAYMENTS.................................... 82 SECTION 13.8 INJUNCTIVE RELIEF....................................... 82 SECTION 13.9 ACCOUNTING MATTERS...................................... 82 SECTION 13.10 SUCCESSORS AND ASSIGNS; PARTICIPATIONS................. 83 SECTION 13.11 AMENDMENTS, WAIVERS AND CONSENTS; RENEWAL.............. 87 SECTION 13.12 PERFORMANCE OF DUTIES.................................. 87 SECTION 13.13 INDEMNIFICATION........................................ 87 SECTION 13.14 ALL POWERS COUPLED WITH INTEREST....................... 88 SECTION 13.15 SURVIVAL OF INDEMNITIES................................ 88 SECTION 13.16 TITLES AND CAPTIONS.................................... 88 SECTION 13.17 SEVERABILITY OF PROVISIONS............................. 89 SECTION 13.18 COUNTERPARTS........................................... 89 SECTION 13.19ACC AS AGENT FOR OTHER BORROWERS................... 89 SECTION 13.20 TERM OF AGREEMENT...................................... 89 EXHIBITS Exhibit A - Form of Revolving Credit Note Exhibit B - Form of Notice of Borrowing Exhibit C - Form of Notice of Conversion/Continuation Exhibit D - Form of Officer's Certificate Exhibit E - Form of Assignment and Acceptance Exhibit F - Form of Pledge Agreement Exhibit G - Form of Security Agreement Exhibit H - Form of Landlord Consent Exhibit I - Form of Mortgage Exhibit J - Form of Joinder Agreement Exhibit K - Form of Intercompany Subordination Agreement SCHEDULES Schedule 1.1 -Lenders and Commitments Schedule 1.2 -Sublimits Schedule 1.3 -Canadian Subsidiary Security Documents Schedule 5.1(a) -Jurisdictions of Organization and Qualification to Do Business as Foreign Corporation Schedule 5.1(b) -Subsidiaries and Capitalization Schedule 5.1(d) -Required Governmental Approvals Schedule 5.1(h) -ERISA Plans Schedule 5.1(l) -Material Contracts Schedule 5.1(m) -Labor and Collective Bargaining Agreements Schedule 5.1(r) -Real Property Schedule 5.1(t) -Debt and Contingent Obligations Schedule 5.1(u) -Litigation Schedule 5.1(v) -Communications Licenses and Regulatory Matters Schedule 9.3 -Existing Liens Schedule 9.4 -Existing Loans, Advances and Investments CREDIT AGREEMENT, dated as of the 21 day of July, 1995, by and among ACC CORP., a corporation organized under the laws of Delaware ("ACC"), and the Subsidiaries thereof designated as Borrowers herein, as Borrowers, ACC, as Guarantor, the Lenders who are or may become a party to this Agreement, FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking association, as Managing Agent and Administrative Agent and SHAWMUT BANK CONNECTICUT, N.A., a national banking association, as Managing Agent. STATEMENT OF PURPOSE The Borrowers have requested and the Lenders have agreed to extend certain credit facilities to the Borrowers on the terms and conditions of this Agreement. ACC, as parent of the other Borrowers, will benefit directly and indirectly from the extension of such credit facilities to such Borrowers. As a precondition to making any extensions of credit hereunder, the Lenders have required, and ACC has agreed, to execute this Agreement as Guarantor. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, such parties hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 DEFINITIONS. The following terms when used in this Agreement shall have the meanings assigned to them below: "ACC" means ACC Corp., a corporation organized under the laws of Delaware, and its successors. "ACC CORP. PLEDGE AGREEMENT" means the Pledge Agreement executed by ACC in favor of the Administrative Agent for the benefit of itself and the Lenders substantially in the form of EXHIBIT F, as amended or modified. "ACC LEC" means ACC National Telecom Corp., a corporation organized under the laws of Delaware, and its successors. "ACC MASS." means ACC Long Distance of Massachusetts Corp., a corporation organized under the laws of Delaware, and its successors. "ACC NATIONAL" means ACC National Long Distance Corp., a corporation organized under the laws of Delaware, and its successors. "ACC NATIONAL PLEDGE AGREEMENT" means the Pledge Agreement executed by ACC National in favor of the Administrative Agent for the benefit of itself and the Lenders substantially in the form of EXHIBIT F, as amended or modified. "ACC RADIO" means ACC Radio Corp., a corporation organized under the laws of New York, and its successors. "ACC U.K." means ACC Long Distance U.K., Ltd., a corporation organized under the laws of the United Kingdom, and its successors. "ACC U.K. SECURITY DOCUMENTS" means the collective reference to the Debenture of even date executed by ACC U.K. in favor of the Administrative Agent for the benefit of itself and the Lenders and any other agreement or writing pursuant to which a U.K. Borrower, or any Subsidiary thereof, pledges or grants a security interest in the Collateral or any such Person guarantees or otherwise secures the payment and/or performance of the obligations of a U.K. Borrower under the Loan Documents, in each case as amended or modified. "ACC U.S." means ACC Long Distance Corp., a corporation organized under the laws of New York, and its successors. "ADDITIONAL BORROWER" means any Material Subsidiary which has become a Borrower hereunder in accordance with Section 7.12. "ADMINISTRATIVE AGENT" means First Union in its capacity as administrative agent hereunder, and any successor thereto appointed pursuant to Section 12.9. "ADMINISTRATIVE AGENT'S CORRESPONDENT" means the financial institution designated by the Administrative Agent to act as its correspondent hereunder in the United Kingdom with respect to distribution and payment of Loans denominated in Sterling. "ADMINISTRATIVE AGENT'S OFFICE" means the office of the Administrative Agent specified in or determined in accordance with the provisions of Section 13.1. "AFFILIATE" means, with respect to any Person and its Subsidiaries, any other Person (other than a Subsidiary thereof) which directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first Person or any of its Subsidiaries. The term "control" means (a) the power to vote ten percent (10%) or more of the securities or other equity interests of a Person having ordinary voting power, or (b) the possession, directly or indirectly, of any other power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. "AGENTS" means the collective reference to the Managing Agents and the Administrative Agent. "AGGREGATE COMMITMENT" means the aggregate amount of the Lenders' Commitments hereunder, as such amount may be reduced at any time or from time to time pursuant to this Agreement. On the Closing Date, the Aggregate Commitment shall be Thirty-five Million Dollars ($35,000,000). "AGREEMENT" means this Credit Agreement, as amended or modified from time to time. "APPLICABLE LAW" means all applicable provisions of constitutions, laws, statutes, treaties, rules, regulations and orders of all Governmental Authorities and all orders and decrees of all courts and arbitrators. "APPLICABLE MARGIN" shall have the meaning assigned thereto in Section 3.1(c). "ASSIGNMENT AND ACCEPTANCE" shall have the meaning assigned thereto in Section 13.10. "BASE RATE" means, at any time, the higher of (a) the Prime Rate or (b) the Federal Funds Rate as determined by the Administrative Agent PLUS 1/2 of 1%; each change in the Base Rate shall take effect simultaneously with the corresponding change or changes in the Prime Rate or the Federal Funds Rate. "BASE RATE LOAN" means any Loan bearing interest at a rate determined with reference to the Base Rate as provided in Section 3.1(a) hereof. "BORROWERS" means the collective reference to the Domestic Borrowers and U.K. Borrowers party hereto on the Closing Date and each Additional Borrower in their respective capacities as a Borrower hereunder. "BUSINESS DAY" means (a) for all purposes other than as set forth in clause (b) below, any day other than a Saturday, Sunday or legal holiday on which banks in Charlotte, North Carolina and Hartford, Connecticut are open for the conduct of their domestic and international commercial banking business, and (b) with respect to all notices and determinations in connection with, and payments of principal and interest on, any LIBOR Rate Loan, any day (i) that is a Business Day described in clause (a) and that is also a day for trading by and between banks in deposits for the applicable Permitted Currency in the London interbank market and (ii) on which banks are open for the conduct of their domestic and international banking business in the place where the Administrative Agent's Correspondent shall make available Loans in such Permitted Currency. "CANADIAN NOTE DOCUMENTS" means the promissory note and any other document evidencing the loans and other advances of ACC Corp. extended in favor of the Canadian Subsidiaries. "CANADIAN SUBSIDIARIES" means the collective reference to each Material Subsidiary of ACC Corp. organized under the laws of Canada or any province thereof which is a borrower under the Canadian Note Documents. "CANADIAN SUBSIDIARY SECURITY DOCUMENTS" means the collective reference to documents set forth on SCHEDULE 1.3 and any other agreement or writing pursuant to which a Canadian Subsidiary pledges or grants a security interest in its assets in order to secure the payment and/or performance of its obligations under the Canadian Note Documents, in each case as amended or modified. "CAPITAL ASSET" means, with respect to ACC and its Subsidiaries, any asset that would, in accordance with GAAP, be required to be classified and accounted for as a capital asset on a Consolidated balance sheet of ACC and its Subsidiaries. "CAPITAL EXPENDITURES" means, with respect to ACC and its Subsidiaries for any period, the aggregate cost of all Capital Assets acquired by any such Person during such period, determined in accordance with GAAP. "CAPITAL LEASE" means, with respect to ACC and its Subsidiaries, any lease of any property that would, in accordance with GAAP, be required to be classified and accounted for as a capital lease on a Consolidated balance sheet of ACC and its Subsidiaries. "CHANGE IN CONTROL" shall have the meaning assigned thereto in Section 11.1(i). "CLOSING DATE" means the date of this Agreement or such later Business Day upon which each condition described in Article IV shall be satisfied or waived in all respects in a manner acceptable to the Agents in their sole discretion. "CODE" means the Internal Revenue Code of 1986, and the rules and regulations thereunder, each as amended or supplemented from time to time. "COLLATERAL" means any assets pledged by ACC or any of its Subsidiaries to the Administrative Agent for the ratable benefit of the Agents and the Lenders in order to secure the Obligations or a portion thereof. "COMMITMENT" means, as to any Lender, the obligation of such Lender to make Loans to the Borrowers hereunder in an aggregate principal amount at any time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 1.1, as the same may be reduced or modified at any time or from time to time pursuant to Sections 2.5 and 13.10. "COMMITMENT PERCENTAGE" means, as to any Lender at any time, the ratio of (a) the amount of the Commitment of such Lender to (b) the Aggregate Commitment of all of the Lenders. "COMMUNICATIONS LICENSE" means any long distance telecommunications or other license, permit, consent, certificate of compliance, franchise, approval, waiver or authorization granted or issued by the FCC, CRTC or DTI including, without limitation, any of the foregoing authorizing or permitting the acquisition, construction or operation of Network Facilities or any other long distance telecommunications system. "CONSOLIDATED" means, when used with reference to financial statements or financial statement items of ACC and its Subsidiaries, such statements or items on a consolidated basis in accordance with applicable principles of consolidation under GAAP. "CONTINGENT INTEREST AGREEMENT" means the Contingent Interest Agreement of even date between ACC and the Managing Agents substantially in the form of EXHIBIT F hereto, as amended or modified. "CONTINGENT OBLIGATION" means, with respect to ACC and its Subsidiaries, without duplication, any obligation, contingent or otherwise, of any such Person pursuant to which such Person has directly or indirectly guaranteed any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of any such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement condition or otherwise) or (b) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); PROVIDED, that the term Contingent Obligation shall not include endorsements for collection or deposit in the ordinary course of business. "CREDIT FACILITY" means the revolving credit facility established pursuant to Article II hereof. "CRTC" means the Canadian Radio-Television and Telecommunications Commission or any successor to Governmental Authority. "CURRENT DOLLAR EQUIVALENT" means at any date, with respect to any Loan denominated in Sterling, the amount of Dollars which is equivalent to the then outstanding principal amount of such Loan at the most favorable spot exchange rate determined by the Administrative Agent to be available to it for the sale of Dollars for Sterling at approximately 11:00 A.M. (Charlotte time) two (2) Business Days after such date. Sterling equivalents of Loans denominated in Dollars (to the extent used herein) shall be determined by the Administrative Agent in a manner consistent with this definition. "DEBT" means, with respect to ACC and its Subsidiaries at any date and without duplication, the sum of the following calculated in accordance with GAAP: (a) all liabilities, obligations and indebtedness for borrowed money including but not limited to obligations evidenced by bonds, debentures, notes or other similar instruments of any such Person (excluding the Fleet Venture Notes), (b) all obligations to pay the deferred purchase price of property or services of any such Person, except trade payables arising in the ordinary course of business not more than ninety (90) days past due, (c) all obligations of any such Person as lessee under Capital Leases, (d) all Debt of any other Person secured by a Lien on any asset of any such Person, (e) all Contingent Obligations of any such Person, (f) all obligations, contingent or otherwise, of any such Person relative to the face amount of letters of credit, whether or not drawn, and banker's acceptances issued for the account of any such Person and (g) all net obligations incurred by any such Person pursuant to Hedging Agreements. "DEFAULT" means any of the events specified in Section 11.1 which with the passage of time, the giving of notice or any other condition, would constitute an Event of Default. "DOLLARS" OR "$" means, unless otherwise qualified, dollars in lawful currency of the United States. "DOLLAR AMOUNT" means (a) with respect to each Loan made or continued (or to be made or continued) in Dollars, the principal amount thereof and (b) with respect to each Loan made or continued (or to be made or continued) in Sterling, the amount of Dollars which is equivalent to the principal amount of such Loan at the most favorable spot exchange rate determined by the Administrative Agent to be available to it for the sale of Dollars for Sterling at approximately 11:00 A.M. (Charlotte time) two (2) Business Days before such Loan is made or continued (or to be made or continued), as such Dollar Amount may be adjusted from time to time pursuant to Sections 3.8 or 3.9. When used with respect to any Sterling portion of a Loan being repaid or remaining outstanding at any time or with respect to any other sum expressed in Sterling, "Dollar Amount" shall mean the amount of Dollars which is equivalent to the principal amount of such Loan, or the amount so expressed in Sterling, at the most favorable spot exchange rate determined by the Administrative Agent to be available to it for the sale of Dollars for Sterling at the relevant time. Sterling amounts of Loans made, continued or denominated in Dollars (to the extent used herein) shall be determined by the Administrative Agent in a manner consistent with this definition. "DOMESTIC BORROWER" means the collective reference to each Borrower which is organized under the laws of any State of the United States or the District of Columbia. "DTI" means the Department of Trade and Industry of the United Kingdom or any successor Governmental Authority. "ELIGIBLE ASSIGNEE" means, with respect to any assignment of the rights, interest and obligations of a Lender hereunder, a Person that is at the time of such assignment (a) a commercial bank organized under the laws of the United States or any state thereof, having combined capital and surplus in excess of $500,000,000, (b) a finance company, insurance company or other financial institution which in the ordinary course of business extends credit of the type extended hereunder and that has total assets in excess of $1,000,000,000, (c) already a Lender hereunder (whether as an original party to this Agreement or as the assignee of another Lender), and (d) the successor (whether by transfer of assets, merger or otherwise) to all or substantially all of the commercial lending business of the assigning Lender, and, in the case of (a), (b) or any other Person, has been approved in writing as an Eligible Assignee by ACC and the Managing Agents. "EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the meaning of Section 3(3) of ERISA which (a) is maintained for employees of ACC or any ERISA Affiliate or (b) has at any time within the preceding six years been maintained for the employees of ACC or any current or former ERISA Affiliate. "ENVIRONMENTAL LAWS" means any and all federal, state, provincial and local laws, statutes, ordinances, rules, regulations, permits, licenses, approvals, interpretations and orders of courts or Governmental Authorities, relating to the protection of human health or the environment, including, but not limited to, requirements pertaining to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation, handling, reporting, licensing, permitting, investigation or remediation of Hazardous Materials. "ERISA" means the Employee Retirement Income Security Act of 1974, and the rules and regulations thereunder, each as amended or modified from time to time. "ERISA AFFILIATE" means any Person who together with the ACC is treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA. "ESCROW JOINDER AGREEMENT" means the Escrow Joinder Agreement dated July __, 1995, as amended or modified, executed by the Administrative Agent, ACC, ACC Canada and The R-M Trust Company, as trustee, with respect to the shares of ACC Canada pledged pursuant to the ACC Corp. Pledge Agreement. "EVENT OF DEFAULT" means any of the events specified in Section 11.1, provided that any requirement for passage of time, giving of notice, or any other condition, has been satisfied. "EXCESS CASH FLOW" means, for any Fiscal Year of ACC and its Subsidiaries commencing with Fiscal Year 1996, the following calculated on a Consolidated basis without duplication for such period in accordance with GAAP: (a) Operating Cash Flow for such period PLUS Net Working Capital for such period (if negative), LESS (b) the sum of (i) Fixed Charges for such period, (ii) Net Working Capital for such period (if positive) and (iii) any payments to the Managing Agents pursuant to the Contingent Interest Agreement during such period. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "FCC" means the Federal Communications Commission or any successor Governmental Authority. "FEDERAL FUNDS RATE" means, for any day, a fluctuating interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published at 11:00 a.m. (Charlotte time) for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "FIRST UNION" means First Union National Bank of North Carolina, a national banking association, and its successors. "FISCAL YEAR" means the fiscal year of ACC and its Subsidiaries ending on December 31. "FIXED CHARGES" means, with respect to ACC and its Subsidiaries, for any period, the following without duplication, each calculated for such period in accordance with GAAP: (a) all principal payments or similar amounts required to be paid with respect to Total Debt during such period PLUS (b) Interest Expense required to be paid during such period PLUS (c) total cash dividends or distributions paid or payable by ACC during such period (excluding cash dividends on the Preferred Stock which accrued but were not paid during such period) PLUS (d) all payments in respect of any retirement, redemption or other acquisition of the capital stock of ACC and its Subsidiaries consummated during such period PLUS (e) all Capital Expenditures during such period PLUS (f) all income and franchise taxes paid or payable in cash during such period. "FLEET NOTE AND WARRANT PURCHASE AGREEMENT" means the Note and Warrant Purchase Agreement dated May 22, 1995 by and among ACC, Fleet Venture Resources, Inc., Fleet Equity Partners VI, L.P., and Chisholm Partners II, L.P., as in effect on the Closing Date. "FLEET VENTURE NOTES" means each Convertible Subordinated Promissory Note issued pursuant to the Fleet Note and Warrant Purchase Agreement. "FLEET VENTURE SUBORDINATION AGREEMENT" means the Subordination Agreement of even date executed by the holders of the Fleet Venture Notes in favor of the Administrative Agent for the benefit of the Lenders, as amended or modified. "GAAP" means generally accepted accounting principles, as recognized by the American Institute of Certified Public Accountants and the Financial Accounting Standards Board, consistently applied and maintained on a consistent basis for ACC and its Subsidiaries throughout the period indicated. "GOVERNMENTAL APPROVALS" means all authorizations, consents, approvals, licenses and exemptions of, registrations and filings with, and reports to, all Governmental Authorities, including without limitation all Communications Licenses and PUC Authorizations. "GOVERNMENTAL AUTHORITY" means any nation, province, state or political subdivision thereof, and any government or any Person exercising executive, legislative, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing, including without limitation the FCC, CRTC, DTI and any PUC. "GUARANTEED OBLIGATIONS" shall have the meaning assigned thereto in Section 10.1. "GUARANTOR" means ACC in its capacity as guarantor under Article X hereof. "GUARANTY" means the unconditional guaranty agreement of ACC set forth in Article X hereof. "HAZARDOUS MATERIALS" means any substances or materials (a) which are or become defined as hazardous wastes, hazardous substances, pollutants, contaminants or toxic substances under any Environmental Law, (b) which are toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to human health or the environment and are or become regulated by any Governmental Authority, (c) the presence of which require investigation or remediation under any Environmental Law or common law, (d) the discharge or emission or release of which requires a permit or license under any Environmental Law or other Governmental Approval, (e) which are deemed to constitute a nuisance, a trespass or pose a health or safety hazard to persons or neighboring properties, (f) which are materials consisting of underground or aboveground storage tanks, whether empty, filled or partially filled with any substance or (g) which contain, without limitation, asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived substances or waste, crude oil, nuclear fuel, natural gas or synthetic gas. "HEDGING AGREEMENT" means any agreement with respect to an interest rate swap, collar, cap, floor or a forward rate agreement or other agreement regarding the hedging of interest rate or currency risk exposure executed in connection with hedging the interest rate or currency exposure of the Borrowers, and any confirming letter executed pursuant to such hedging agreement, all as amended or modified. "INTERCOMPANY SUBORDINATION AGREEMENT" means the Subordination Agreement of even date substantially in the form of EXHIBIT K, as amended or modified, executed by the Borrowers and other Subsidiaries party thereto with respect to the loans by ACC to such Persons under the Canadian Note Documents and as described on SCHEDULE 9.4. "INTEREST EXPENSE" means, with respect to ACC and its Subsidiaries for any period, total interest expense of ACC and its Subsidiaries (including without limitation, interest expense attributable to Capital Leases and any other capitalized interest expense) and, to the extent not included therein, fees and other charges payable with respect to all Debt, (including fees and charges payable with respect to Hedging Agreements, letters of credit and similar investments), all determined on a Consolidated basis for such period in accordance with GAAP. "INTEREST PERIOD" shall have the meaning assigned thereto in Section 3.1(b). "JOINDER AGREEMENT" means a Joinder Agreement substantially in the form of EXHIBIT J executed by each Material Subsidiary in accordance with Section 7.12, as amended or modified. "LANDLORD CONSENTS" means the Landlord Agreements substantially in the form of EXHIBIT H or any similar agreement delivered by or on behalf of a Borrower and executed by the owner of the parcels of real property with respect to which a Mortgage or other Security Document has been executed in favor of the Administrative Agent for the benefit of itself and the Lenders, as any such Agreement may be amended or modified. "LENDER" means each Person executing this Agreement as a Lender set forth on the signature pages hereto and each Person that hereafter becomes a party to this Agreement as a Lender pursuant to Section 13.10. "LENDING OFFICE" means, with respect to any Lender, the office of such Lender maintaining such Lender's Commitment Percentage of the Loans. "LEVERAGE RATIO" shall have the meaning assigned thereto in Section 8.1. "LIBOR" means the rate of interest determined on the basis of the rate for deposits in Dollars in minimum amounts of at least $5,000,000 (or the Dollar Amount thereof with respect to a borrowing to be made in Sterling) for a period equal to the applicable Interest Period appearing on Telerate Page 3750 as of 11:00 a.m. (London time) two Business Days prior to the first day of the applicable Interest Period. In the event that such rate does not appear on Telerate Page 3750, "LIBOR" shall be determined by the Administrative Agent to be the arithmetic average (rounded upward, if necessary, to the nearest one- sixteenth of one percent (1/16%)) of the rate per annum at which deposits in the Permitted Currency in which the Loan bearing interest based upon such rate is denominated would be offered by first class banks in the London interbank market to the Administrative Agent (or the Administrative Agent's Correspondent) at approximately 11:00 a.m. (London time) two Business Days prior to the first day of the applicable Interest Period for a period equal to such Interest Period and in an amount substantially equal to the amount of the applicable Loan. "LIBOR RATE" means (a) LIBOR DIVIDED BY (b) one (1) LESS the Reserve Percentage. "LIBOR RATE LOAN" means any Loan bearing interest at a rate determined with reference to the LIBOR Rate as provided in Section 3.1(a) hereof. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, Capital Lease or other title retention agreement relating to such asset. "LOAN" means any revolving loan made to the Borrower pursuant to Section 2.1, and all such Loans collectively as the context requires. "LOAN DOCUMENTS" means, collectively, this Agreement, the Notes, the Contingent Interest Agreement, any Joinder Agreement, the Security Documents and any supplements thereto executed in connection with any Joinder Agreement, any Hedging Agreement executed by any Lender, the Subordination Agreements, the Canadian Note Documents and each other document, instrument and agreement executed and delivered by any Borrower, a Subsidiary thereof or their counsel in connection with this Agreement or otherwise referred to herein or contemplated hereby, all as may be amended or modified from time to time. "MANAGING AGENTS" means First Union and Shawmut in their capacity as managing agents hereunder, and any successor thereto in each case appointed pursuant to Section 12.9; each, a "Managing Agent." "MATERIAL ADVERSE EFFECT" means, with respect to ACC or any of its Subsidiaries, a material adverse effect on the properties, business, prospects, operations or condition (financial or otherwise) of any such Person or the ability of any such Person to perform its obligations under the Loan Documents to which it is a party. "MATERIAL CONTRACT" means (a) any contract or other agreement, written or oral, of a Borrower or any of its Subsidiaries involving monetary liability of or to any such Person in an amount in excess of $250,000 per annum, or (b) any other contract or agreement, written or oral, of a Borrower or any of its Subsidiaries the failure to comply with which could reasonably be expected to have a Material Adverse Effect. "MATERIAL SUBSIDIARY" means any direct or indirect Subsidiary of ACC which Subsidiary has total assets equal to or in excess of $1,000,000 and in which a Borrower or Subsidiary has made an investment of equal to or in excess of $1,000,000. "MORTGAGE" means a Leasehold Mortgage substantially in the form of EXHIBIT I or any other real property security agreement delivered by a Borrower pursuant to which a Borrower grants a Lien on its interest in a parcel of real property to the Administrative Agent for the benefit of itself and the Lenders. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which ACC or any ERISA Affiliate is making, or is accruing an obligation to make, contributions within the preceding six years. "NET INCOME" means, with respect to ACC and its Subsidiaries for any period, the Consolidated net income (or loss) of ACC and its Subsidiaries for such period determined in accordance with GAAP; PROVIDED, that there shall be excluded from net income (or loss) (a) if the ability of ACC to receive, recover or repatriate cash or receive the economic benefits (other than any increase in value of ACC's stock or ownership interest in a Subsidiary thereof) from any of its Subsidiaries is materially limited or restricted for a material period of time at any date of determination by operation of the terms of the charter of such Subsidiary or any agreement, instrument, or Applicable Law, the portion of the income of each such Subsidiary so restricted and (b) the effect of any currency translation adjustments. "NET CASH PROCEEDS" means, as applicable, (a) with respect to any sale of assets, the gross cash proceeds received by ACC or any of its Subsidiaries from such sale LESS the sum of (i) all legal, title, recording, transfer and income tax expenses, commissions and similar fees and expenses incurred, and all other federal, state, local and foreign taxes assessed, in connection therewith and (ii) the principal amount of, premium, if any, and interest on any Debt secured by a Lien on the asset (or a portion thereof) sold, which Debt is required to be repaid in connection with such sale of assets, (b) with respect to any offering of capital stock or Debt securities, the gross cash proceeds received by ACC or any of its Subsidiaries therefrom LESS all legal, underwriting and similar fees and expenses incurred in connection therewith and (c) with respect to any payment under an insurance policy, the amount of cash proceeds received by ACC or its applicable Subsidiary from the related insurance company. "NET WORKING CAPITAL" means, with respect to ACC and its Subsidiaries for any period, (a) Working Capital as of the last day of such period LESS (b) Working Capital as of the day prior to the first day of such period. "NET WORTH" means, at any date of determination thereof, the sum of the capital stock (excluding treasury stock, cumulative translation adjustments and capital stock subscribed and unissued) and retained earnings (including earned surplus, capital surplus and the balance of the current profit and loss account not transferrable to retained earnings) accounts of ACC and its Subsidiaries appearing on a Consolidated balance sheet of ACC and its Subsidiaries prepared in accordance with GAAP. "NETWORK AGREEMENT" means any document or agreement entered into by ACC or any of its Subsidiaries regarding the use, operation, maintenance or otherwise concerning any of the Network Facilities. "NETWORK FACILITIES" means the network of digital or analog facilities owned or leased by ACC or any of its Subsidiaries. "NOTES" means the separate Revolving Credit Notes made by the applicable Borrower or Borrowers payable to the order of each Lender, substantially in the form of EXHIBIT A-1 hereto with respect to the Domestic Borrowers and EXHIBIT A-2 hereto with respect to the U.K. Borrowers, evidencing the Credit Facility, and any amendments and modifications thereto, any substitutes therefor, and any replacements, restatements, renewals or extension thereof, in whole or in part; "Note" means any of such Notes. "NOTICE OF BORROWING" shall have the meaning assigned thereto in Section 2.2(a). "NOTICE OF CONVERSION/CONTINUATION" shall have the meaning assigned thereto in Section 3.2. "OBLIGATIONS" means, in each case, whether now in existence or hereafter arising: (a) the principal of and interest on (including interest accruing after the filing of any bankruptcy or similar petition) the Loans, (b) all payment and other net obligations owing by a Borrower to any Lender or Agent under any Hedging Agreement and (c) all other fees and commissions (including attorney's fees), charges, indebtedness, loans, liabilities, financial accommodations, obligations, covenants and duties owing by a Borrower to the Lenders or to any Agent, of every kind, nature and description, direct or indirect, absolute or contingent, due or to become due, contractual or tortious, liquidated or unliquidated, and whether or not evidenced by any note, and whether or not for the payment of money under or in respect of this Agreement, any Note or any of the other Loan Documents. "OFFICER'S COMPLIANCE CERTIFICATE" shall have the meaning assigned thereto in Section 6.2. "OPERATING CASH FLOW" means, with respect to ACC and its Subsidiaries for any period, the following, each calculated on a Consolidated basis for such period without duplication in accordance with GAAP: (a) Net Income, PLUS (b) to the extent deducted in determining Net Income (i) income and franchise taxes, (ii) Interest Expense and (iii) amortization and depreciation and other similar non-cash charges LESS (c) the sum of (i) interest income, (ii) non-cash income, (iii) capitalized costs and expenses and (iv) any items of gain (or PLUS any non-cash items of loss) which were included in determining Net Income and were not realized in the ordinary course of business. For purposes of calculating compliance with Article VIII, Operating Cash Flow shall be adjusted in a manner reasonably satisfactory to the Managing Agents to include as of the first day of any calculation period any acquisition consummated during such period in accordance with this Agreement and exclude as of the first day of any calculation period any Subsidiary or assets sold in accordance with this Agreement during such period. "OTHER TAXES" shall have the meaning assigned thereto in Section 3.13(b). "PBGC" means the Pension Benefit Guaranty Corporation or any successor agency. "PENSION PLAN" means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of the Code and which (a) is maintained for employees of ACC or any ERISA Affiliates or (b) has at any time within the preceding six years been maintained for the employees of ACC or any of their current or former ERISA Affiliates. "PERMITTED CURRENCY" means Dollars or Sterling, or each such currency, as the context requires. "PERSON" means an individual, corporation, partnership, association, trust, business trust, limited liability company, joint venture, joint stock company, pool, syndicate, sole proprietorship, unincorporated organization, Governmental Authority or any other form of entity or group. "PLEDGE AGREEMENT" means the collective reference to the ACC Pledge Agreement and ACC National Pledge Agreement, or either such Pledge Agreement, as the context requires. "PREFERRED STOCK" means the Series A Preferred Stock of ACC governed by and issued in accordance with the terms set forth in the Certificate of Designation attached as EXHIBIT D to the Fleet Note and Warrant Purchase Agreement. "PRIME RATE" means, at any time, the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate. Each change in the Prime Rate shall be effective as of the opening of business on the day such change in the Prime Rate occurs. The parties hereto acknowledge that the rate announced publicly by the Administrative Agent as its Prime Rate is an index or base rate and shall not necessarily be its lowest or best rate charged to its customers or other banks. "PRO FORMA DEBT SERVICE" means, with respect to ACC and its Subsidiaries at any date of determination, the sum of the following calculated without duplication on a Consolidated PRO FORMA basis for the period of four (4) consecutive fiscal quarters immediately succeeding such date of determination in accordance with GAAP: (a) all payments of principal or similar amounts required to be paid with respect to Total Debt during such period based upon the aggregate amount of outstanding Debt on such date of determination and (b) Interest Expense required to be paid during such period based upon rates of interest in effect on such date of determination. "PROJECTIONS" shall have the meaning assigned thereto in Section 6.1(c). "PUC" means any state, provincial or other local regulatory agency or body that exercises jurisdiction over the rates or services or the ownership, construction or operation of any Network Facility or long distance telecommunications systems or over Persons who own, construct or operate a Network Facility or long distance telecommunications systems, in each case by reason of the nature or type of the business subject to regulation and not pursuant to laws and regulations of general applicability to Persons conducting business in any such jurisdiction. "PUC AUTHORIZATIONS" means all applications, filings, reports, documents, recordings and registrations with, and all validations, exemptions, franchises, waivers, approvals, orders or authorizations, consents, licenses, certificates and permits from any PUC. "REGISTER" shall have the meaning assigned thereto in Section 13.10(d). "REQUIRED LENDERS" means, at any date, any combination of Lenders whose Commitment Percentages aggregate at least sixty-six and two-thirds percent (66- 2/3%) or, if the Commitments have been terminated, the holders of at least sixty-six and two-thirds percent (66-2/3%) of the aggregate principal amount of the Notes. "RESERVE PERCENTAGE" means the maximum daily arithmetic reserve requirement imposed by the Board of Governors of the Federal Reserve System (or any successor) under Regulation D on Eurocurrency liabilities (as defined in Regulation D) for the applicable Interest Period as of the first day of such Interest Period, but subject to any changes in such reserve requirement becoming effective during the Interest Period. For purposes of calculating the Reserve Percentage, the reserve requirement shall be as set forth in Regulation D without benefit of credit for prorations, exemptions or offsets under Regulation D, and further without regard to whether or not any Lender elects to actually fund any Loan or portion thereof with Eurocurrency liabilities. Each calculation by the Administrative Agent of the LIBOR Rate shall be conclusive and binding for all purposes, absent manifest error. "SECURITY AGREEMENT" means the Security Agreement of even date substantially in the form of EXHIBIT G executed by the Domestic Borrowers in favor of the Administrative Agent for the benefit of itself and the Lenders, as amended or modified. "SECURITY DOCUMENTS" means the collective reference to the Security Agreement, the Trademark Assignment, the Pledge Agreements, the Landlord Consents, the Mortgages, the Canadian Subsidiary Security Documents, the ACC U.K. Security Documents, the Escrow Joinder Agreement and each other agreement or writing pursuant to which ACC or any Subsidiary thereof pledges or grants a security interest in the Collateral or such Person guaranties the payment and/or performance of the Obligations. "SHAWMUT" means Shawmut Bank Connecticut, N.A., a national banking association, and its successors. "SOLVENT" means, as to ACC and its Subsidiaries taken on a Consolidated basis on a particular date, that such Persons (a) have capital sufficient to carry on their business and transactions and all business and transactions in which they are about to engage and are able to pay their debts as they mature, (b) own property having a value at fair valuation greater than the amount required to pay their probable liabilities (including contingencies), and (c) do not believe that they will incur debts or liabilities beyond their ability to pay such debts or liabilities as they mature. "STERLING" means pounds sterling in the lawful currency of the United Kingdom. "SUBLIMIT" means the maximum aggregate amount of Loans available at any time to the applicable Borrower or group of Borrowers hereunder as set forth on SCHEDULE 1.2. If a Sublimit on such Schedule applies to more than one Borrower, such Sublimit shall be in the aggregate amount available to all such Borrowers taken together, and not an amount available to each such Borrower individually. "SUBORDINATED DEBT" means any Debt designated as Subordinated Debt on SCHEDULE 5.1(T) hereof and any other Debt of ACC or any Subsidiary subordinated in right and time of payment to the Obligations on terms reasonably satisfactory to the Required Lenders. "SUBORDINATION AGREEMENTS" means the collective reference to the Fleet Venture Subordination Agreement and the Intercompany Subordination Agreement, or either such agreement, as the context requires. "SUBSIDIARY" means as to any Person, any corporation, partnership or other entity of which more than fifty percent (50%) of the outstanding capital stock or other ownership interests having ordinary voting power to elect a majority of the board of directors or other managers of such corporation, partnership or other entity is at the time, directly or indirectly, owned by or the management is otherwise controlled by such Person (irrespective of whether, at the time, capital stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency). Unless otherwise qualified, references to "Subsidiary" or "Subsidiaries" herein shall refer to those of ACC. "TAXES" shall have the meaning assigned thereto in Section 3.13(a). "TERMINATION DATE" means the earliest of the dates referred to in Section 2.6. "TERMINATION EVENT" means: (a) a "Reportable Event" described in Section 4043 of ERISA (other than a Reportable Event as to which the provision of 30 days notice has been waived by the PBGC under applicable regulations); or (b) the withdrawal of ACC or any ERISA Affiliate from a Pension Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA; or (c) the termination of a Pension Plan, the filing of a notice of intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a distress termination under Section 4041(c) of ERISA; or (d) the institution of proceedings to terminate, or the appointment of a trustee with respect to, any Pension Plan by the PBGC; or (e) any other event or condition which would constitute grounds under Section 4042(a) of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; or (f) the partial or complete withdrawal of ACC or any ERISA Affiliate from a Multiemployer Plan; or (g) the imposition of a Lien pursuant to Section 412 of the Code or Section 302 of ERISA; or (h) any event or condition which results in the reorganization or insolvency of a Multiemployer Plan under Sections 4241 or 4245 of ERISA; or (i) any event or condition which results in the termination of a Multiemployer Plan under Section 4041A of ERISA or the institution by PBGC of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA. "TOTAL DEBT" means, with respect to ACC and its Subsidiaries at any date of determination and without duplication, all Debt of ACC and its Subsidiaries on a Consolidated basis. "TRADEMARK ASSIGNMENT" means the Trademark Assignment of even date executed by ACC in favor of the Administrative Agent for the benefit of itself and the Lenders, as amended or modified. "UCC" means the Uniform Commercial Code as in effect in the State of North Carolina. "U.K. BORROWERS" means the collective reference to each Borrower organized under the laws of the United Kingdom or any political subdivision thereof. "UNITED STATES" means the United States of America. "WHOLLY-OWNED" means, with respect to a Subsidiary, a Subsidiary all of the shares of capital stock or other ownership interests of which are, directly or indirectly, owned or controlled by ACC and/or one or more of its Wholly- Owned Subsidiaries. "WORKING CAPITAL" means, with respect to ACC and its Subsidiaries at any date, the difference between current assets and current liabilities as of such date determined in accordance with GAAP. SECTION 1. GENERAL. All terms of an accounting nature not specifically defined herein shall have the meaning assigned thereto by GAAP. Unless otherwise specified, a reference in this Agreement to a particular section, subsection, Schedule or Exhibit is a reference to that section, subsection, Schedule or Exhibit of this Agreement. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter. Any reference herein to "Charlotte time" shall refer to the applicable time of day in Charlotte, North Carolina. SECTION 2. OTHER DEFINITIONS AND PROVISIONS. (a) USE OF CAPITALIZED TERMS. Unless otherwise defined therein, all capitalized terms defined in this Agreement shall have the defined meanings when used in this Agreement, the Notes and the other Loan Documents or any certificate, report or other document made or delivered pursuant to this Agreement. (b) MISCELLANEOUS. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. ARTICLE II REVOLVING CREDIT FACILITY SECTION 1. REVOLVING CREDIT LOANS. Subject to the terms and conditions of this Agreement, each Lender severally agrees to make Loans in a Permitted Currency to the applicable Borrower or Borrowers from time to time from the Closing Date through the Termination Date as requested by such Borrower or Borrowers in accordance with the terms of Sections 2.1 and 2.2; PROVIDED, that, based upon the Dollar Amount of any Loans denominated in Dollars and the Current Dollar Equivalent of any Loans denominated in Sterling, (a) the maximum amount of Loans available to each Borrower at any time hereunder shall not exceed the Sublimit applicable to such Borrower, (b) the aggregate principal amount of all outstanding Loans (after giving effect to any amount requested) shall not exceed the Aggregate Commitment and (c) the principal amount of outstanding Loans from any Lender to the Borrowers shall not at any time exceed such Lender's Commitment. Each Loan by a Lender shall be in a principal amount equal to such Lender's Commitment Percentage of the aggregate principal amount of Loans requested on such occasion. Loans to be made in Sterling shall be funded in an amount equal to the Dollar Amount of such Loan. Loans to the Domestic Borrowers shall be denominated in Dollars and Loans to the U.K. Borrowers shall be denominated in Sterling. Subject to the terms and conditions hereof, the Borrowers may borrow, repay and reborrow Loans hereunder until the Termination Date. SECTION 1.2 PROCEDURE FOR ADVANCES OF LOANS. (a) REQUESTS FOR BORROWING. The applicable Borrower or Borrowers shall give the Administrative Agent irrevocable prior written notice in the form attached hereto as EXHIBIT B (a "Notice of Borrowing") not later than 11:00 a.m. (Charlotte time) (i) on the same Business Day as each Base Rate Loan and (ii) at least three (3) Business Days before each LIBOR Rate Loan, of its intention to borrow, specifying (A) the date of such borrowing, which shall be a Business Day, (B) whether such Loan shall be denominated in Dollars or in Sterling, (C) the amount of such borrowing, which shall be with respect to LIBOR Rate Loans denominated in Dollars in an aggregate principal amount of $2,500,000 or a whole multiple of $1,000,000 in excess thereof (and with respect to Loans denominated in Sterling, the Dollar Amount in each case thereof), and with respect to Base Rate Loans in an aggregate principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof, (D) if denominated in Dollars, whether the Loans are to be LIBOR Rate Loans or Base Rate Loans and (E) in the case of a LIBOR Rate Loan, the duration of the Interest Period applicable thereto. Notices received after 11:00 a.m. (Charlotte time) shall be deemed received on the next Business Day. The Administrative Agent shall promptly notify the Lenders of each Notice of Borrowing. (b) DISBURSEMENT OF LOANS DENOMINATED IN DOLLARS. Not later than 1:00 p.m. (Charlotte time) on the proposed borrowing date for any Loan denominated in Dollars, each Lender will make available to the Administrative Agent, for the account of the applicable Borrower or Borrowers, at the office of the Administrative Agent in Dollars in funds immediately available to the Administrative Agent, such Lender's Commitment Percentage of the requested borrowing. The Borrowers hereby irrevocably authorize the Administrative Agent to disburse the proceeds of each borrowing requested pursuant to this Section 2.2(b) in immediately available funds by crediting such proceeds to a deposit account of the applicable Borrower or Borrowers maintained with the Administrative Agent or by wire transfer from such deposit account to another account as may be requested by such Borrower or Borrowers by prior written notice to the Administrative Agent. (c) DISBURSEMENT OF LOANS DENOMINATED IN STERLING. Not later than 1:00 p.m. (the time of the Administrative Agent's Correspondent) on the proposed borrowing date for any Loan denominated in Sterling, each Lender will make available to the Administrative Agent at the office of the Administrative Agent's Correspondent in Sterling in funds immediately available to the Administrative Agent, such Lender's Commitment Percentage of the requested borrowing to be denominated in Sterling. The Borrowers hereby irrevocably authorize the Administrative Agent to disburse the proceeds of each borrowing requested pursuant to this Section 2.2(b) in immediately available funds by crediting such proceeds to an account of the applicable Borrower maintained with the Administrative Agent's Correspondent or by wire transfer from such deposit account to another account as may be requested by such Borrower by prior written notice to the Administrative Agent. (d) AVAILABILITY. Subject to Section 3.6 hereof, the Administrative Agent shall not be obligated to disburse the proceeds of any Loan requested pursuant to this Section 2.2 until each Lender shall have made available to the Administrative Agent its Commitment Percentage of such Loan. SECTION 1.3 REPAYMENT OF LOANS. (e) REPAYMENT ON TERMINATION DATE. Each Borrower shall repay the outstanding principal amount of all Loans made to such Borrower in full, together with all accrued but unpaid interest thereon, on the Termination Date. (f) MANDATORY REPAYMENT OF EXCESS LOANS. If at any time the outstanding principal amount of all Loans exceeds the Aggregate Commitment, such excess shall be repaid by the applicable Borrower or Borrowers in accordance with Section 3.8. (g) CERTAIN ASSET SALES. The Net Cash Proceeds received by any Borrower in connection with any asset sale described in Section 9.6 (other than Section 9.6(d)) shall be used within three (3) Business Days of receipt thereof to prepay all outstanding Loans on a PRO RATA basis under each Sublimit. (h) EQUITY OFFERING. Prior to June 30, 1997, the Net Cash Proceeds received by any Borrower from any offering of equity securities shall be used within three (3) Business Days of receipt thereof to prepay all outstanding Loans on a PRO RATA basis under each Sublimit. (i) CANADIAN SUBSIDIARIES. ACC Corp. shall prepay the Loans in an amount equal to the Net Cash Proceeds received by a Canadian Subsidiary (i) under the business interruption insurance policy of any such Person with respect to any claim pending on the date hereof and (ii) in connection with any equity offering described in Section 2.3(d). Each such repayment shall be used within three (3) Business Days of receipt thereof to prepay all outstanding Loans on a PRO RATA basis under each Sublimit. (j) OPTIONAL REPAYMENTS. Any applicable Borrower may at any time and from time to time repay the Loans made thereto, in whole or in part, upon at least three (3) Business Days' irrevocable notice to the Administrative Agent with respect to LIBOR Rate Loans and one (1) Business Day irrevocable notice with respect to Base Rate Loans, specifying the date and amount of repayment and whether the repayment is of LIBOR Rate Loans or Base Rate Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each. Upon receipt of such notice, the Administrative Agent shall promptly notify each Lender. If any such notice is given, the amount specified in such notice shall be due and payable on the date set forth in such notice. Partial repayments shall be in an aggregate amount of $2,500,000 or a whole multiple of $1,000,000 in excess thereof with respect to LIBOR Rate Loans and $1,000,000 or a whole multiple of $500,000 in excess thereof with respect to Base Rate Loans. (k) LIMITATION ON REPAYMENT OF LIBOR RATE LOANS. No Borrower may repay any LIBOR Rate Loan hereunder on any day other than on the last day of the Interest Period applicable thereto unless such repayment is accompanied by any amount required to be paid pursuant to Section 3.11. (l) NO COMMITMENT REDUCTION. No repayment pursuant to this Section 2.3 shall require a corresponding permanent reduction in the Aggregate Commitment. SECTION 1.4 REVOLVING CREDIT NOTES. Each Lender's Loans and the obligation of each Borrower to repay the Loans made thereto shall be evidenced by the Note executed by such Borrower payable to the order of such Lender representing such Borrower's obligation to pay such Lender's Commitment Percentage of the Sublimit of such Borrower or, if less, the aggregate unpaid principal amount of all Loans made and to be made by such Lender to the Borrower hereunder, PLUS interest and all other fees, charges and other amounts due thereon. Each Note shall be dated the date hereof and shall bear interest on the unpaid principal amount thereof at the applicable interest rate per annum specified in Section 3.1. SECTION 1.5 PERMANENT REDUCTIONS OF THE AGGREGATE COMMITMENT. (m) The Borrowers shall have the right at any time and from time to time, upon at least five (5) Business Days prior written notice to the Administrative Agent, to permanently reduce, in whole at any time or in part from time to time, without premium or penalty, the Aggregate Commitment in an aggregate principal amount not less than $2,500,000 or any whole multiple of $1,000,000 in excess thereof. (n) The Aggregate Commitment shall be reduced by (i) the amount of Net Cash Proceeds received by any Borrower or Canadian Subsidiary (A) in connection with any asset sale not permitted by Section 9.6, (B) in an amount greater than $50,000 (or the equivalent thereof in any foreign currency) under any policy of insurance of any Borrower upon receipt of any such proceeds (other than as set forth in Section 2.3) and (C) as described in Section 2.3(d) on or after June 30, 1997 upon receipt thereof and (ii) within one hundred twenty (120) days after each Fiscal Year end commencing with Fiscal Year end 1996, an amount equal to seventy- five percent (75%) of Excess Cash Flow for such Fiscal Year as set forth on the Officer's Compliance Certificate for such Fiscal Year. (o) The Aggregate Commitment shall be permanently reduced by the following amounts on the corresponding dates as follows: Amount of Aggregate DATE REDUCTION COMMITMENT July 1, 1997 $2,450,000 $32,550,000 Oct. 1, 1997 2,450,000 30,100,000 Jan. 1, 1998 2,450,000 27,650,000 April 1, 1998 2,450,000 25,200,000 July 1, 1998 2,450,000 22,750,000 Oct. 1, 1998 2,450,000 20,300,000 Jan. 1, 1999 2,905,000 17,395,000 April 1, 1999 2,905,000 14,490,000 July 1, 1999 2,905,000 11,585,000 Oct. 1, 1999 2,905,000 8,680,000 Jan. 1, 2000 2,905,000 5,775,000 April 1, 2000 2,905,000 2,870,000 July 1, 2000 2,870,000 -0- (p) Each permanent reduction permitted or required pursuant to this Section 2.5 shall be accompanied by a payment of principal sufficient to reduce the aggregate outstanding Loans of the Lenders after such reduction to the Sublimits and Aggregate Commitment as so reduced and by payment of accrued interest on the amount of such repaid principal. The amount of each partial permanent reduction under this Section 2.5 shall be applied PRO RATA to reduce each Sublimit and the remaining mandatory reduction amounts required under Section 2.5(b). Any permanent reduction of the Aggregate Commitment to zero shall be accompanied by payment of all outstanding Obligations and termination of the Commitments and Credit Facility. If the reduction of the Aggregate Commitment requires the repayment of any LIBOR Rate Loan, such reduction may be made only on the last day of the then current Interest Period applicable thereto unless such repayment is accompanied by any amount required to be paid pursuant to Section 3.11. SECTION 2. TERMINATION OF CREDIT FACILITY. The Credit Facility shall terminate on the earliest of (a) July 1, 2000, (b) the date of termination by the Borrower pursuant to Section 2.5(a) and (c) the date of termination by the Administrative Agent on behalf of the Lenders pursuant to Section 11.2(a). SECTION 3. USE OF PROCEEDS. The Borrowers shall use the proceeds of the Loans (a) to finance the acquisition of Capital Assets, (b) to finance loans, advances, acquisitions and investments permitted by Section 9.4, (c) repay on the Closing Date existing Debt of the Borrowers and (d) for working capital and general corporate requirements of the Borrowers, including the payment of certain fees and expenses incurred in connection with the transactions contemplated hereby. SECTION 4. NATURE OF OBLIGATIONS; SECURITY. The obligations of the Domestic Borrowers under their Note and the other obligations of such Borrowers hereunder (other than the obligations of ACC as Guarantor) shall be joint and several among such Borrowers. The obligations of the U.K. Borrowers under their Note and the Obligations of such Borrowers hereunder shall be joint and several among such Borrowers, but in relation to the Domestic Borrowers, shall be several and not joint and several. The obligations of each Borrower shall be secured in accordance with the terms of the applicable Security Documents. ARTICLE III GENERAL LOAN PROVISIONS SECTION 3.1 INTEREST. (a) INTEREST RATE OPTIONS. Subject to the provisions of this Section 3.1, at the election of the applicable Borrower or Borrowers, Loans denominated in Dollars shall bear interest at the Base Rate or the LIBOR Rate PLUS, in each case, the Applicable Margin as set forth below and Loans denominated in Sterling shall bear interest at the LIBOR Rate PLUS the Applicable Margin as set forth below. The applicable Borrower or Borrowers shall select the rate of interest and Interest Period, if any, applicable to any Loan at the time a Notice of Borrowing is given pursuant to Section 2.2 or at the time a Notice of Conversion/Continuation is given pursuant to Section 3.2. Each Loan or portion thereof bearing interest based on the Base Rate shall be a "Base Rate Loan", and each Loan or portion thereof bearing interest based on the LIBOR Rate shall be a "LIBOR Rate Loan". Any Loan or any portion thereof to be denominated in Dollars as to which the applicable Borrower or Borrowers have not duly specified an interest rate as provided herein shall be deemed a Base Rate Loan. (b) INTEREST PERIODS. In connection with each LIBOR Rate Loan, the applicable Borrower or Borrowers, by giving notice at the times described in Section 3.1(a), shall elect an interest period (each, an "Interest Period") to be applicable to such Loan, which Interest Period shall be a period of one, two, three, or six months; PROVIDED that: (i) the Interest Period shall commence on the date of advance of or conversion to any LIBOR Rate Loan and, in the case of immediately successive Interest Periods, each successive Interest Period shall commence on the date on which the next preceding Interest Period expires; (ii) if any Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; PROVIDED, that if any Interest Period would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; (iv) no Interest Period shall extend beyond the Termination Date and no Interest Period shall be selected by the Borrower which, in connection with mandatory reductions of the Aggregate Commitment pursuant to Section 2.5(b), would cause the early termination of such Interest Period; and (v) with respect to Loans denominated in Dollars, there shall be no more than three (3) Interest Periods outstanding at any time and with respect to Loans denominated in Sterling, there shall be no more than one (1) Interest Period for each such currency. (c) APPLICABLE MARGIN. The Applicable Margin provided for in Section 3.1(a) with respect to the Loans (the "Applicable Margin") shall (i) on the Closing Date equal the percentages set forth in the certificate delivered pursuant to Section 4.2(e)(ii) and (ii) for each fiscal quarter thereafter be determined by reference to the Leverage Ratio as of the end of the fiscal quarter immediately preceding the delivery of the applicable Officer's Compliance Certificate as follows: Applicable Margin Per Annum LEVERAGE RATIO BASE RATE + LIBOR RATE + Greater than 3.5 1.50% 2.95% to 1.0. Greater than 3.0 to 1.0 1.25% 2.75% but less than or equal to 3.5 to 1.0. Greater than 2.5 to 1.0 but0.75% 2.25% less than or equal to 3.0 to 1.0 Less than or equal to -0- 1.50% 2.5 to 1.0 Adjustments, if any, in the Applicable Margin shall be made by the Administrative Agent upon receipt by the Administrative Agent of quarterly financial statements for ACC and its Subsidiaries and the accompanying Officer's Compliance Certificate setting forth the Leverage Ratio of ACC and its Subsidiaries as of the most recent fiscal quarter end. Subject to Section 3.1(d), in the event the Borrower fails to deliver such financial statements and certificate within the time required by Section 6.2(c) hereof, the Applicable Margin shall be the highest Applicable Margin set forth above until the delivery of such financial statements and certificate. (d) DEFAULT RATE. Upon the occurrence and during the continuance of an Event of Default, (i) the Borrower shall no longer have the option to request LIBOR Rate Loans, (ii) all outstanding LIBOR Rate Loans shall bear interest at a rate per annum two percent (2%) in excess of the rate then applicable to LIBOR Rate Loans until the end of the applicable Interest Period and convert on such date to a Base Rate Loan and bear interest thereafter at a rate equal to two percent (2%) in excess of the rate then applicable to Base Rate Loans and (iii) all outstanding Base Rate Loans shall bear interest at a rate per annum equal to two percent (2%) in excess of the rate then applicable to Base Rate Loans. Interest shall continue to accrue on the Notes after the filing by or against any Borrower of any petition seeking any relief in bankruptcy or under any act or law pertaining to insolvency or debtor relief, whether state, federal or foreign. (e) INTEREST PAYMENT AND COMPUTATION. Interest on each Base Rate Loan shall be payable in arrears on the last Business Day of each calendar quarter commencing September 30, 1995, and interest on each LIBOR Rate Loan shall be payable on the last day of each Interest Period applicable thereto, and if such Interest Period extends over three (3) months, at the end of each three month interval during such Interest Period. All interest rates, fees and commissions provided hereunder shall be computed on the basis of a 360-day year and assessed for the actual number of days elapsed, except that interest with respect to each Base Rate Loan and the commitment fee referenced in Section 3.3(a) shall be computed on the basis of a 365- day year. (f) MAXIMUM RATE. In no contingency or event whatsoever shall the aggregate of all amounts deemed interest hereunder or under any of the Notes charged or collected pursuant to the terms of this Agreement or pursuant to any of the Notes exceed the highest rate permissible under any Applicable Law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that the Lenders have charged or received interest hereunder in excess of the highest applicable rate, the rate in effect hereunder shall automatically be reduced to the maximum rate permitted by Applicable Law and the Lenders shall at the Administrative Agent's option promptly refund to the applicable Borrower or Borrowers any interest received by Lenders in excess of the maximum lawful rate or shall apply such excess to the principal balance of the Obligations. It is the intent hereof that the Borrowers not pay or contract to pay, and that no Agent or any Lender receive or contract to receive, directly or indirectly in any manner whatsoever, interest in excess of that which may be paid by the Borrowers under Applicable Law. SECTION 3.2 NOTICE AND MANNER OF CONVERSION OR CONTINUATION OF LOANS. Provided that no Default or Event of Default has occurred and is then continuing, the Borrower shall have the option to (a) convert at any time all or any portion of its outstanding Base Rate Loans in a principal amount equal to $2,500,000 or any whole multiple of $1,000,000 in excess thereof into one or more LIBOR Rate Loans denominated in Dollars, (b) upon the expiration of any Interest Period, convert all or any part of its outstanding LIBOR Rate Loans denominated in Dollars in a principal amount equal to $1,000,000 or a whole multiple of $500,000 in excess thereof into Base Rate Loans or (c) upon the expiration of any Interest Period, continue any LIBOR Rate Loan in a principal amount of $2,500,000 or any whole multiple of $1,000,000 in excess thereof (or with respect to Loans denominated in Sterling, the Dollar Amount in each case thereof) as a LIBOR Rate Loan denominated in the same Permitted Currency. Whenever the Borrower desires to convert or continue Loans as provided above, the Borrower shall give the Administrative Agent irrevocable prior written notice in the form attached as EXHIBIT C (a "Notice of Conversion/Continuation") not later than 11:00 a.m. (Charlotte time) three (3) Business Days before the day on which a proposed conversion or continuation of such Loan is to be effective specifying (i) the Loans to be converted or continued, and, in the case of a LIBOR Rate Loan to be converted or continued, the Permitted Currency in which such Loan is denominated and the last day of the Interest Period therefor, (ii) the effective date of such conversion or continuation (which shall be a Business Day), (iii) the principal amount of such Loans to be converted or continued and (iv) the Interest Period to be applicable to such converted or continued LIBOR Rate Loan. The Administrative Agent shall promptly notify the Lenders of such Notice of Conversion/Continuation. SECTION 3.3 FEES. (a) COMMITMENT FEE. The Borrowers shall pay to the Administrative Agent, for the account of the Lenders, a non-refundable commitment fee at a rate per annum equal to .50% on the average daily unused portion of the Aggregate Commitment; PROVIDED, that (i) if the Leverage Ratio as set forth in the Officer's Compliance Certificate for any fiscal quarter is less than or equal to 2.5 to 1.0, the commitment fee payable with respect to such amount on the immediately succeeding payment date shall be .375% and (ii) until December 31, 1995, if any amount is unavailable to be borrowed hereunder solely because such borrowing would cause a violation of Section 8.1, the commitment fee payable with respect to such unavailable amount for the period of such unavailability shall be .250%. The commitment fee shall be payable in arrears on the last Business Day of each calendar quarter during the term of this Agreement commencing September 30, 1995, and on the Termination Date. Such commitment fee shall be distributed by the Administrative Agent to the Lenders PRO RATA in accordance with the Lenders' respective Commitment Percentages. (b) STRUCTURING AND UP-FRONT FEES. The Borrowers shall pay to the Administrative Agent, for the account of the Lenders, a non-refundable up- front fee and the unpaid portion of the structuring fee in accordance with the term sheet referred to in paragraph (c) of this Section. (c) ADMINISTRATIVE AGENT'S FEES. In order to compensate the Administrative Agent for its obligations hereunder, the Borrowers agree to pay to the Administrative Agent for its own account the administrative fee set forth in the term sheet executed by ACC dated June 6, 1995, which fee shall be payable in advance on the Closing Date and on each anniversary of such date. SECTION 3.4 MANNER OF PAYMENT. (a) LOANS DENOMINATED IN DOLLARS. Each payment (including repayments described in Article II) by any Borrower on account of the principal of or interest on the Loans denominated in Dollars or of any fee, commission or other amounts payable to the Lenders under this Agreement or any Note (except as set forth in Section 3.4(b)) shall be made in Dollars not later than 1:00 p.m. (Charlotte time) on the date specified for payment under this Agreement to the Administrative Agent for the account of the Lenders PRO RATA in accordance with their respective Commitment Percentages at the Administrative Agent's Office, in immediately available funds, and shall be made without any set-off, counterclaim or deduction whatsoever. Any payment received after such time but before 2:00 p.m. (Charlotte time) on such day shall be deemed a payment on such date for the purposes of Section 11.1, but for all other purposes shall be deemed to have been made on the next succeeding Business Day. Any payment received after 2:00 p.m. (Charlotte time) shall be deemed to have been made on the next succeeding Business Day for all purposes. (b) LOANS DENOMINATED IN STERLING. Each payment (including repayments described in Article II) by any Borrower on account of the principal of or interest on the Loans denominated in Sterling shall be made in Sterling not later than 1:00 p.m. (the time of the Administrative Agent's Correspondent) on the date specified for payment under this Agreement to the Administrative Agent's account with the applicable Administrative Agent's Correspondent for the account of the Lenders PRO RATA in accordance with their respective Commitment Percentages, in immediately available funds, and shall be made without any set-off, counterclaim or deduction whatsoever. Any payment received after such time but before 2:00 P.M. (the time of the Administrative Agent's Correspondent) on such day shall be deemed a payment on such date for the purposes of Section 11.1, but for all other purposes shall be deemed to have been made on the next succeeding Business Day. Any payment received after 2:00 P.M. (the time of the Administrative Agent's Correspondent) shall be deemed to have been made on the next succeeding Business Day for all purposes. (c) PRO RATA TREATMENT. Upon receipt by the Administrative Agent of each such payment, the Administrative Agent shall credit each Lender's account with its PRO RATA share of such payment in accordance with such Lender's Commitment Percentage and shall wire advice of the amount of such credit to each Lender. Each payment to the Administrative Agent of its fees shall be made in like manner, but for the account of the Administrative Agent. Subject to Section 3.1(b)(ii), if any payment under this Agreement or any Note shall be specified to be made upon a day which is not a Business Day, it shall be made on the next succeeding day which is a Business Day and such extension of time shall in such case be included in computing any interest if payable along with such payment. SECTION 3.5 CREDITING OF PAYMENTS AND PROCEEDS. Unless otherwise provided in the Security Agreement, in the event that any Borrower shall fail to pay any of the Obligations when due and the Obligations have been accelerated pursuant to Section 11.2, all payments received by the Lenders upon the Notes and the other Obligations and all net proceeds from the enforcement of the Obligations shall be applied first to all Administrative Agent's fees and expenses then due and payable, then to all other expenses then due and payable by the Borrowers hereunder, then to all indemnity obligations then due and payable by the Borrowers hereunder, then to all commitment and other fees and commissions then due and payable, then to accrued and unpaid interest on the Notes and any termination payments due in respect of a Hedging Agreement with any Lender (PRO RATA in accordance with all such amounts due), then to the principal amount of the Notes, in that order. SECTION 3.6 NATURE OF OBLIGATIONS OF LENDERS REGARDING EXTENSIONS OF CREDIT; ASSUMPTION BY ADMINISTRATIVE AGENT. The obligations of the Lenders under this Agreement to make the Loans are several and are not joint or joint and several. Unless the Administrative Agent shall have received notice from a Lender prior to a proposed borrowing date that such Lender will not make available to the Administrative Agent such Lender's ratable portion of the amount to be borrowed on such date (which notice shall not release such Lender of its obligations hereunder), the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the proposed borrowing date in accordance with Section 2.2 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If such amount is made available to the Administrative Agent on a date after such borrowing date, such Lender shall pay to the Administrative Agent on demand an amount, until paid, equal to (a) with respect to a Loan denominated in Dollars the amount of such Lender's Commitment Percentage of such borrowing and interest thereon at a rate per annum equal to the daily average Federal Funds Rate during such period as determined by the Administrative Agent and (b) with respect to a Loan denominated in Sterling, such Lender's Commitment Percentage of such borrowing at a rate per annum equal to the Administrative Agent's aggregate marginal cost (including the cost of maintaining any required reserves or deposit insurance and of any fees, penalties, overdraft charges or other costs or expenses incurred by the Administrative Agent as a result of the failure to deliver funds hereunder) of carrying such amount. A certificate of the Administrative Agent with respect to any amounts owing under this Section shall be conclusive, absent manifest error. If such Lender's Commitment Percentage of such borrowing is not made available to the Administrative Agent by such Lender within three (3) Business Days of such borrowing date, the Administrative Agent shall be entitled to recover such amount made available by the Administrative Agent with interest thereon at the rate per annum then applicable to such Loan hereunder, on demand, from the applicable Borrower or Borrowers. The failure of any Lender to make its Commitment Percentage of any Loan available shall not relieve it or any other Lender of its obligation, if any, hereunder to make its Commitment Percentage of such Loan available on such borrowing date, but no Lender shall be responsible for the failure of any other Lender to make its Commitment Percentage of such Loan available on the borrowing date. SECTION 3.7 MANDATORY REDENOMINATION OF STERLING LOANS. If any LIBOR Rate Loan denominated in Sterling is required to be converted to a Base Rate Loan pursuant to Sections 3.1(d), 3.10 or any other applicable provision hereof, such Base Rate Loan shall be funded in Dollars under the Sublimit of the Domestic Borrowers (excluding ACC LEC) in an amount equal to the Dollar Amount of such LIBOR Rate Loan, all subject to the provisions of Section 3.8. The applicable Borrower or Borrowers shall reimburse the Lenders upon any such conversion for any amounts required to be paid under Section 3.11. SECTION 3.8 CURRENCY APPRECIATION; SUBLIMITS; MANDATORY REDUCTIONS. (a) AGGREGATE COMMITMENTS. If at any time and for any reason, the aggregate principal amount of all Loans denominated in Dollars and the aggregate Current Dollar Equivalent of all Loans denominated in Sterling as of such time exceeds the Aggregate Commitment, the applicable Borrower or Borrowers shall (i) if (and to the extent) necessary to eliminate such excess, immediately repay outstanding Base Rate Loans, if any, by the Dollar Amount of such excess, and/or reduce any pending request for a Base Rate Loan on such day by the Dollar Amount of such excess, to the extent thereof and (ii) if (and to the extent) necessary to eliminate such excess, immediately repay LIBOR Rate Loans and/or reduce any pending requests for a borrowing or continuation or conversion of such Loans submitted in respect of such Loans on such day, by the Dollar Amount of such excess, to the extent thereof. (b) SUBLIMITS. If at any time and for any reason the aggregate principal amount of all Loans denominated in Dollars or the aggregate Current Dollar Equivalent of all Loans denominated in Sterling as of such time, exceeds the Sublimit applicable to any Borrower or Borrowers, such Borrower or Borrowers shall (i) immediately repay Base Rate Loans outstanding to such Borrower or Borrowers, if any, by the Dollar Amount of any such excess and/or reduce on such day any pending request for a Base Rate Loan submitted by such Borrower or Borrowers by the Dollar Amount of such excess, to the extent thereof and (ii) immediately repay LIBOR Rate Loans and/or reduce any pending requests for a borrowing or continuation or conversion submitted in respect of such Loans on such day, by the Dollar Amount of any remaining excess, to the extent thereof. (c) COMPLIANCE AND PAYMENTS. Each Borrower's compliance with this Section 3.8 shall be tested on each day an interest payment is due under Section 3.1(e). All payments pursuant to this Section 3.8 shall be accompanied by any amount required to be repaid under Section 3.11. SECTION 3.9 REGULATORY LIMITATION. In the event, as a result of increases in the value of Sterling against the Dollar or for any other reason, the obligation of any of the Lenders to make Loans (taking into account the Dollar Amount of the Obligations and all other indebtedness required to be aggregated under 12 USCA 84, as amended, the regulations promulgated thereunder and any other Applicable Law) is determined by such Lender to exceed its then applicable legal lending limit under 12 USCA 84, as amended, and the regulations promulgated thereunder, or any other Applicable Law, the amount of additional Loans such Lender shall be obligated to make hereunder shall immediately be reduced to the maximum amount which such Lender may legally advance (as determined by such Lender), the obligation of each of the remaining Lenders hereunder shall be proportionately reduced, based on their applicable Commitment Percentages, and, to the extent necessary under such laws and regulations (as determined by each of the Lenders, with respect to the applicability of such laws and regulations to itself), the Borrowers shall reduce, or cause to be reduced, complying to the extent practicable with the remaining provisions hereof, the Obligations outstanding hereunder by an amount sufficient to comply with such maximum amounts. SECTION 3.10 CHANGED CIRCUMSTANCES. (a) CIRCUMSTANCES AFFECTING LIBOR RATE AVAILABILITY. If with respect to any Interest Period the Administrative Agent or any Lender (after consultation with Administrative Agent) shall determine that (i) by reason of circumstances affecting the foreign exchange and interbank markets generally, deposits in eurodollars or Sterling, in the applicable amounts are not being quoted via Telerate Page 3750 or offered to the Administrative Agent or such Lender for such Interest Period, (ii) a fundamental change has occurred in the foreign exchange or interbank markets with respect to Sterling (including, without limitation, changes in national or international financial, political or economic conditions or currency exchange rates or exchange controls) or (iii) it has become otherwise materially impractical for the Administrative Agent or the Lenders, as applicable, to make such Loan in Sterling, then the Administrative Agent shall forthwith give notice thereof to the Borrowers. Thereafter, until the Administrative Agent notifies the Borrowers that such circumstances no longer exist, the obligation of the Lenders to make LIBOR Rate Loans, and the right of the Borrowers to convert any Loan to or continue any Loan as a LIBOR Rate Loan, shall be suspended, and the applicable Borrower or Borrowers shall repay in full (or cause to be repaid in full) the then outstanding principal amount of each such LIBOR Rate Loan, together with accrued interest thereon, on the last day of the then current Interest Period applicable to such LIBOR Rate Loan or convert the then outstanding principal amount of each such LIBOR Rate Loan to a Base Rate Loan as of the last day of such Interest Period. (b) LAWS AFFECTING LIBOR RATE AVAILABILITY. If, after the date hereof, the introduction of, or any change in, any Applicable Law or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or any of their respective Lending Offices) with any request or directive (whether or not having the force of law) of any such Authority, central bank or comparable agency, shall make it unlawful or impossible for any of the Lenders (or any of their respective Lending Offices) to honor its obligations hereunder to make or maintain any LIBOR Rate Loan, such Lender shall promptly give notice thereof to the Administrative Agent and the Administrative Agent shall promptly give notice to the Borrowers and the other Lenders. Thereafter, until Administrative Agent notifies the Borrowers that such circumstances no longer exist (which notification shall be given as soon as practicable, but in any event not later than thirty (30) days after the Administrative Agent obtains actual knowledge that such circumstances no longer exist), (i) the obligations of the Lenders to make LIBOR Rate Loans and the right of the Borrower to convert any Loan or continue any Loan as a LIBOR Rate Loan shall be suspended and thereafter the Borrower may select only Base Rate Loans hereunder, and (ii) if any of the Lenders may not lawfully continue to maintain a LIBOR Rate Loan to the end of the then current Interest Period applicable thereto as a LIBOR Rate Loan, the applicable LIBOR Rate Loan shall immediately be converted to a Base Rate Loan for the remainder of such Interest Period. (c) INCREASED COSTS. If, after the date hereof, the introduction of, or any change in, any Applicable Law, or in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any of the Lenders (or any of their respective Lending Offices) with any request or directive (whether or not having the force of law) of such Authority, central bank or comparable agency: (i) shall subject any of the Lenders (or any of their respective Lending Offices) to any tax, duty or other charge with respect to any LIBOR Rate Loan or any Note or shall change the basis of taxation of payments to any of the Lenders (or any of their respective Lending Offices) of the principal of or interest on any LIBOR Rate Loan or any Note or any other amounts due under this Agreement in respect thereof (except for changes in the rate of tax on the overall net income of any of the Lenders or any of their respective Lending Offices imposed by the jurisdiction in which such Lender is organized or is or should be qualified to do business or such Lending Office is located); or (ii) shall impose, modify or deem applicable any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), special deposit, insurance or capital or similar requirement against assets of, deposits with or for the account of, or credit extended by any of the Lenders (or any of their respective Lending Offices) or shall impose on any of the Lenders (or any of their respective Lending Offices) or the foreign exchange and interbank markets any other condition affecting any LIBOR Rate Loan or any Note; and the result of any of the foregoing is to increase the costs to any of the Lenders of maintaining any LIBOR Rate Loan or to reduce the yield or amount of any sum received or receivable by any of the Lenders under this Agreement or under the Notes in respect of a LIBOR Rate Loan, then such Lender shall promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify the Borrower of such fact and demand compensation therefor and, within fifteen (15) days after such notice by Administrative Agent, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or Lenders for such increased cost or reduction. The Administrative Agent will promptly notify the Borrower of any event of which it has knowledge which will entitle such Lender to compensation pursuant to this Section 3.10(c); PROVIDED, that the Administrative Agent shall incur no liability whatsoever to the Lenders or the Borrower in the event it fails to do so. A certificate of the Administrative Agent setting forth the basis for determining such additional amount or amounts necessary to compensate such Lender or Lenders shall be conclusively presumed to be correct save for manifest error. SECTION 3.11 INDEMNITY. The Borrower hereby indemnifies each of the Lenders against any loss or expense (including without limitation any foreign exchange costs) which may arise or be attributable to each Lender's obtaining, liquidating or employing deposits or other funds acquired to effect, fund or maintain the Loans (a) as a consequence of any failure by the Borrower to make any payment when due of any amount due hereunder in connection with a LIBOR Rate Loan, (b) due to any failure of the Borrower to borrow on a date specified therefor in a Notice of Borrowing or Notice of Continuation/Conversion with respect to any LIBOR Rate Loan or (c) due to any payment, prepayment or conversion of any LIBOR Rate Loan on a date other than the last day of the Interest Period therefor. Each Lender's calculations of any such loss or expense shall be furnished to the Borrower and shall be conclusive, absent manifest error. SECTION 3.12 CAPITAL REQUIREMENTS. If either (a) the introduction of, or any change in, or in the interpretation of, any Applicable Law or (b) compliance with any guideline or request from any central bank or comparable agency or other Governmental Authority (whether or not having the force of law), has or would have the effect of reducing the rate of return on the capital of, or has affected or would affect the amount of capital required to be maintained by, any Lender or any corporation controlling such Lender as a consequence of, or with reference to the Commitments and other commitments of this type, below the rate which the Lender or such other corporation could have achieved but for such introduction, change or compliance, then within five (5) Business Days after written demand by any such Lender, the Borrowers shall pay to such Lender from time to time as specified by such Lender additional amounts sufficient to compensate such Lender or other corporation for such reduction. A certificate as to such amounts submitted to the Borrowers and the Administrative Agent by such Lender, shall, in the absence of manifest error, be presumed to be correct and binding for all purposes. SECTION 3.13 TAXES. (a) PAYMENTS FREE AND CLEAR. Any and all payments by the Borrowers hereunder or under the Notes shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholding, and all liabilities with respect thereto excluding, (i) in the case of each Lender and each Agent, income and franchise taxes imposed by the jurisdiction under the laws of which such Lender or Agent (as the case may be) is organized or is or should be qualified to do business or any political subdivision of such jurisdiction or country which includes such jurisdiction and (ii) in the case of each Lender, income and franchise taxes imposed by the jurisdiction of such Lender's Lending Office or any political subdivision of such jurisdiction or country which includes such jurisdiction (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If any Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Lender or any Agent, (A) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.13) such Lender or Agent (as the case may be) receives an amount equal to the amount such party would have received had no such deductions been made, (B) such Borrower shall make such deductions, (C) such Borrower shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable law, and (D) such Borrower shall deliver to the Administrative Agent evidence of such payment to the relevant taxing authority or other authority in the manner provided in Section 3.13(d). (b) STAMP AND OTHER TAXES. In addition, the Borrowers shall pay any present or future stamp, registration, recordation or documentary taxes or any other similar fees or charges or excise or property taxes, levies of the United States or any state or political subdivision thereof or any applicable foreign jurisdiction which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, the Loans, the other Loan Documents, or the perfection of any rights or security interest in respect thereto (hereinafter referred to as "Other Taxes"). (c) INDEMNITY. The Borrowers shall indemnify each Lender and each Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section 3.13) paid by such Lender or Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Such indemnification shall be made within thirty (30) days from the date such Lender or Agent (as the case may be) makes written demand therefor. (d) EVIDENCE OF PAYMENT. Within thirty (30) days after the date of any payment of Taxes or Other Taxes, the affected Borrower shall furnish to the Administrative Agent, at its address referred to in Section 13.1, the original or a certified copy of a receipt evidencing payment thereof or other evidence of payment satisfactory to the Administrative Agent. (e) DELIVERY OF TAX FORMS. Each Lender organized under the laws of a jurisdiction other than the United States or any state thereof shall deliver to the Borrower, with a copy to the Administrative Agent, on the Closing Date or concurrently with the delivery of the relevant Assignment and Acceptance, as applicable, (i) two United States Internal Revenue Service Forms 4224 or Forms 1001, as applicable (or successor forms) properly completed and certifying in each case that such Lender is entitled to a complete exemption from withholding or deduction for or on account of any United States federal income taxes, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the case may be, to establish an exemption from United States backup withholding taxes. Each such Lender further agrees to deliver to the Borrower, with a copy to the Administrative Agent, a Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms or manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower, certifying in the case of a Form 1001 or 4224 that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes (unless in any such case an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders such forms inapplicable or the exemption to which such forms relate unavailable and such Lender notifies the Borrower and the Administrative Agent that it is not entitled to receive payments without deduction or withholding of United States federal income taxes) and, in the case of a Form W-8 or W-9, establishing an exemption from United States backup withholding tax. (f) SURVIVAL. Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 3.13 shall survive the payment in full of the Obligations and the termination of the Commitments. ARTICLE IV CLOSING; CONDITIONS OF CLOSING AND BORROWING SECTION 4.1 CLOSING. The closing shall take place at the offices of Kennedy Covington Lobdell & Hickman, L.L.P., 100 North Tryon Street, Suite 4200, Charlotte, North Carolina 28202 at 10:00 a.m. on July __, 1995, or on such other date as the parties hereto shall mutually agree. SECTION 4.2 CONDITIONS TO CLOSING AND INITIAL EXTENSIONS OF CREDIT. The obligation of the Lenders to close this Agreement and to make the initial Loan is subject to the satisfaction of each of the following conditions: (a) EXECUTED LOAN DOCUMENTS. (i) This Agreement, (ii) the Notes, (iii) the Security Agreement, (iv) the Trademark Assignment, (v) the Pledge Agreements, (vi) the Mortgages, (vii) the Landlord Consents, (viii) the Contingent Interest Agreement, (ix) the Canadian Subsidiary Security Documents and Canadian Note Documents, (x) the ACC U.K. Security Documents, (xi) the Subordination Agreements and (xii) the Escrow Joinder Agreement shall have been duly authorized, executed and delivered to the Agents in form and substance satisfactory thereto by the parties thereto, shall be in full force and effect and no default shall exist thereunder, and the Borrower shall have delivered original counterparts thereof to the Administrative Agent. (b) CLOSING CERTIFICATES; ETC. (i) COMPLIANCE CERTIFICATE OF THE BORROWERS. The Administrative Agent shall have received a certificate from the chief executive officer or chief financial officer of ACC, in form and substance reasonably satisfactory to the Administrative Agent, to the effect that all representations and warranties of the Borrowers contained in this Agreement and the other Loan Documents are true, correct and complete; that the Borrowers are not in violation of any of the covenants contained in this Agreement and the other Loan Documents; that, after giving effect to the transactions contemplated by this Agreement, no Default or Event of Default has occurred and is continuing; that the Borrowers have satisfied each of the closing conditions to be satisfied thereby; and that the Borrowers have filed all required tax returns and owe no delinquent taxes. (ii) CERTIFICATE OF SECRETARY OF EACH BORROWER. The Administrative Agent shall have received a certificate of the secretary or assistant secretary (or director with respect to ACC U.K.) of each Borrower certifying, as applicable, that attached thereto is a true and complete copy of the articles of incorporation or other charter documents of such Borrower and all amendments thereto, certified as of a recent date by the appropriate Governmental Authority in its jurisdiction of incorporation; that attached thereto is a true and complete copy of the bylaws of such Borrower as in effect on the date of such certification; that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors of such Borrower, authorizing the borrowings contemplated hereunder and the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party; and as to the incumbency and genuineness of the signature of each officer of such Borrower executing Loan Documents to which such Person is a party. (iii) CERTIFICATES OF GOOD STANDING. The Administrative Agent shall have received long-form certificates as of a recent date of the good standing of each Borrower under the laws of their respective jurisdictions of organization and such other jurisdictions requested by the Agents. (iv) OPINIONS OF COUNSEL. The Administrative Agent shall have received favorable opinions of United States, Canadian and United Kingdom counsel to the Borrowers addressed to the Agents and Lenders with respect to such Persons, the Loan Documents and regulatory matters (including without limitation Communications Licenses and PUC Authorizations) reasonably satisfactory in form and substance to the Agents and Lenders. (v) TAX FORMS. The Administrative Agent shall have received copies of the United States Internal Revenue Service forms required by Section 3.13 hereof. (c) COLLATERAL. (i) FILINGS AND RECORDINGS. All filings that are necessary to perfect the Liens of the Administrative Agent and the Lenders in the Collateral described in the Security Documents shall have been filed in all appropriate locations and the Administrative Agent shall have received evidence satisfactory to the Administrative Agent that such security interests constitute valid and perfected first priority Liens therein, subject to Liens permitted by Section 9.3. (ii) PLEDGED STOCK. The Administrative Agent shall have received original stock certificates evidencing the capital stock pledged pursuant to the Pledge Agreements, together with an appropriate undated stock power for each certificate duly executed in blank by the registered owner thereof. (iii) LIEN SEARCHES. The Administrative Agent shall have received the results of a Lien search of all filings made against such Borrowers under the Uniform Commercial Code as in effect in any jurisdiction in which any of their assets are located, indicating among other things that their assets are free and clear of any Lien except for the Liens permitted by Section 9.3. (iv) MORTGAGE DOCUMENTS. The Administrative Agent shall have received such mortgagee title and hazard insurance policies, title searches, property surveys, appraisals and environmental assessments with respect to each property covered by a Mortgage as it shall reasonably request in writing from the applicable Borrower. (v) INSURANCE. The Administrative Agent shall have received certificates of insurance and copies (certified by the applicable Borrower) of insurance policies in the form required under Section 7.3 and the Security Documents and otherwise in form and substance reasonably satisfactory to the Administrative Agent. (d) CONSENTS; NO ADVERSE CHANGE. (i) GOVERNMENTAL AND THIRD PARTY APPROVALS. All necessary approvals, authorizations and consents, if any be required, of any Person and of all Governmental Authorities and courts having jurisdiction with respect to the execution and delivery of this Agreement and the other Loan Documents shall have been obtained and copies thereof delivered to the Administrative Agent. (ii) PERMITS AND LICENSES. All permits and licenses, including permits and licenses required under Applicable Laws, necessary to the current conduct of business by the Borrowers and their Subsidiaries shall have been obtained. (iii) NO INJUNCTION, ETC. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any Governmental Authority to enjoin, restrain, or prohibit, or to obtain substantial damages in respect of, or which is related to or arises out of this Agreement or the other Loan Documents or the consummation of the transactions contemplated hereby or thereby, or which, in the Managing Agents' reasonable discretion, would make it inadvisable to consummate the transactions contemplated by this Agreement and such other Loan Documents. (iv) NO MATERIAL ADVERSE CHANGE. There shall not have occurred any material adverse change in the condition (financial or otherwise), operations, properties, business or prospects of the Borrowers and their Subsidiaries, or any event or condition that has had or could be reasonably expected to have a Material Adverse Effect. (v) NO EVENT OF DEFAULT. No Default or Event of Default shall have occurred and be continuing. (e) FINANCIAL MATTERS. (i) FINANCIAL STATEMENTS. The Agents shall have received the most recent audited Consolidated financial statements of ACC and its Subsidiaries. (ii) FINANCIAL CONDITION CERTIFICATE. ACC shall have delivered to the Administrative Agent a certificate, in form and substance reasonably satisfactory to such Agent, and certified as accurate in all material respects by the chief executive officer or chief financial officer of ACC, that (A) attached thereto is a PRO FORMA balance sheet of ACC and its Subsidiaries setting forth on a PRO FORMA basis the financial condition of ACC and its Subsidiaries on a Consolidated basis as of that date, reflecting on a PRO FORMA basis the effect of the transactions contemplated herein, including all material fees and expenses in connection therewith, and evidencing compliance on a PRO FORMA basis with the covenants contained in Articles VIII and IX hereof, (B) the financial projections previously delivered to the Managing Agents represent the good faith opinions of the Borrowers and senior management thereof as to the projected results contained therein, and (C) attached thereto is a calculation of the Applicable Margin in accordance with Section 3.1(c) as of March 31, 1995. (iii) EQUITY PROCEEDS. The Borrower shall deliver evidence reasonably satisfactory to the Administrative Agent of receipt by ACC of Net Cash Proceeds in an amount equal to at least $11,000,000 from its offering of equity securities from March 29, 1995 to April 15, 1995, pursuant to Regulation S of the Securities Act of 1933, as amended. (iv) FLEET VENTURE INVESTMENT. The Fleet Note and Warrant Purchase Agreement shall have been executed upon terms satisfactory to the Managing Agents and ACC shall have received Net Cash Proceeds from the offering of the Fleet Venture Notes thereunder in an amount not less than $8,700,000. (v) PAYMENT AT CLOSING. There shall have been paid by the Borrowers to the Agents and the Lenders the fees set forth or referenced in Section 3.3 and any other accrued and unpaid fees or commissions due hereunder (including, without limitation, legal fees and expenses), and to any other Person such amount as may be due thereto in connection with the transactions contemplated hereby, including all taxes, fees and other charges in connection with the execution, delivery, recording, filing and registration of any of the Loan Documents. The Administrative Agent shall have received duly authorized and executed copies of the term sheet referred to in Section 3.3(c). (f) MISCELLANEOUS. (i) NOTICE OF BORROWING. The Administrative Agent shall have received written instructions from the applicable Borrower to the Administrative Agent directing the payment of any proceeds of Loans made under this Agreement that are to be paid on the Closing Date. (ii) PROCEEDINGS AND DOCUMENTS. All opinions, certificates and other instruments and all proceedings in connection with the transactions contemplated by this Agreement shall be reasonably satisfactory in form and substance to the Lenders. The Lenders shall have received copies of all other instruments and other evidence as the Lender may reasonably request, in form and substance reasonably satisfactory to the Lenders, with respect to the transactions contemplated by this Agreement and the taking of all actions in connection therewith. (iii) DUE DILIGENCE AND OTHER DOCUMENTS. The Borrower shall have delivered to the Administrative Agent such other documents, certificates and opinions as the Agents reasonably request, including without limitation copies of each document evidencing or governing the Subordinated Debt, certified by a secretary or assistant secretary of the applicable Borrower as a true and correct copy thereof. SECTION 4.3 CONDITIONS TO ALL LOANS. The obligations of the Lenders to make any Loan is subject to the satisfaction of the following conditions precedent on the relevant borrowing or issue date, as applicable: (i) CONTINUATION OF REPRESENTATIONS AND WARRANTIES. The representations and warranties contained in Article V shall be true and correct on and as of such borrowing or issuance date with the same effect as if made on and as of such date. (ii) NO EXISTING DEFAULT. No Default or Event of Default shall have occurred and be continuing hereunder on the borrowing date with respect to such Loan or after giving effect to the Loans to be made on such date. ARTICLE V REPRESENTATIONS AND WARRANTIES OF BORROWERS SECTION 5.1 REPRESENTATIONS AND WARRANTIES. To induce the Agents to enter into this Agreement and the Lenders to make the Loans, the Borrowers hereby represent and warrant to the Agents and Lenders that: (a) ORGANIZATION; POWER; QUALIFICATION. Each of ACC and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, has the power and authority to own its properties and to carry on its business as now being conducted and is duly qualified and authorized to do business in each jurisdiction where its business requires such qualification and authorization. The jurisdictions in which ACC and its Subsidiaries are organized and qualified to do business are described on SCHEDULE 5.1(A). (b) OWNERSHIP. Each Material Subsidiary and other Subsidiary of ACC is listed on SCHEDULE 5.1(B). The capitalization of ACC and its Subsidiaries consists of the number of shares, authorized, issued and outstanding, of such classes and series, with or without par value, described on SCHEDULE 5.1(B). All outstanding shares have been duly authorized and validly issued and are fully paid and nonassessable. The shareholders of the Subsidiaries of ACC and the number of shares owned by each are described on SCHEDULE 5.1(B). There are no outstanding stock purchase warrants, subscriptions, options, securities, instruments or other rights of any type or nature whatsoever, which are convertible into, exchangeable for or otherwise provide for or permit the issuance of capital stock of ACC or its Subsidiaries, except as described on SCHEDULE 5.1(B). (c) AUTHORIZATION OF AGREEMENT, LOAN DOCUMENTS AND BORROWING. Each of ACC and its Subsidiaries has the right, power and authority and has taken all necessary corporate and other action to authorize the execution, delivery and performance of this Agreement and each of the other Loan Documents to which it is a party in accordance with their respective terms. This Agreement and each of the other Loan Documents have been duly executed and delivered by the duly authorized officers of ACC and each of its Subsidiaries party thereto and each such document constitutes the legal, valid and binding obligation of ACC or its Subsidiary party thereto, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar state or federal debtor relief laws from time to time in effect which affect the enforcement of creditors' rights in general and the availability of equitable remedies. (d) COMPLIANCE OF AGREEMENT, LOAN DOCUMENTS AND BORROWING WITH LAWS, ETC. The execution, delivery and performance by ACC and its Subsidiaries of the Loan Documents to which each such Person is a party, in accordance with their respective terms, the borrowings hereunder and the transactions contemplated hereby do not and will not, by the passage of time, the giving of notice or otherwise, (i) except as set forth on SCHEDULE 5.1(D) hereto, require any Governmental Approval or violate any Applicable Law relating to ACC or any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute a default under the articles of incorporation, bylaws or other organizational documents of ACC or any of its Subsidiaries or any material indenture, agreement or other instrument to which such Person is a party or by which any of its properties may be bound or any Governmental Approval relating to such Person or (iii) result in or require the creation or imposition of any Lien upon or with respect to any material property now owned or hereafter acquired by such Person other than Liens arising under the Loan Documents. (e) COMPLIANCE WITH LAW; GOVERNMENTAL APPROVALS. Each of ACC and its Subsidiaries (i) has all Governmental Approvals required by any Applicable Law for it to conduct its business. Each such Governmental Approval is in full force and effect, is final and not subject to review on appeal and is not the subject of any pending or, to the best of its knowledge, threatened attack by direct or collateral proceeding and (ii) is in compliance with each Governmental Approval applicable to it and in compliance with all other Applicable Laws relating to it or any of its respective properties. (f) TAX RETURNS AND PAYMENTS. Each of ACC and its Subsidiaries has duly filed or caused to be filed all federal, state, local and other tax returns required by Applicable Law to be filed, and has paid, or made adequate provision for the payment of, all federal, state, local and other taxes, assessments and governmental charges or levies upon it and its property, income, profits and assets which are due and payable, except where the payment of such tax is being disputed in good faith and adequate reserves have been established in accordance with GAAP. No Governmental Authority has asserted any Lien or other claim against ACC or Subsidiary thereof with respect to material unpaid taxes which has not been discharged or resolved or is not being contested in good faith. The charges, accruals and reserves on the books of ACC and any of its Subsidiaries in respect of federal, state, local and other taxes for all Fiscal Years and portions thereof are in the judgment of ACC adequate, and ACC does not anticipate any additional material taxes or assessments for any of such years. (g) ENVIRONMENTAL MATTERS. (i) The properties of ACC and its Subsidiaries do not contain, and to the best knowledge of the Borrowers, have not previously contained, any Hazardous Materials in amounts or concentrations which (A) constitute or constituted a violation of, or (B) could give rise to material liability under, applicable Environmental Laws; (ii) Such properties and all operations conducted in connection therewith are in material compliance, and have been in material compliance, with all applicable Environmental Laws, and to the best knowledge of the Borrowers, there is no contamination at or under such properties or such operations in violation of applicable Environmental Laws or which could materially interfere with the continued operation of such properties or, if such properties are owned by any such Person, materially impair the fair saleable value thereof; (iii) Neither ACC nor any Subsidiary thereof has received any notice of material violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of their properties or the operations conducted in connection therewith, nor does ACC or any Subsidiary thereof have knowledge or reason to believe that any such notice will be received or is being threatened; (iv) Hazardous Materials have not been transported or disposed of from the properties of ACC and its Subsidiaries in violation of, or in a manner or to a location which could give rise to material liability under, Environmental Laws, nor to the best knowledge of the Borrowers, have any Hazardous Materials been generated, treated, stored or disposed of at, on or under any of such properties in material violation of, or in a manner that could give rise to material liability under, any applicable Environmental Laws; (v) No judicial proceedings or governmental or administrative action is pending, or to the best knowledge of the Borrowers, threatened, under any Environmental Law to which ACC or any Subsidiary thereof is or will be named as a party with respect to such properties or operations conducted in connection therewith, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to such properties or such operations; and (vi) There has been no release, or to the best knowledge of the Borrowers, threat of release, of Hazardous Materials at or from such properties, in violation of or in amounts or in a manner that could give rise to material liability under Environmental Laws. (h) ERISA. (i) Neither ACC nor any ERISA Affiliate maintains or contributes to, or has any obligation under, any Employee Benefit Plans other than those identified on SCHEDULE 5.1(H); (ii) ACC and each ERISA Affiliate is in material compliance with all applicable provisions of ERISA and the regulations and published interpretations thereunder with respect to all Employee Benefit Plans except for any required amendments for which the remedial amendment period as defined in Section 401(b) of the Code has not yet expired. Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified, and each trust related to such plan has been determined to be exempt under Section 501(a) of the Code. No liability has been incurred by ACC or any ERISA Affiliate which remains unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan or any Multiemployer Plan; (iii) No Pension Plan has been terminated, nor has any accumulated funding deficiency (as defined in Section 412 of the Code) been incurred (without regard to any waiver granted under Section 412 of the Code), nor has any funding waiver from the Internal Revenue Service been received or requested with respect to any Pension Plan, nor has ACC or any ERISA Affiliate failed to make any contributions or to pay any amounts due and owing as required by Section 412 of the Code, Section 302 of ERISA or the terms of any Pension Plan prior to the due dates of such contributions under Section 412 of the Code or Section 302 of ERISA, nor has there been any event requiring any disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA with respect to any Pension Plan; (iv) Neither ACC nor any ERISA Affiliate has: (A) engaged in a nonexempt prohibited transaction described in Section 406 of the ERISA or Section 4975 of the Code; (B) incurred any liability to the PBGC which remains outstanding other than the payment of premiums and there are no premium payments which are due and unpaid; (C) failed to make a required contribution or payment to a Multiemployer Plan; or (D) failed to make a required installment or other required payment under Section 412 of the Code; (v) No Termination Event has occurred or is reasonably expected to occur; and (vi) No material proceeding, claim, lawsuit and/or investigation is existing or, to the best knowledge of ACC after due inquiry, threatened concerning or involving any (A) employee welfare benefit plan (as defined in Section 3(1) of ERISA) currently maintained or contributed to by ACC or any ERISA Affiliate, (B) Pension Plan or (C) Multiemployer Plan. (i) MARGIN STOCK. Neither ACC nor any Subsidiary thereof is engaged principally or as one of its activities in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin stock" (as each such term is defined or used in Regulations G and U of the Board of Governors of the Federal Reserve System). No part of the proceeds of any of the Loans will be used for purchasing or carrying margin stock or for any purpose which violates, or which would be inconsistent with, the provisions of Regulation G, T, U or X of such Board of Governors. (j) GOVERNMENT REGULATION. Neither ACC nor any Subsidiary thereof is an "investment company" or a company "controlled" by an "investment company" (as each such term is defined or used in the Investment Company Act of 1940, as amended) and neither ACC nor any Subsidiary thereof is, or after giving effect to any Loan will be a "Holding Company" or a "Subsidiary Company" of a "Holding Company" or an "Affiliate" of a "Holding Company" within the respective meanings of each of the quoted terms of the Public Utility Holding Company Act of 1935 as amended, or any other Applicable Law which materially limits its ability to incur or consummate the transactions contemplated hereby. (k) PATENTS, COPYRIGHTS AND TRADEMARKS. Each of ACC and its Subsidiaries owns or possesses all patent, copyright and trademark rights which are required to conduct its business without infringing upon any validly asserted rights of others. No event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any such rights. Neither ACC nor any of its Subsidiaries have been threatened with any litigation regarding patents, copyrights or trademarks that would present a material impediment to the business of any such Person. (l) MATERIAL CONTRACTS. SCHEDULE 5.1(L) sets forth a complete and accurate list of all Material Contracts of ACC and its Subsidiaries in effect as of the Closing Date not listed on any other Schedule hereto; other than as set forth in SCHEDULE 5.1(L), each of ACC and any Subsidiary thereof party thereto has performed all of its obligations under such Material Contracts and, to the best knowledge of the Borrowers, each other party thereto is in compliance with each such Material Contract, and each such Material Contract is, and after giving effect to the consummation of the transactions contemplated by the Loan Documents will be, in full force and effect in accordance with the terms thereof. ACC and its Subsidiaries have delivered to the Administrative Agent a true and complete copy of each Material Contract required to be listed on SCHEDULE 5.1(M). (m) EMPLOYEE RELATIONS. Each of ACC and its Subsidiaries is not, except as set forth on SCHEDULE 5.1(M), party to any collective bargaining agreement nor has any labor union been recognized as the representative of its employees. ACC knows of no pending, threatened or contemplated strikes, work stoppage or other collective labor disputes involving its employees or those of its Subsidiaries. (n) BURDENSOME PROVISIONS. Neither ACC nor any Subsidiary thereof is a party to any indenture, agreement, lease or other instrument, or subject to any corporate or partnership restriction, Governmental Approval or Applicable Law which is so unusual or burdensome as in the foreseeable future could be reasonably expected to have a Material Adverse Effect. ACC and its Subsidiaries do not presently anticipate that future expenditures needed to meet the provisions of any statutes, orders, rules or regulations of a Governmental Authority will be so burdensome as to have a Material Adverse Effect. (o) FINANCIAL STATEMENTS. The (i) Consolidated balance sheets of ACC and its Subsidiaries as of December 31, 1994, and the related statements of income and retained earnings and cash flows for the Fiscal Year then ended and (ii) unaudited Consolidated balance sheet of ACC and its Subsidiaries as of March 31, 1995, and related unaudited interim statements of income and cash flows, copies of which have been furnished to the Administrative Agent and each Lender, are complete and correct and fairly present the assets, liabilities and financial position of ACC and its Subsidiaries, as at such dates, and the results of the operations and changes of financial position for the periods then ended. All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP. ACC and its Subsidiaries have no material Debt, obligation or other unusual forward or long-term commitment which is not disclosed in the foregoing financial statements or in the notes thereto. (p) NO MATERIAL ADVERSE CHANGE. Since December 31, 1994, there has been no material adverse change in the condition (financial or otherwise), operations, properties, business or prospects of the Borrowers and their Subsidiaries, including any event or condition that has had or is reasonably likely to have a Material Adverse Effect. (q) SOLVENCY. As of the Closing Date and after giving effect to each Loan made hereunder, ACC and its Subsidiaries taken as a whole will be Solvent. (r) TITLES TO PROPERTIES. Each of ACC and its Subsidiaries has such title to the real property owned or leased by it as is necessary or desirable to the conduct of its business and good and marketable title to all of its personal property sufficient to carry on its business as presently conducted, except such property as has been disposed of by ACC or its Subsidiaries subsequent to such date which dispositions have been in the ordinary course of business or as otherwise expressly permitted hereunder. SCHEDULE 5.1(R) hereto sets forth the address of all real property owned or leased by a Borrower and its Subsidiaries (and if leased, the record owner thereof). (s) LIENS. None of the properties and assets of ACC or any Subsidiary thereof is subject to any Lien, except in each case Liens permitted pursuant to Section 9.3. No financing statement under the Uniform Commercial Code of any state which names ACC or any Subsidiary thereof or any of their respective trade names or divisions as debtor and which has not been terminated, has been filed in any state or other jurisdiction and neither ACC nor any Subsidiary thereof has signed any such financing statement or any security agreement authorizing any secured party thereunder to file any such financing statement, except to perfect those Liens permitted by Section 9.3 hereof. (t) DEBT AND CONTINGENT OBLIGATIONS. SCHEDULE 5.1(T) is a complete and correct listing of all Debt and Contingent Obligations of ACC and its Subsidiaries in excess of $250,000. ACC and its Subsidiaries have performed and are in material compliance with all of the terms of such Debt and Contingent Obligations and all instruments and agreements relating thereto, and no default or event of default, or event or condition which with notice or lapse of time or both would constitute such a default or event of default on the part of ACC or its Subsidiaries exists with respect to any such Debt or Contingent Obligation. (u) LITIGATION. Except as set forth on SCHEDULE 5.1(U), there are no actions, suits or proceedings pending nor, to the knowledge of ACC, threatened against or in any other way relating adversely to or affecting ACC or any Subsidiary thereof or any of their respective properties in any court or before any arbitrator of any kind or before or by any Governmental Authority. (v) COMMUNICATIONS REGULATORY MATTERS. (i) Each Network Agreement has been duly executed and delivered by the respective parties thereto, is in full force and effect and neither the Borrowers, any Subsidiary thereof nor, to the best knowledge of the Borrowers, any of the other parties thereto, is in default of any of the provisions thereof in any material respect. (ii) SCHEDULE 5.1(V) hereto sets forth, as of the date hereof, a true and complete list of the following information for each Communications License or PUC Authorization issued to ACC or any its Subsidiaries: (A) for all Communications Licenses, the name of the licensee, the type of service and the expiration dates; and (B) for each PUC Authorization, the geographic area covered by such PUC Authorization, the services that may be provided thereunder and the expiration date, if any. (iii) The Communications Licenses and PUC Authorizations specified on SCHEDULE 5.1(V) hereto are valid and in full force and effect without conditions except for such conditions as are generally applicable to holders of such Communications Licenses and PUC Authorizations. No event has occurred and is continuing which could reasonably be expected to (A) result in the imposition of a material forfeiture or the revocation, termination or adverse modification of any such Communications License or PUC Authorization or (B) materially and adversely affect any rights of ACC or any of its Subsidiaries thereunder. ACC has no reason to believe and has no knowledge that Communications Licenses and PUC Authorizations will not be renewed in the ordinary course. (iv) All of the material properties, equipment and systems owned, leased or managed by ACC and its Subsidiaries are, and (to the best knowledge of ACC) all such property, equipment and systems to be acquired or added in connection with any contemplated system expansion or construction will be, in good repair, working order and condition (reasonable wear and tear excepted) and are and will be in compliance with all terms and conditions of the Communications Licenses and PUC Authorizations and all standards or rules imposed by any Governmental Authority or as imposed under any agreements with telephone companies and customers. (v) ACC and each of its Subsidiaries have paid all franchise, license or other fees and charges which have become due pursuant to any Governmental Approval in respect of its business and has made appropriate provision as is required by GAAP for any such fees and charges which have accrued. (w) ABSENCE OF DEFAULTS. No event has occurred and is continuing which constitutes a Default or an Event of Default, or which constitutes, or which with the passage of time or giving of notice or both would constitute, a default or event of default by ACC or any Subsidiary thereof under any Material Contract or judgment, decree or order to which ACC or its Subsidiaries is a party or by which ACC or its Subsidiaries or any of their respective properties may be bound or which would require ACC or its Subsidiaries to make any payment thereunder prior to the scheduled maturity date therefor. (x) SENIOR DEBT. All of the Obligations of ACC and its Subsidiaries under the Loan Documents are entitled to the benefits of the subordination provisions of the documents evidencing any Subordinated Debt. ACC acknowledges that the Agents and Lenders are entering into this Agreement and the Lenders are making Loans hereunder in reliance upon such subordination provisions. (y) ACCURACY AND COMPLETENESS OF INFORMATION. All written information, reports and other papers and data produced by or on behalf of ACC or any Subsidiary thereof and furnished to the Lenders were, at the time the same were so furnished, complete and correct in all material respects. No document furnished or written statement made to the Agents or the Lenders by ACC or any Subsidiary thereof in connection with the negotiation, preparation or execution of this Agreement or any of the Loan Documents contains or will contain any untrue statement of a fact material to the creditworthiness of ACC or its Subsidiaries or omits or will omit to state a material fact necessary in order to make the statements contained therein not misleading. ACC is not aware of any facts which it has not disclosed in writing to the Agents having a Material Adverse Effect, or insofar as ACC can now foresee, could reasonably be expected to have a Material Adverse Effect. SECTION 5.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All representations and warranties set forth in this Article V and all representations and warranties contained in any certificate, or any of the Loan Documents (including but not limited to any such representation or warranty made in or in connection with any amendment thereto) shall constitute representations and warranties made under this Agreement. All representations and warranties made under this Agreement shall be made or deemed to be made at and as of the Closing Date, shall survive the Closing Date and shall not be waived by the execution and delivery of this Agreement, any investigation made by or on behalf of the Lenders or any borrowing hereunder. ARTICLE VI FINANCIAL INFORMATION AND NOTICES Until all the Obligations have been finally and indefeasibly paid and satisfied in full and the Commitments terminated, unless consent has been obtained in the manner set forth in Section 13.11 hereof, the Borrowers will furnish or cause to be furnished to the Administrative Agent at the Administrative Agent's Office (with copies for each Managing Agent) and the Administrative Agent at its address set forth in Section 13.1 hereof, or such other office as may be designated by such Agent from time to time: SECTION 6.1 FINANCIAL STATEMENTS AND PROJECTIONS. (a) QUARTERLY FINANCIAL STATEMENTS. As soon as practicable and in any event within forty-five (45) days after the end of each fiscal quarter, an unaudited Consolidated and consolidating balance sheet of ACC and its Subsidiaries as of the close of such fiscal quarter and unaudited Consolidated and consolidating statements of income, retained earnings and cash flows for the fiscal quarter then ended and that portion of the Fiscal Year then ended, including the notes thereto, all in reasonable detail setting forth in comparative form the corresponding figures for the preceding Fiscal Year and prepared by ACC in accordance with GAAP, and certified by the chief financial officer of ACC to present fairly in all material respects the financial condition of ACC and its Subsidiaries as of their respective dates and the results of operations of ACC and its Subsidiaries for the respective periods then ended, subject to normal year end adjustments. The Lenders agree that so long as ACC has a class of equity securities registered under section 12 of the Securities Exchange Act of 1934, as amended, the Lenders will accept the report on Form 10-Q filed by ACC with the Securities and Exchange Commission. (b) ANNUAL FINANCIAL STATEMENTS. As soon as practicable and in any event within one hundred and twenty (120) days after the end of each Fiscal Year, an unaudited consolidating balance sheet and income statement of ACC and its Subsidiaries and an audited Consolidated balance sheet of ACC and its Subsidiaries as of the close of such Fiscal Year and audited Consolidated statements of income, retained earnings and cash flows for the Fiscal Year then ended, including the notes thereto, all in reasonable detail setting forth in comparative form the corresponding figures for the preceding Fiscal Year and audited by an independent certified public accounting firm of nationally recognized standing in accordance with GAAP, and accompanied by a report thereon by such certified public accountants that is not qualified with respect to scope limitations imposed by ACC or any of its Subsidiaries or with respect to accounting principles followed by ACC or any of its Subsidiaries not in accordance with GAAP. The Lenders agree that so long as ACC has a class of equity securities registered under section 12 of the Securities Exchange Act of 1934, as amended, the Lenders will accept the report on Form 10-K filed by ACC with the Securities and Exchange Commission. (c) ANNUAL BUSINESS PLAN AND FINANCIAL PROJECTIONS. As soon as practicable and in any event within thirty (30) days prior to the beginning of each Fiscal Year, a business plan of ACC and its Subsidiaries for the ensuing four fiscal quarters, such plan to include, on a quarterly basis, the following: a quarterly operating and capital budget, a projected income statement, statement of cash flows and balance sheet, each prepared on a basis consistent with GAAP, and a report containing management's discussion and analysis of such projections (such business plan and projections, the "Projections"), accompanied by a certificate from the chief financial officer of ACC to the effect that, to the best of such officer's knowledge, the Projections are good faith estimates of the anticipated financial condition and operations of ACC and its Subsidiaries for such four quarter period based on the then current business plan. SECTION 6.2 OFFICER'S COMPLIANCE CERTIFICATE. At each time financial statements are delivered pursuant to Sections 6.1(a) or (b), a certificate of the chief executive officer or chief financial officer of ACC in the form of EXHIBIT D attached hereto (an "Officer's Compliance Certificate"): (a) stating that such officer has reviewed such financial statements and such statements fairly present the financial condition of the Borrowers as of the dates indicated and the results of their operations and cash flows for the periods indicated; (b) stating that to such officer's knowledge, based on a reasonable examination, no Default or Event of Default exists, or, if such is not the case, specifying such Default or Event of Default and its nature, when it occurred, whether it is continuing and the steps being taken by the Borrowers with respect to such Default or Event of Default; and (c) setting forth as at the end of such fiscal quarter or Fiscal Year, as the case may be, the calculations required to establish whether or not ACC and its Subsidiaries were in compliance with the financial covenants set forth in Article VIII hereof as at the end of each respective period, the calculation of Excess Cash Flow for such Fiscal Year and the calculation of the Applicable Margin pursuant to Section 3.1(c) as at the end of each respective period. SECTION 6.3 ACCOUNTANTS' CERTIFICATE. At each time financial statements are delivered pursuant to Section 6.1(b), a certificate of the independent public accountants certifying such financial statements addressed to the Managing Agents for the benefit of the Lenders stating that in making the examination necessary for the certification of such financial statements, they obtained no knowledge of any Default or Event of Default or, if such is not the case, specifying such Default or Event of Default and its nature and period of existence. SECTION 6.4 OTHER REPORTS. (a) Promptly upon receipt thereof, copies of any management report and any management responses thereto submitted to any Borrower or its Board of Directors by its independent public accountants in connection with their auditing function; (b) Within ten (10) Business Days after the receipt by ACC or any of its Subsidiaries of notice that any Communications License or material PUC Authorization has been lost or canceled, copies of any such notice accompanied by a report describing the measures undertaken by ACC or any of its Subsidiaries to prevent such loss or cancellation (and the anticipated impact, if any, that such loss or cancellation will have upon the business of ACC and its Subsidiaries); and (c) Such other information regarding the operations, business affairs and financial condition of ACC or any of its Subsidiaries as the Agents or any Lender may reasonably request. SECTION 6.5 NOTICE OF LITIGATION AND OTHER MATTERS. Prompt (but in no event later than three (3) days after an officer of any Borrower obtains knowledge thereof) telephonic and written notice of: (a) the commencement of all material proceedings and investigations by or before any Governmental Authority and all actions and proceedings in any court or before any arbitrator against or involving ACC or any Subsidiary thereof or any of their respective properties, assets or businesses; (b) any notice of any material violation received by ACC or any Subsidiary thereof from any Governmental Authority including, without limitation, any notice of a material violation of Environmental Laws; (c) any labor controversy that has resulted in, or could reasonably be expected to result in, a strike or other work action against ACC or any Subsidiary thereof; (d) any attachment, judgment, lien, levy or order exceeding $250,000 that may be assessed against or threatened against ACC or any Subsidiary thereof; (e) any Default or Event of Default, or any event which constitutes or which with the passage of time or giving of notice or both would constitute a default or event of default under any Subordinated Debt or other Material Contract to which ACC or any of its Subsidiaries is a party or by which ACC or any Subsidiary thereof or any of their respective properties may be bound; (f) (i) the failure of ACC or any ERISA Affiliate to make a required installment or payment under Section 302 of ERISA or Section 412 of the Code by the due date, (ii) any Termination Event or "prohibited transaction", as such term is defined in Section 406 of ERISA or Section 4975 of the Code, in connection with any Employee Benefit Plan or any trust created thereunder, along with a description of the nature thereof, what action ACC has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto, (iii) all notices received by ACC or any ERISA Affiliate of the PBGC's intent to terminate any Pension Plan or to have a trustee appointed to administer any Pension Plan, (iv) all notices received by ACC or any ERISA Affiliate from a Multiemployer Plan sponsor concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA and (v) any Borrower obtaining knowledge or reason to know that ACC or any ERISA Affiliate has filed or intends to file a notice of intent to terminate any Pension Plan under a distress termination within the meaning of Section 4041(c) of ERISA; (g) the enactment or promulgation after the date hereof of any federal, state or local statute, regulation or ordinance or judicial or administrative decision or order (or, to the extent that any Borrower has knowledge thereof, any such proposed statute, regulation, ordinance, decision or order, whether by the introduction of legislation or the commencement of rulemaking or similar proceedings or otherwise) having a material effect or relating to the operation of the Network Facilities by ACC or any of its Subsidiaries (including, without limitation, any statutes, decisions or orders affecting long distance telecommunication resellers generally and not directed against ACC or any of its Subsidiaries specifically) which have been issued or adopted (or which have been proposed) and which could reasonably be expected to have a Material Adverse Effect; or (h) any event which makes any of the representations set forth in Section 5.1 inaccurate in any material respect. SECTION 6.6 ACCURACY OF INFORMATION. All written information, reports, statements and other papers and data furnished by or on behalf of any Borrower to any Agent or Lender whether pursuant to this Article VI or any other provision of this Agreement, or any of the Security Documents, shall be, at the time the same is so furnished, complete and correct in all material respects based on the applicable Borrower's knowledge thereof. SECTION 6.7 REVISIONS OR UPDATES TO SCHEDULES. Should any of the information or disclosures provided on any of the Schedules originally attached hereto become outdated or incorrect in any material respect during any fiscal quarter, the Borrowers shall provide promptly to the Administrative Agent (with copies for each Managing Agent) such revisions or updates to such Schedule(s) as may be necessary or appropriate to update or correct such Schedule(s) within forty-five (45) days after the end of such fiscal quarter; PROVIDED that subsequent disclosures shall not constitute a cure or waiver of any Default or Event of Default resulting from the matters disclosed. ARTICLE VII AFFIRMATIVE COVENANTS Until all of the Obligations have been finally and indefeasibly paid and satisfied in full and the Commitments terminated, unless consent has been obtained in the manner provided for in Section 13.11, each Borrower will, and will cause each of its Subsidiaries to: SECTION 7.1 PRESERVATION OF CORPORATE EXISTENCE AND RELATED MATTERS. Except as permitted by Section 9.5, preserve and maintain its separate corporate existence and all rights, franchises, licenses and privileges necessary to the conduct of its business; and qualify and remain qualified as a foreign corporation and authorized to do business in each jurisdiction where its business requires such qualification and authorization. SECTION 7.2 MAINTENANCE OF PROPERTY. Protect and preserve all properties useful in and material to its business, including material copyrights, patents, trade names and trademarks; maintain in good working order and condition all buildings (reasonable wear and tear excepted), equipment and other tangible real and personal property; and from time to time make or cause to be made all renewals, replacements and additions to such property necessary in the reasonable judgement of the Borrowers for the conduct of its business, so that the business carried on in connection therewith may be properly and advantageously conducted at all times. SECTION 7.3 INSURANCE. In addition to the requirements set forth in the Security Documents, maintain insurance with financially sound and reputable insurance companies against such risks and in such amounts as are customarily maintained by similar businesses and as may be required by Applicable Law, and on the Closing Date and from time to time thereafter deliver to the Administrative Agent upon its request a detailed list of the insurance then in effect, stating the names of the insurance companies, the amounts and rates of the insurance, the dates of the expiration thereof and the properties and risks covered thereby. SECTION 7.4 ACCOUNTING METHODS AND FINANCIAL RECORDS. Maintain a system of accounting, and keep such books, records and accounts (which shall be true and complete in all material respects) as may be required or as may be necessary to permit the preparation of financial statements in accordance with GAAP (or generally accepted accounting principles as in effect in Canada and the United Kingdom with respect to the U.K. Borrowers) and in compliance with the regulations of any Governmental Authority having jurisdiction over it or any of its properties. SECTION 7.5 PAYMENT AND PERFORMANCE OF OBLIGATIONS. Pay and perform all Obligations under this Agreement and the other Loan Documents and pay or perform (a) all taxes, assessments and other governmental charges that may be levied or assessed upon it or any of its property, and (b) all other indebtedness, obligations and liabilities in accordance with customary trade practices; PROVIDED, that ACC or such Subsidiary may contest any item described in clauses (a) and (b) hereof in good faith so long as adequate reserves are maintained with respect thereto in accordance with GAAP. SECTION 7.6 COMPLIANCE WITH LAWS AND APPROVALS. Observe and remain in material compliance with all Applicable Laws and maintain in full force and effect all material Governmental Approvals, in each case applicable or necessary to the conduct of its business. SECTION 7.7 ENVIRONMENTAL LAWS. In addition to and without limiting the generality of Section 7.6, (a) comply in all material respects with, and use its best efforts to ensure such compliance by all of its tenants and subtenants, if any, with, all applicable Environmental Laws and obtain and comply with and maintain, and use its best efforts to ensure that all of its tenants and subtenants obtain and comply with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws; (b) conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws, and timely comply with all lawful orders and directives of any Governmental Authority regarding Environmental Laws; and (c) defend, indemnify and hold harmless the Agents and the Lenders, and their respective parents, Subsidiaries, Affiliates, employees, agents, officers and directors, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the violation of, noncompliance with or liability under any Environmental Laws applicable to the operations of ACC or such Subsidiary, or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, reasonable attorney's and consultant's fees, investigation and laboratory fees, response costs, court costs and litigation expenses, except to the extent that any of the foregoing arise out of or relate to the gross negligence or willful misconduct of the party seeking indemnification therefor. SECTION 7.8 COMPLIANCE WITH ERISA. If applicable thereto, in addition to and without limiting the generality of Section 7.6, make timely payment of contributions required to meet the minimum funding standards set forth in ERISA with respect to any Employee Benefit Plan; not take any action or fail to take action the result of which could be a liability to the PBGC or to a Multiemployer Plan; not participate in any prohibited transaction that could result in any civil penalty under ERISA or tax under the Code; furnish to the Administrative Agent upon the Administrative Agent's request such additional information about any Employee Benefit Plan as may be reasonably requested by the Administrative Agent; and operate each Employee Benefit Plan in such a manner that will not incur any tax liability under Section 4980B of the Code or any liability to any qualified beneficiary as defined in Section 4980B of the Code. SECTION 7.9 COMPLIANCE WITH AGREEMENTS. Comply in all material respects with each term, condition and provision of all leases, agreements and other instruments entered into in the conduct of its business including, without limitation, any Material Contract; PROVIDED, that ACC or such Subsidiary may contest any such lease, agreement or other instrument in good faith so long as adequate reserves are maintained in accordance with GAAP. SECTION 7.10 CONDUCT OF BUSINESS. Engage only in businesses in substantially the same fields as the businesses conducted on the Closing Date and, to the extent permitted by Section 9.4(c), in lines of business reasonably related thereto. SECTION 7.11 VISITS AND INSPECTIONS. Upon reasonable notice therefrom and during normal business hours, permit representatives of any of the Agents, from time to time, to visit and inspect its properties; inspect, audit and make extracts from its books, records and files, including, but not limited to, management letters prepared by independent accountants; and discuss with its principal officers, and its independent accountants, its business, assets, liabilities, financial condition, results of operations and business prospects. SECTION 7.12 MATERIAL SUBSIDIARIES; ADDITIONAL COLLATERAL. (a) Upon the creation of any Material Subsidiary permitted by this Agreement, cause to be executed and delivered to the Administrative Agent: (i) a Joinder Agreement and the documents referred to therein, (ii) the supplement substantially in the form attached to the Security Agreement, (iii) the supplement substantially in the form attached to the applicable Pledge Agreement, or if the owner of such Subsidiary is not ACC or ACC National, a pledge agreement substantially in the form of the Pledge Agreement executed by such owner with such modifications thereto as requested by the Required Lenders, (iv) a Mortgage and Landlord Consent with respect to any real property owned or leased by such Subsidiary if reasonably requested by the Required Lenders, (v) if such Material Subsidiary is a Subsidiary of a Canadian Subsidiary, such joinder agreements as reasonably requested by the Required Lenders in order that such Subsidiary become a party to the Canadian Note Documents, and if such Material Subsidiary is a Subsidiary of ACC U.K. or a Canadian Subsidiary, supplements to the Security Documents executed by such Borrowers or additional documents substantially in the form of such Security Documents, in each case as requested by the Required Lenders, (vi) such other documents reasonably requested by the Required Lenders consistent with the terms of this Agreement which provide that such Subsidiary shall become a Borrower bound by all of the terms, covenants and agreements contained in the Loan Documents and that the assets of such Material Subsidiary shall become Collateral for the Obligations and (vii) such other documents as the Required Lenders shall reasonably request, including without limitation, officers' certificates, financial statements, opinions of counsel, board resolutions, charter documents, certificates of existence and authority to do business and any other closing certificates and documents described in Section 4.2. (b) Promptly upon receipt thereof, ACC National shall deliver to the Administrative Agent copies of each Governmental Approval required in connection with the pledge by ACC National of the capital stock of ACC Mass. under the ACC National Pledge Agreement. (c) ACC shall, and cause its Material Subsidiaries to, promptly deliver from time to time such additional Security Documents to the Administrative Agent upon the request of the Required Lenders with respect to any assets of any such Person not subject to an existing Lien in favor of the Administrative Agent for the benefit of the Lenders. SECTION 7.13 HEDGING AGREEMENT. (a) Not later than thirty (30) days after the date hereof, cause the Borrowers to execute Hedging Agreements with respect to interest rate exposure under the Credit Agreement with durations of at least two years and an aggregate notional principal amount thereunder equal to at least $10,000,000 at interest rates not to exceed two percent (2%) over the then current three month LIBOR Rate at the time of execution of such Hedging Agreements with respect to the applicable Permitted Currency and otherwise in form and substance reasonably satisfactory to the Managing Agents, (b) not later than one-hundred and eighty (180) days after the date hereof execute additional Hedging Agreements in the form described in clause (a) such that the notional principal amount covered by all such Hedging Agreements equals fifty percent (50) of the Aggregate Commitment and (c) maintain at all times Hedging Agreements with respect to currency risk in form and substance reasonably satisfactory to the Managing Agents. SECTION 7.14 FURTHER ASSURANCES. Make, execute and deliver all such additional and further acts, things, deeds and instruments as any Agent or Lender may reasonably require to document and consummate the transactions contemplated hereby and to vest completely in and insure each Agent and the Lenders their respective rights under this Agreement, the Notes, the Letters of Credit and the other Loan Documents. ARTICLE VIII FINANCIAL COVENANTS Until all of the Obligations have been finally and indefeasibly paid and satisfied in full and the Commitments terminated, unless consent has been obtained in the manner set forth in Section 13.11 hereof, ACC and its Subsidiaries on a Consolidated basis will not: SECTION 8.1 MAXIMUM LEVERAGE RATIO. As of any date of determination, permit the ratio (the "Leverage Ratio") of (a) Total Debt as of such date to (b), for any calculation period during calendar year 1995, Operating Cash flow for the two (2) consecutive fiscal quarters ending on or immediately prior to such date TIMES two (2), and for any calculation period thereafter, Operating Cash Flow for the period of four (4) consecutive fiscal quarters ending on or immediately prior to such date, to exceed the corresponding ratio set forth below: PERIOD RATIO Closing Date through September 30, 1995 3.75 to 1.00 October 1, 1995 through June 30, 1996 3.50 to 1.00 July 1, 1996 through December 31, 1996 2.75 to 1.00 January 1, 1997 and thereafter 2.00 to 1.00; SECTION 8.2 MINIMUM PRO FORMA DEBT SERVICE COVERAGE RATIO. As of any date of determination, permit the ratio of (a), for any calculation period during calendar year 1995, Operating Cash Flow for the two (2) consecutive fiscal quarters ending on or immediately prior to such date TIMES two (2), and for any calculation period thereafter, Operating Cash Flow for the period of four (4) consecutive fiscal quarters ending on or immediately prior to such date, to (b) Pro Forma Debt Service on such date, to be less than the corresponding ratio set forth below: PERIOD RATIO Closing Date through September 30, 1995 1.75 to 1.00 October 1, 1995 through December 31, 1995 2.00 to 1.00 January 1, 1996 and thereafter 2.50 to 1.00 SECTION 8.3 FIXED CHARGE COVERAGE RATIO. As of any date of determination, permit the ratio of (a) (i), for any calculation period during calendar year 1995, Operating Cash Flow for the two (2) consecutive fiscal quarters ending on or immediately prior to such date TIMES two (2), and for any calculation period thereafter, Operating Cash Flow for the period of four (4) consecutive fiscal quarters ending on or immediately prior to such date to (b) Fixed Charges for such period, to be less than the corresponding ratio set forth below: PERIOD RATIO Closing date through September 30, 1995 .30 to 1.0 October 1, 1995 through June 29, 1996 .70 to 1.0 June 30, 1996 through September 29, 1996 1.00 to 1.0 September 30, 1996 and thereafter 1.15 to 1.0 SECTION 8.4 MINIMUM NET WORTH. Permit Consolidated Net Worth at any time to be less than (a) $21,500,000 PLUS (b) fifty percent (50%) of Consolidated Net Income of ACC and its Subsidiaries (LESS total debits for such period with respect to accrued and unpaid (i) interest payments recorded by ACC for the Fleet Venture Notes and (ii) dividends recorded by ACC for the Preferred Stock, not to exceed $1,200,000 in the aggregate) as of each fiscal quarter end occurring after the Closing Date PLUS (c) one hundred percent (100%) of the aggregate Net Cash Proceeds of any offering of capital stock of ACC or any of its Wholly-Owned Subsidiaries received thereby after the Closing Date. For the purposes of this Section 8.4, the minimum required Consolidated Net Worth (i) shall be adjusted in a manner satisfactory to the Managing Agents for any payment required under the Contingent Interest Agreement and (ii) shall not be reduced if Consolidated Net Income as of any fiscal quarter end is less than zero. ARTICLE IX NEGATIVE COVENANTS Until all of the Obligations have been finally and indefeasibly paid and satisfied in full and the Commitments terminated, unless consent has been obtained in the manner set forth in Section 13.11 hereof, ACC will not and will not permit any of its Subsidiaries to: SECTION 9.1 LIMITATIONS ON DEBT. Create, incur, assume or suffer to exist any Debt except (a) the Obligations, (b) Debt incurred in connection with a Hedging Agreement with a counterparty and upon terms and conditions reasonably satisfactory to the Managing Agents, (c) Subordinated Debt, the Net Cash Proceeds of which are utilized to repay the Obligations and, with respect to any such Net Cash Proceeds received after June 30, 1997, permanently reduce the Aggregate Commitment by the amount of such Net Cash Proceeds, (d) existing Debt set forth on SCHEDULE 5.1(T) and the renewal and refinancing (but not the increase) thereof, (e) Debt consisting of Contingent Obligations permitted by Section 9.2, (f) Debt of ACC and its Subsidiaries incurred in connection with Capitalized Leases, (g) purchase money Debt of ACC and its Subsidiaries and (h) unsecured Debt of ACC and its Subsidiaries; PROVIDED, that (i) the aggregate amount of the Debt permitted pursuant to clauses (f), (g) and (h) PLUS the aggregate amount of Debt constituting Contingent Obligations permitted by Sections 9.2(c), (d) and (e) shall not at any time exceed $10,000,000 and (ii) no Subsidiary of ACC shall be a party to any agreement which shall restrict, limit or otherwise encumber (by covenant or otherwise) the ability of such Subsidiary to make any payment to ACC, in the form of dividends, intercompany advances or otherwise. SECTION 9.2 LIMITATIONS ON CONTINGENT OBLIGATIONS. Create, incur, assume or suffer to exist any Contingent Obligations except (a) Contingent Obligations in favor of the Administrative Agent for the benefit of the Agents and the Lenders, (b) Contingent Obligations in respect of Network Agreements and Network Facilities incurred in the ordinary course of business, (c) Contingent Obligations to secure payment or performance of customer service contracts incurred in the ordinary course of business, (d) Contingent Obligations incurred as a general or joint venture partner in connection with any investment in a partnership or joint venture permitted pursuant to Section 10.4 and (e) Contingent Obligations not covered by clauses (b), (c) or (d) of this Section; PROVIDED, that the aggregate principal amount at any time outstanding of all Contingent Obligations permitted by Sections 9.2(c), (d) and (e) PLUS the aggregate outstanding principal amount of all Debt outstanding under clauses (f), (g) and (h) of Section 9.1 shall not exceed $10,000,000. SECTION 9.3 LIMITATIONS ON LIENS. Create, incur, assume or suffer to exist, any Lien on or with respect to any of its assets or properties (including shares of capital stock), real or personal, whether now owned or hereafter acquired, except: (a) Liens for taxes, assessments and other governmental charges or levies (excluding any Lien imposed pursuant to any of the provisions of ERISA or Environmental Laws) not yet due or as to which the period of grace (not to exceed thirty (30) days), if any, related thereto has not expired or which are being contested in good faith and by appropriate proceedings if adequate reserves are maintained to the extent required by GAAP; (b) the claims of materialmen, mechanics, carriers, warehousemen, processors or landlords for labor, materials, supplies or rentals incurred in the ordinary course of business, (i) which are not overdue for a period of more than thirty (30) days or (ii) which are being contested in good faith and by appropriate proceedings; (c) Liens consisting of deposits or pledges made in the ordinary course of business in connection with, or to secure payment of, obligations under workers' compensation, unemployment insurance or similar legislation or obligations (not to exceed $2,000,000) under customer service contracts; (d) Liens constituting encumbrances in the nature of zoning restrictions, easements and rights or restrictions of record on the use of real property, which in the aggregate are not substantial in amount and which do not, in any case, materially detract from the value of such property or impair the use thereof in the ordinary conduct of business; (e) Liens of the Administrative Agent for the benefit of the Agents and the Lenders; (f) Existing liens described on SCHEDULE 9.3; (g) Liens securing Debt permitted under Section 9.1(f); and (h) Liens securing Debt permitted under Section 9.1(g); PROVIDED that (i) such Liens shall be created substantially simultaneously with the acquisition of the related Capital Asset, (ii) such Liens do not at any time encumber any property other than the property financed by such Debt and (iii) the principal amount of Debt secured by any such Lien shall at no time exceed 100% of the original purchase price of such property at the time it was acquired. SECTION 9.4 LIMITATIONS ON LOANS, ADVANCES, INVESTMENTS AND ACQUISITIONS. Purchase, own, invest in or otherwise acquire, directly or indirectly, any capital stock, interests in any partnership or joint venture, evidence of Debt or other obligation or security, substantially all or a material portion of the business or assets of any other Person or any other investment or interest whatsoever in any other Person; or make or permit to exist, directly or indirectly, any loans, advances or extensions of credit to, or any investment in cash or by delivery of property in, any Person; or enter into, directly or indirectly, any commitment or option in respect of the foregoing except: (a) (i) loans or advances by any Subsidiary to a Borrower, (ii) loans from ACC Corp. to the Canadian Subsidiaries in an aggregate principal amount not to exceed $29,000,000 pursuant to the Canadian Note Documents and secured by the Canadian Subsidiary Security Documents, each as in effect on the Closing Date (or as amended or modified pursuant to Section 7.12 or with the prior written consent of the Required Lenders); PROVIDED, that the amount of such loans funded with proceeds of Loans hereunder shall not at any time exceed $10,000,000 in aggregate principal amount, and (iii) the other existing loans, advances and investments described on SCHEDULE 9.4; (b) investments by any Domestic Borrower or Subsidiary thereof in (i) marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency thereof maturing within one (1) year from the date of acquisition thereof, (ii) commercial paper maturing no more than 120 days from the date of creation thereof and currently having the highest rating obtainable from either Standard & Poor's Corporation or Moody's Investors Service, Inc., (iii) certificates of deposit maturing no more than 120 days from the date of creation thereof issued by commercial banks incorporated under the laws of the United States of America, each having combined capital, surplus and undivided profits of not less than $500,000,000 and having a rating of "A" or better by a nationally recognized rating agency; PROVIDED, that the aggregate amount invested in such certificates of deposit shall not at any time exceed $5,000,000 for any one such certificate of deposit and $10,000,000 for any one such bank, or (iv) time deposits maturing no more than 30 days from the date of creation thereof with commercial banks or savings banks or savings and loan associations each having membership either in the Federal Deposit Insurance Corporation ("FDIC") or the deposits of which are insured by the FDIC and in amounts not exceeding the maximum amounts of insurance thereunder, and investments by any Canadian Subsidiary or by ACC U.K. or any Subsidiary thereof in any corresponding government securities or cash equivalents reasonably satisfactory to the Required Lenders; (c) investments by ACC or any Subsidiary in the form of acquisitions of all or substantially all of the business or a line of business (whether by the acquisition of capital stock, assets or any combination thereof) of any other Person if a description of the acquisition and the governing documentation shall have been delivered to the Managing Agents at least fifteen (15) Business Days prior to the consummation of the acquisition and the Required Lenders shall have consented in writing thereto prior to such consummation; (d) investments by ACC or any Subsidiary thereof in joint venture and other partnership interests in an aggregate amount not to exceed $1,000,000 during the term of this Agreement, unless the Required Lenders have consented in writing to any such investment prior to the consummation thereof; and (e) loans to employees in the ordinary course of business for travel and other advanced expenses not to exceed $20,000 with respect to any individual employee or $200,000 in the aggregate. SECTION 9.5 LIMITATIONS ON MERGERS AND LIQUIDATION. Merge, consolidate or enter into any similar combination with any other Person or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution) except (a) any Wholly-Owned Subsidiary of ACC which is not a Material Subsidiary may be liquidated, wound-up or dissolved, (b) any Wholly-Owned Subsidiary of ACC may merge with ACC or any other Wholly-Owned Subsidiary of ACC and (c) any Wholly-Owned Subsidiary may merge into the Person such Wholly-Owned Subsidiary was formed to acquire in connection with an acquisition permitted by Section 9.4(c). SECTION 9.6 LIMITATIONS ON SALE OF ASSETS. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, the sale of any receivables and leasehold interests and any sale-leaseback or similar transaction), whether now owned or hereafter acquired except: (a) the sale of inventory in the ordinary course of business; (b) the sale of obsolete assets no longer used or usable in the business of ACC or any of its Subsidiaries; (c) the sale or discount without recourse of accounts receivable arising in the ordinary course of business in connection with the compromise or collection thereof; (d) the transfer by any Subsidiary of any of its property to a Wholly-Owned Subsidiary, ACC or the Borrower; (e) the disposition by ACC of a percentage of its equity ownership interest in ACC U.K. not to exceed 20% of such interest in connection with any joint venture investments permitted hereunder; and (f) the disposition by ACC of its entire equity ownership interest in ACC LEC as long as ACC demonstrates to the satisfaction of the Lenders that the purchase price therefor exceeds the cash value of the assets of ACC LEC and $1,500,000 of such purchase price is paid in cash in immediately available funds on the closing date of such sale. SECTION 9.7 LIMITATIONS ON DIVIDENDS AND DISTRIBUTIONS. Declare or pay any dividends upon any of its capital stock; purchase, redeem, retire or otherwise acquire, directly or indirectly, any shares of its capital stock, or make any distribution of cash, property or assets among the holders of shares of its capital stock; or make any material change in its capital structure that could reasonably be expected to have a Material Adverse Effect; PROVIDED that (a) any Borrower may pay dividends in shares of its own capital stock, (b) any Subsidiary of a Borrower may pay dividends or make other distributions in respect of its capital stock to such Borrower, (c) any Subsidiary of a Borrower may make payments on any Debt or other obligation owed to such Borrower which Debt or other obligation and such payment are permitted hereunder and any other applicable Loan Document and (d) as long as no Default or Event of Default has occurred and is continuing or would be created thereby, ACC may pay cash dividends on the Preferred Stock in accordance with the terms thereof on the Closing Date. SECTION 9.8 LIMITATIONS ON EXCHANGE AND ISSUANCE OF CAPITAL STOCK. Issue, sell or otherwise dispose of any class or series of capital stock that, by its terms or by the terms of any security into which it is convertible or exchangeable, is, or upon the happening of an event or passage of time would be, (a) convertible or exchangeable into Debt or (b) required to be redeemed or repurchased, including at the option of the holder, in whole or in part, or has, or upon the happening of an event or passage of time would have, a redemption or similar payment due, in any such case prior to ninety (90) days after the Termination Date. SECTION 9.9 TRANSACTIONS WITH AFFILIATES. Directly or indirectly: (a) make any loan or advance to, or purchase or assume any note or other obligation to or from, any of its officers, directors, shareholders or other Affiliates, or to or from any member of the immediate family of any of its officers, directors, shareholders or other Affiliates, or subcontract any operations to any of its Affiliates, or (b) enter into, or be a party to, any transaction with any of its Affiliates, except pursuant to the reasonable requirements of its business and upon fair and reasonable terms that are fully disclosed to the Required Lenders and are no less favorable to it than would obtain in a comparable arm's length transaction with a Person not its Affiliate. SECTION 9.10 CERTAIN ACCOUNTING CHANGES. Change its Fiscal Year end, or make any material change in its accounting treatment and reporting practices except as required by GAAP. SECTION 9.11 AMENDMENTS; PAYMENTS AND PREPAYMENTS OF SUBORDINATED DEBT. Amend or modify (or permit the modification or amendment of) any of the terms or provisions of any Subordinated Debt; or cancel or forgive, make any voluntary or optional payment or prepayment on, or redeem or acquire for value (including without limitation by way of depositing with any trustee with respect thereto money or securities before due for the purpose of paying when due) any Subordinated Debt. SECTION 9.12 LICENSES. Terminate any Communications License, PUC Authorization or other Governmental Approval or any Material Contract without the prior written consent of the Required Lenders if in the reasonable opinion of the Required Lenders such termination would have a Material Adverse Effect. SECTION 9.13 RESTRICTIVE AGREEMENTS. Enter into any Debt which contains any negative pledge on assets or any covenants materially more restrictive than the provisions of Articles VIII, IX and X hereof, or which restricts, limits or otherwise encumbers its ability to incur Liens on or with respect to any of its assets or properties other than the assets or properties securing such Debt. ARTICLE X UNCONDITIONAL GUARANTY SECTION 10.1 GUARANTY OF OBLIGATIONS. The Guarantor hereby unconditionally guarantees to the Administrative Agent for the ratable benefit of the Agents and the Lenders, and their respective successors, endorsees, transferees and assigns, the prompt payment and performance of all Obligations of the Borrowers (other than ACC), whether primary or secondary (whether by way of endorsement or otherwise), whether now existing or hereafter arising, whether or not from time to time reduced or extinguished (except by payment thereof) or hereafter increased or incurred, whether or not recovery may be or hereafter become barred by the statute of limitations, whether enforceable or unenforceable as against any such Borrower, whether or not discharged, stayed or otherwise affected by any bankruptcy, insolvency or other similar law or proceeding, whether created directly with any Agent or Lender or acquired by any Agent or Lender through assignment, endorsement or otherwise, whether matured or unmatured, whether joint or several, as and when the same become due and payable (whether at maturity or earlier, by reason of acceleration, mandatory repayment or otherwise), in accordance with the terms of any such instruments evidencing any such obligations, including all renewals, extensions or modifications thereof (all Obligations of each such Borrower to any Agent or Lender, including all of the foregoing, being hereinafter collectively referred to as the "Guaranteed Obligations"). SECTION 10.2 NATURE OF GUARANTY. The Guarantor agrees that this Guaranty is a continuing, unconditional guaranty of payment and performance and not of collection, and that its obligations under this Guaranty shall be primary, absolute and unconditional, irrespective of, and unaffected by (a) the genuineness, validity, regularity, enforceability or any future amendment of, or change in, this Agreement or any other Loan Document or any other agreement, document or instrument to which any such Borrower is or may become a party, (b) the absence of any action to enforce this Guaranty, this Agreement or any other Loan Document or the waiver or consent by the Administrative Agent or any Lender with respect to any of the provisions of this Guaranty, this Agreement or any other Loan Document, (c) the existence, value or condition of, or failure to perfect its Lien against, any security for or other guaranty of the Guaranteed Obligations or any action, or the absence of any action, by the Administrative Agent or any Lender in respect of such security or guaranty (including, without limitation, the release of any such security or guaranty) or (d) any other action or circumstances which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor; it being agreed by the Guarantor that its obligations under this Guaranty shall not be discharged until the final and indefeasible payment and performance, in full, of the Guaranteed Obligations and the termination of the Commitments. The Guarantor expressly waives all rights it may now or in the future have under any statute (including without limitation North Carolina General Statutes Section 26-7, ET SEQ. or similar law), or at law or in equity, or otherwise, to compel the Administrative Agent or any Lender to proceed in respect of the Guaranteed Obligations against any such Borrower or any other party or against any security for or other guaranty of the payment and performance of the Guaranteed Obligations before proceeding against, or as a condition to proceeding against, the Guarantor. The Guarantor further expressly waives and agrees not to assert or take advantage of any defense based upon the failure of the Administrative Agent or any Lender to commence an action in respect of the Guaranteed Obligations against any such Borrower, the Guarantor or any other party or any security for the payment and performance of the Guaranteed Obligations. The Guarantor agrees that any notice or directive given at any time to the Administrative Agent or any Lender which is inconsistent with the waivers in the preceding two sentences shall be null and void and may be ignored by the Administrative Agent or Lender, and, in addition, may not be pleaded or introduced as evidence in any litigation relating to this Guaranty for the reason that such pleading or introduction would be at variance with the written terms of this Guaranty, unless the Administrative Agent and the Required Lenders have specifically agreed otherwise in writing. The foregoing waivers are of the essence of the transaction contemplated by the Loan Documents and, but for this Guaranty and such waivers, the Agents and Lenders would decline to enter into this Agreement. SECTION 10.3 DEMAND BY THE ADMINISTRATIVE AGENT. In addition to the terms set forth in Section 10.2, and in no manner imposing any limitation on such terms, if all or any portion of the then outstanding Guaranteed Obligations under this Agreement are declared to be immediately due and payable, then the Guarantor shall, upon demand in writing therefor by the Administrative Agent to the Guarantor, pay all or such portion of the outstanding Guaranteed Obligations then declared due and payable. Payment by the Guarantor shall be made to the Administrative Agent, to be credited and applied upon the Guaranteed Obligations, in immediately available funds in the Permitted Currency in which the relevant Guaranteed Obligations are denominated to an account designated by the Administrative Agent or at the Administrative Agent's office or at any other address that may be specified in writing from time to time by the Administrative Agent. SECTION 10.4 WAIVERS. In addition to the waivers contained in Section 10.2, the Guarantor waives, and agrees that it shall not at any time insist upon, plead or in any manner whatever claim or take the benefit or advantage of, any appraisal, valuation, stay, extension, marshalling of assets or redemption laws, or exemption, whether now or at any time hereafter in force, which may delay, prevent or otherwise affect the performance by the Guarantor of its obligations under, or the enforcement by the Administrative Agent or the Lenders of, this Guaranty. The Guarantor further hereby waives diligence, presentment, demand, protest and notice of whatever kind or nature with respect to any of the Guaranteed Obligations and waives the benefit of all provisions of law which are or might be in conflict with the terms of this Guaranty. The Guarantor represents, warrants and agrees that its obligations under this Guaranty are not and shall not be subject to any counterclaims, offsets or defenses of any kind against the Administrative Agent, the Lenders or any such Borrower whether now existing or which may arise in the future. SECTION 10.5 MODIFICATION OF LOAN DOCUMENTS ETC. If the Administrative Agent or the Lenders shall at any time or from time to time, with or without the consent of, or notice to, the Guarantor (a) change or extend the manner, place or terms of payment of, or renew or alter all or any portion of, the Guaranteed Obligations, (b) take any action under or in respect of the Loan Documents in the exercise of any remedy, power or privilege contained therein or available to it at law, in equity or otherwise, or waive or refrain from exercising any such remedies, powers or privileges, (c) amend or modify, in any manner whatsoever, the Loan Documents, (d) extend or waive the time for performance by the Guarantor, any such Borrower or any other Person of, or compliance with, any term, covenant or agreement on its part to be performed or observed under a Loan Document (other than this Guaranty), or waive such performance or compliance or consent to a failure of, or departure from, such performance or compliance, (e) take and hold security or collateral for the payment of the Guaranteed Obligations or sell, exchange, release, dispose of, or otherwise deal with, any property pledged, mortgaged or conveyed, or in which the Administrative Agent or the Lenders have been granted a Lien, to secure any Debt of the Guarantor or any such Borrower to any Agent or the Lenders, (f) release anyone who may be liable in any manner for the payment of any amounts owed by the Guarantor or any such Borrower to any Agent or Lender, (g) modify or terminate the terms of any intercreditor or subordination agreement pursuant to which claims of other creditors of the Guarantor or any such Borrower are subordinated to the claims of any Agent or Lender or (h) apply any sums by whomever paid or however realized to any amounts owing by the Guarantor or any such Borrower to any Agent or Lender on account of the Obligations in such manner as the Administrative Agent or any Lender shall determine in its reasonable discretion; then neither the Administrative Agent nor any Lender shall incur any liability to the Guarantor as a result thereof, and no such action shall impair or release the obligations of the Guarantor under this Guaranty. SECTION 10.6 REINSTATEMENT. The Guarantor agrees that, if any payment made by any such Borrower or any other Person applied to the Obligations is at any time annulled, set aside, rescinded, invalidated, declared to be fraudulent or preferential or otherwise required to be refunded or repaid, or the proceeds of Collateral are required to be returned by any Agent or Lender to any such Borrower, its estate, trustee, receiver or any other party, including, without limitation, the Guarantor, under any Applicable Law or equitable cause, then, to the extent of such payment or repayment, the Guarantor's liability hereunder (and any Lien or Collateral securing such liability) shall be and remain in full force and effect, as fully as if such payment had never been made, and, if prior thereto, this Guaranty shall have been canceled or surrendered (and if any Lien or Collateral securing the Guarantor's liability hereunder shall have been released or terminated by virtue of such cancellation or surrender), this Guaranty (and such Lien or Collateral) shall be reinstated in full force and effect, and such prior cancellation or surrender shall not diminish, release, discharge, impair or otherwise affect the obligations of the Guarantor in respect of the amount of such payment (or any Lien or Collateral securing such obligation). SECTION 10.7 NO SUBROGATION. Until all amounts owing to the Agents and Lenders on account of the Obligations are paid in full and the Commitments are terminated, the Guarantor hereby waives any claims or other rights which it may now or hereafter acquire against any such Borrower that arise from the existence or performance of the Guarantor's obligations under this Guaranty, including, without limitation, any right of subrogation, reimbursement, exoneration, indemnification, any right to participate in any claim or remedy of the Administrative Agent or the Lenders against any such Borrower or any Collateral which the Administrative Agent or the Lenders now have or may hereafter acquire, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, by any payment made hereunder or otherwise, including without limitation, the right to take or receive from any such Borrower, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights. If any amount shall be paid to the Guarantor on account of such rights at any time when all of the Obligations shall not have been paid in full, such amount shall be held by the Guarantor in trust for the Administrative Agent, segregated from other funds of the Guarantor, and shall, forthwith upon receipt by the Guarantor, be turned over to the Administrative Agent in the exact form received by the Guarantor (duly indorsed by the Guarantor to the Administrative Agent, if required) to be applied against the Obligations, whether matured or unmatured, in such order as set forth herein. ARTICLE XI DEFAULT AND REMEDIES SECTION 11.1 EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default, whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any Governmental Authority or otherwise: (a) DEFAULT IN PAYMENT OF PRINCIPAL OF LOANS. Any Borrower shall default in any payment of principal of any Loan or Note when and as due (whether at maturity, by reason of acceleration or otherwise). (b) OTHER PAYMENT DEFAULT. Any Borrower shall default in the payment when and as due (whether at maturity, by reason of acceleration or otherwise) of interest on any Loan or Note or the payment of any other Obligation, and such default shall continue unremedied for five (5) Business Days. (c) MISREPRESENTATION. Any representation or warranty made or deemed to be made by any Borrower or any of its Subsidiaries under this Agreement, any Loan Document or any amendment hereto or thereto, shall at any time prove to have been incorrect or misleading in any material respect when made or deemed made. (d) DEFAULT IN PERFORMANCE OF CERTAIN COVENANTS. Any Borrower shall default in the performance or observance of any covenant or agreement contained in Sections 6.5(e) or 7.12 or Articles VIII or IX of this Agreement. (e) DEFAULT IN PERFORMANCE OF OTHER COVENANTS AND CONDITIONS. Any Borrower or Subsidiary thereof shall default in the performance or observance of any term, covenant, condition or agreement contained in this Agreement (other than as specifically provided for otherwise in this Section 11.1) or any other Loan Document and such default shall continue for a period of thirty (30) days after written notice thereof has been given to such Borrower by the Administrative Agent. (f) HEDGING AGREEMENT. Any termination payment shall be due by a Borrower under any Hedging Agreement and such amount is not paid within ten (10) Business Days of the due date thereof. (g) DEBT CROSS-DEFAULT. ACC or any of its Subsidiaries shall (i) default in the payment of any Debt (other than the Notes) the aggregate outstanding amount of which is in excess of $250,000 (or the equivalent thereof in any foreign currency) beyond the period of grace if any, provided in the instrument or agreement under which such Debt was created; or (ii) default in the observance or performance of any other agreement or condition relating to any Debt (other than the Notes) the aggregate outstanding amount of which is in excess of $250,000 (or the equivalent thereof in any foreign currency) or contained in any instrument or agreement evidencing, securing or relating thereto or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Debt (or a trustee or agent on behalf of such holder or holders) to cause, with the giving of notice if required, any such Debt to become due prior to its stated maturity (any applicable grace period having expired). (h) OTHER CROSS-DEFAULTS. ACC or any of its Subsidiaries shall default in the payment when due, or in the performance or observance, of any obligation or condition of any Material Contract the breach of which could reasonably be expected to have a Material Adverse Effect unless, but only as long as, the existence of any such default is being contested by ACC or such Subsidiary in good faith by appropriate proceedings and adequate reserves in respect thereof have been established on the books of ACC or such Subsidiary to the extent required by GAAP. (i) CHANGE IN CONTROL. Any person or group of persons (within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended) other than current management thereof, shall obtain ownership or control in one or more series of transactions of more than twenty percent (20%) of the common stock and twenty percent (20%) of the voting power of ACC entitled to vote in the election of members of the board of directors of ACC or there shall have occurred under any indenture or other instrument evidencing any Debt in excess of $250,000 (or the equivalent thereof in any foreign currency) any "change in control" (as defined in such indenture or other evidence of Debt) obligating ACC to repurchase, redeem or repay all or any part of the Debt or capital stock provided for therein (any such event, a "Change in Control"). (j) VOLUNTARY BANKRUPTCY PROCEEDING. Any Borrower or Subsidiary thereof shall (i) commence a voluntary case under the federal bankruptcy laws (as now or hereafter in effect); (ii) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition for adjustment of debts; (iii) consent to or fail to contest within sixty (60) days of the filing thereof any petition filed against it in an involuntary case under such bankruptcy laws or other laws; (iv) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of a substantial part of its property, domestic or foreign; (v) admit in writing its inability to pay its debts as they become due; (vi) make a general assignment for the benefit of creditors; or (vii) take any corporate action for the purpose of authorizing any of the foregoing. (k) INVOLUNTARY BANKRUPTCY PROCEEDING. A case or other proceeding shall be commenced against any Borrower or Subsidiary thereof in any court of competent jurisdiction seeking (i) relief under the federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or adjustment of debts; or (ii) the appointment of a trustee, receiver, custodian, liquidator or the like for any Borrower or Subsidiary thereof or for all or any substantial part of their respective assets, domestic or foreign, and such case or proceeding shall continue undismissed or unstayed for a period of sixty (60) consecutive calendar days, or an order granting the relief requested in such case or proceeding (including, but not limited to, an order for relief under such federal bankruptcy laws) shall be entered. (l) FAILURE OF AGREEMENTS. Any material provision of this Agreement or of any other Loan Document shall for any reason cease to be valid and binding on any Borrower or Subsidiary thereof or any such Person shall so state in writing, or this Agreement or any other Loan Document shall for any reason cease to create a valid and perfected first priority Lien on, or security interest in, any of the Collateral purported to be covered thereby, in each case other than in accordance with the express terms hereof or thereof. (m) TERMINATION EVENT. The occurrence of any of the following events: (i) ACC or any ERISA Affiliate fails to make full payment when due of all amounts which, under the provisions of any Pension Plan or Section 412 of the Code, ACC or any ERISA Affiliate is required to pay as contributions thereto; (ii) an accumulated funding deficiency in excess of $250,000 occurs or exists, whether or not waived, with respect to any Pension Plan; (iii) a Termination Event; or (iv) ACC or any ERISA Affiliate as employers under one or more Multiemployer Plan makes a complete or partial withdrawal from any such Multiemployer Plan and the plan sponsor of such Multiemployer Plans notifies such withdrawing employer that such employer has incurred a withdrawal liability requiring payments in an amount exceeding $250,000. (n) JUDGMENT. A judgment or order for the payment of money which exceeds $250,000 in amount shall be entered against the ACC or any of its Subsidiaries by any court and such judgment or order shall continue undischarged or unstayed for a period of thirty (30) days. (o) LOSS OF LICENSE. Any Communications License or PUC Authorization of ACC or any Subsidiary thereof shall expire, terminate, be canceled or otherwise lost or any application therefor be rejected, which event could reasonably be expected to have a Material Adverse Effect. (p) CONVERSION. The Fleet Venture Notes shall not convert into the Preferred Stock in accordance with the terms thereof prior to August 1, 1995. (q) GOVERNMENTAL APPROVALS. Each Governmental Approval referred to in Section 7.12(b) shall not have been delivered to the Administrative Agent within one hundred and eighty (180) days of the date hereof. SECTION 11.2 REMEDIES. Upon the occurrence of an Event of Default, with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrowers: (a) ACCELERATION; TERMINATION OF FACILITIES. Declare the principal of and interest on the Loans and the Notes at the time outstanding, and all other amounts owed to the Lenders and to the Agents under this Agreement or any of the other Loan Documents and all other Obligations, to be forthwith due and payable, whereupon the same shall immediately become due and payable without presentment, demand, protest or other notice of any kind, all of which are expressly waived, anything in this Agreement or the other Loan Documents to the contrary notwithstanding, and terminate the Credit Facility and any right of the Borrower to request borrowings or Letters of Credit thereunder; PROVIDED, that upon the occurrence of an Event of Default specified in Section 11.1(j) or (k), the Credit Facility shall be automatically terminated and all Obligations shall automatically become due and payable. (b) RIGHTS OF COLLECTION. Exercise on behalf of the Lenders all of its other rights and remedies under this Agreement, the other Loan Documents and Applicable Law, in order to satisfy all of the Borrower's Obligations. SECTION 11.3 RIGHTS AND REMEDIES CUMULATIVE; NON-WAIVER; ETC. The enumeration of the rights and remedies of the Agents and the Lenders set forth in this Agreement is not intended to be exhaustive and the exercise by the Agents and the Lenders of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative, and shall be in addition to any other right or remedy given hereunder or under the Loan Documents or that may now or hereafter exist in law or in equity or by suit or otherwise. No delay or failure to take action on the part of any Agent or Lender in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude other or further exercise thereof or the exercise of any other right, power or privilege or shall be construed to be a waiver of any Event of Default. No course of dealing between the Borrowers, the Agents and the Lenders or their respective agents or employees shall be effective to change, modify or discharge any provision of this Agreement or any of the other Loan Documents or to constitute a waiver of any Event of Default. In addition, any election of remedies which results in the denial or impairment of the right of the Administrative Agent to seek a deficiency judgment against any Borrower referred to in Section 10.1 shall not impair the Guarantor's obligation to pay the full amount of the Guaranteed Obligations. SECTION 11.4 CONSENTS. The Borrowers acknowledge that certain transactions contemplated by this Agreement and the other Loan Documents and certain actions which may be taken by the Agents or the Lenders in the exercise of their respective rights under this Agreement and the other Loan Documents may require the consent of a Governmental Authority. If counsel to any Agent reasonably determines that the consent of a Governmental Authority is required in connection with the execution, delivery and performance of any of the aforesaid documents or any documents delivered to the Agents or the Lenders in connection therewith or as a result of any action which may be taken pursuant thereto, then the Borrowers, at their sole cost and expense, agree to use their best efforts to secure such consent and to cooperate with the Agents and the Lenders in any action commenced by any Agent or Lender to secure such consent. SECTION 11.5 JUDGMENT CURRENCY. The obligation of the Borrowers to make payments of the principal of and interest on the Notes and any other amounts payable hereunder in the currency specified for such payment herein or in the Notes shall not be discharged or satisfied by any tender, or any recovery pursuant to any judgment, which is expressed in or converted into any other currency, except to the extent that such tender or recovery shall result in the actual receipt by each of the Administrative Agent and Lenders of the full amount of the particular Permitted Currency expressed to be payable herein or in the Notes. The Administrative Agent shall, using all amounts obtained or received from the Borrowers pursuant to any such tender or recovery in payment of principal of and interest on the Notes, promptly purchase the applicable Permitted Currency at the most favorable spot exchange rate determined by the Administrative Agent to be available to it. The obligation of the Borrowers to make payments in the applicable Permitted Currency shall be enforceable as an alternative or additional cause of action solely for the purpose of recovering in the applicable Permitted Currency the amount, if any, by which such actual receipt shall fall short of the full amount of the Permitted Currency expressed to be payable herein or in the Notes. SECTION 11.6 ADJUSTMENTS. If any Lender (a "Benefitted Lender") shall at any time receive any payment of all or part of its Loans, or interest thereon, or if any Lender shall at any time receive any Collateral in respect to its Loans (whether voluntarily or involuntarily, by set-off or otherwise) in a greater proportion than any such payment to and Collateral received by any other Lender, if any, in respect of such other Lender's Loans, or interest thereon, such Benefitted Lender shall purchase for cash from the other Lenders such portion of each such other Lender's Loans, or shall provide such other Lenders with the benefits of any such Collateral, or the proceeds thereof, as shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such Collateral or proceeds ratably with each of the Lenders; PROVIDED, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned to the extent of such recovery, but without interest. The Borrower agrees that each Lender so purchasing a portion of another Lender's Loans may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion. ARTICLE XII THE AGENTS SECTION 12.1 APPOINTMENT. Each of the Lenders hereby irrevocably designates and appoints First Union as Administrative Agent and Managing Agent of such Lender and Shawmut Bank Connecticut, N.A. as Managing Agent of such Lender under this Agreement and the other Loan Documents and each such Lender irrevocably authorizes First Union as Administrative Agent, and Shawmut Bank Connecticut, N.A. as Managing Agent, respectively, for such Lender, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to each such Agent by the terms of this Agreement and such other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement or such other Loan Documents, none of the Agents shall have any duties or responsibilities, except those expressly set forth herein and therein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or the other Loan Documents or otherwise exist against such Agent. To the extent any provision of this Agreement permits action by any Agent, such Agent shall, subject to the provisions of Section 13.11 hereof and of this Article XII, take such action if directed in writing to do so by the Required Lenders. SECTION 12.2 DELEGATION OF DUTIES. Each of the Agents may execute any of its respective duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. No Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by such Agent with reasonable care. SECTION 12.3 EXCULPATORY PROVISIONS. Neither any Agent nor any of its officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or Affiliates shall be (a) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or the other Loan Documents (except for its or such Person's own gross negligence or willful misconduct), or (b) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrowers or any of their Subsidiaries or any officer thereof contained in this Agreement or the other Loan Documents or in any certificate, report, statement or other document referred to or provided for in, or received by such Agent under or in connection with, this Agreement or the other Loan Documents or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or the other Loan Documents or for any failure of the Borrowers or any of their Subsidiaries to perform its obligations hereunder or thereunder. No Agent shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement, or to inspect the properties, books or records of the Borrowers or any of their Subsidiaries. SECTION 12.4 RELIANCE BY AGENTS. Each of the Agents shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrowers), independent accountants and other experts selected by any Agent. Each of the Agents may deem and treat the payee of any Note as the owner thereof for all purposes unless such Note shall have been transferred in accordance with Section 13.10 hereof. Each of the Agents shall be fully justified in failing or refusing to take any action under this Agreement and the other Loan Documents unless it shall first receive such advice or concurrence of the Required Lenders (or, when expressly required hereby or by the relevant other Loan Document, all the Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action except for its own gross negligence or willful misconduct. Each of the Agents shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the Notes in accordance with a request of the Required Lenders (or, when expressly required hereby, all the Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Notes. SECTION 12.5 NOTICE OF DEFAULT. None of the Agents shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless it has received notice from a Lender or a Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that any Agent receives such a notice, it shall promptly give notice thereof to the Administrative Agent who shall promptly give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; PROVIDED that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. SECTION 12.6 NON-RELIANCE ON SUCH AGENTS AND OTHER LENDERS. Each Lender expressly acknowledges that none of the Agents nor any of their respective officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or Affiliates has made any representations or warranties to it and that no act by any Agent hereinafter taken, including any review of the affairs of the Borrowers or any of its Subsidiaries, shall be deemed to constitute any representation or warranty by such Agent to any Lender. Each Lender represents to the Agents that it has, independently and without reliance upon the Agents or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrowers and their Subsidiaries and made its own decision to make its Loans and issue or participate in Letters of Credit hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrowers and their Subsidiaries. Except for notices, reports and other documents expressly required to be furnished to the Lenders by any Agent hereunder or by the other Loan Documents, no Agent shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Borrowers or any of their Subsidiaries which may come into the possession of such Agent or any of its respective officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or Affiliates. SECTION 12.7 INDEMNIFICATION. The Lenders agree to indemnify the Administrative Agent and the Managing Agents in their capacities as such and (to the extent not reimbursed by the Borrowers and without limiting the obligation of the Borrowers to do so), ratably according to the respective amounts of their Commitment Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Notes) be imposed on, incurred by or asserted against any such Agent in any way relating to or arising out of this Agreement or the other Loan Documents, or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent under or in connection with any of the foregoing; PROVIDED that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from such Agent's bad faith, gross negligence or willful misconduct. The agreements in this Section 13.7 shall survive the payment of the Notes and all other amounts payable hereunder and the termination of this Agreement. SECTION 12.8 EACH OF THE AGENTS IN ITS INDIVIDUAL CAPACITY. Each Agent and its respective Subsidiaries and Affiliates may make loans to, accept deposits from and generally engage in any kind of business with each Borrower as though such Agent were not an Agent hereunder. With respect to any Loans made or renewed by it and any Note issued to it, each Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not an Agent, and the terms "Lender" and "Lenders" shall include the Administrative Agents and the Managing Agents in their individual capacity. SECTION 12.9 RESIGNATION OF AGENTS; SUCCESSOR AGENTS. Each Managing Agent may resign as such Agent at any time by giving notice thereof to the Lenders and the Borrowers. If both Managing Agents have resigned, the Administrative Agent shall serve as a Managing Agent hereunder. Subject to the appointment and acceptance of a successor as provided below, the Administrative Agent may resign at any time by giving notice thereof to the Lenders and the Borrowers. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Administrative Agent which successor shall have minimum capital and surplus of at least $500,000,000 and be consented to by the Borrowers, such consent not to be unreasonably withheld. If no successor Administrative Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent's giving of notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which successor shall have minimum capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent such successor Administrative Agent shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent the provisions of this Section 12.9 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. ARTICLE XIII MISCELLANEOUS SECTION 13.1 NOTICES. (a) METHOD OF COMMUNICATION. Except as otherwise provided in this Agreement, all notices and communications hereunder shall be in writing, or by telephone subsequently confirmed in writing. Any notice shall be effective if delivered by hand delivery or sent via telecopy, recognized overnight courier service or certified mail, return receipt requested, and shall be presumed to be received by a party hereto (i) on the date of delivery if delivered by hand or sent by telecopy, (ii) on the next Business Day if sent by recognized overnight courier service and (iii) on the third Business Day following the date sent by certified mail, return receipt requested. A telephonic notice to any Agent as understood by such Agent will be deemed to be the controlling and proper notice in the event of a discrepancy with or failure to receive a confirming written notice. (b) ADDRESSES FOR NOTICES. Notices to any party shall be sent to it at the following addresses, or any other address as to which all the other parties are notified in writing. If to any Borrower: ACC Corp. 400 West Avenue Rochester, New York 14611 Attention: Michael R. Daley, Executive Vice President and Chief Financial Officer Telephone No.: (716) 987-3175 Telecopy No.: (716) 987-3335 With copies to: Underberg & Kessler 1800 Chase Square Rochester, New York 14604 Attention: Stephen H. Waite, Esq. Telephone No.: (716) 258-2826 Telecopy No.: (716) 258-2821 If to First Union as First Union National Bank of Administrative Agent North Carolina or Managing Agent: One First Union Center, TW-19 301 S. College Street Charlotte, North Carolina 28288-0735 Attention: John Butler Telephone No.: (704) 374-6471 Telecopy No.: (704) 374-4092 If to Shawmut Bank Shawmut Bank Connecticut, N.A. Connecticut, N.A. 777 Main Street, MSN 397 as Managing Agent: Hartford, Connecticut 06115 Attention: Wendy Klepper Telephone No.: (203) 986-1128 Telecopy No.: (203) 986-5637 If to any Lender: The Address set forth on SCHEDULE 1.1 (c) ADMINISTRATIVE AGENT'S OFFICE. The Administrative Agent hereby designates its office located at the address set forth above, or any subsequent office which shall have been specified for such purpose by written notice to the Borrowers and Lenders, as the Administrative Agent's Office referred to herein, to which payments due are to be made and at which Loans will be disbursed and Letters of Credit issued. SECTION 13.2 EXPENSES. (a) The Borrowers will pay all reasonable out-of-pocket expenses of (i) the Managing Agents in connection with the preparation, execution and delivery of this Agreement and each of the other Loan Documents, whenever the same shall be executed and delivered, including all out-of-pocket syndication and due diligence expenses, appraiser's fees, search fees, title insurance premiums, recording fees, taxes and reasonable fees and disbursements of counsel for the Managing Agents; (ii) the Managing Agents in connection with the preparation, execution and delivery of any waiver, amendment or consent by the Agents or the Lenders relating to this Agreement or any of the other Loan Documents including reasonable fees and disbursements of counsel for the Agents, search fees, appraiser's fees, recording fees and taxes imposed in connection therewith; and (iii) the Managing Agents in connection with administering and enforcing their respective rights under the Credit Facility, including consulting with one or more Persons, including appraisers, accountants, engineers and attorneys, concerning or related to the nature, scope or value of any right or remedy of any Agent or any of the Lenders hereunder or under any of the other Loan Documents, including any review of factual matters in connection therewith, which expenses shall include the reasonable fees and disbursements of such Persons. (b) The Guarantor agrees that it will reimburse each Agent and Lender for all expenses (including reasonable attorneys fees and expenses) incurred by each Agent or Lender in connection with the obligations of the Guarantor under the Guaranty and any other Loan Documents and all expenses (including reasonable attorneys fees and expenses) incurred by the Administrative Agent, any Agent or any Lender in connection with the enforcement of the Guaranty. SECTION 13.3 SET-OFF. In addition to any rights now or hereafter granted under Applicable Law and not by way of limitation of any such rights, upon and after the occurrence of any Event of Default and during the continuance thereof, the Lenders and any assignee or participant of a Lender in accordance with Section 13.10 are hereby authorized by the Borrowers at any time or from time to time, without notice to the Borrowers or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, time or demand, including, but not limited to, indebtedness evidenced by certificates of deposit, whether matured or unmatured, excluding government securities required by Applicable Law to be held as security for worker's compensation and similar claims) and any other indebtedness at any time held or owing by the Lenders, or any such assignee or participant to or for the credit or the account of a Borrower against and on account of the Obligations of such Borrower irrespective of whether or not (a) the Lenders shall have made any demand under this Agreement or any of the other Loan Documents or (b) the Administrative Agent shall have declared any or all of the Obligations to be due and payable as permitted by Section 11.2 and although such Obligations shall be contingent or unmatured. SECTION 13.4 GOVERNING LAW. This Agreement, the Notes and the other Loan Documents, unless otherwise expressly set forth therein, shall be governed by, construed and enforced in accordance with the laws of the State of North Carolina, without reference to the conflicts or choice of law principles thereof. SECTION 13.5 CONSENT TO JURISDICTION. The Borrowers hereby irrevocably consent to the personal jurisdiction of the state and federal courts located in Mecklenburg County, North Carolina, in any action, claim or other proceeding arising out of any dispute in connection with this Agreement, the Notes and the other Loan Documents, any rights or obligations hereunder or thereunder, or the performance of such rights and obligations. The Borrowers hereby irrevocably consent to the service of a summons and complaint and other process in any action, claim or proceeding brought by any Agent or Lender in connection with this Agreement, the Notes or the other Loan Documents, any rights or obligations hereunder or thereunder, or the performance of such rights and obligations, on behalf of itself or its property, in the manner specified in Section 13.1. Nothing in this Section 13.5 shall affect the right of any Agent or Lender to serve legal process in any other manner permitted by Applicable Law or affect the right of any Agent or Lender to bring any action or proceeding against any Borrower or its properties in the courts of any other jurisdictions. SECTION 13.6 WAIVER OF JURY TRIAL. EACH AGENT, LENDER AND EACH BORROWER HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. SECTION 13.7 REVERSAL OF PAYMENTS. To the extent any Borrower makes a payment or payments to the Administrative Agent or other Agent for the ratable benefit of the Lenders (or the other Agents) or the Administrative Agent or other Agent receives any payment or proceeds of the Collateral which payments or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds repaid, the Obligations or part thereof intended to be satisfied shall be revived and continued in full force and effect as if such payment or proceeds had not been received by any Agent. SECTION 13.8 INJUNCTIVE RELIEF. The Borrowers recognize that, in the event the Borrowers fail to perform, observe or discharge any of their obligations or liabilities under this Agreement, any remedy of law may prove to be inadequate relief to the Lenders. Therefore, the Borrowers agree that the Lenders, at the Lenders' option, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages. SECTION 13.9 ACCOUNTING MATTERS. All financial and accounting calculations, measurements and computations made for any purpose relating to this Agreement, including, without limitation, all computations utilized by ACC or any Subsidiary thereof to determine compliance with any covenant contained herein, shall, except as otherwise expressly contemplated hereby or unless there is an express written direction by the Administrative Agent to the contrary agreed to by the Borrowers, be performed in accordance with GAAP. In the event that changes in GAAP shall be mandated by the Financial Accounting Standards Board, or any similar accounting body of comparable standing, or shall be recommended by ACC's certified public accountants, to the extent that such changes would modify such accounting terms or the interpretation or computation thereof, such changes shall be followed in defining such accounting terms only from and after the date the Credit and the Lenders shall have amended this Agreement to the extent necessary to reflect any such changes in the financial covenants and other terms and conditions of this Agreement. SECTION 13.10 SUCCESSORS AND ASSIGNS; PARTICIPATIONS. (a) BENEFIT OF AGREEMENT. This Agreement shall be binding upon and inure to the benefit of the Borrowers, each Agent and the Lenders, all future holders of the Notes, and their respective successors and assigns, except that no Borrower shall assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. Nothing set forth in the Guaranty shall impair, as between the Borrowers, the Agents and the Lenders, the obligations of the Borrowers hereunder and under the other Loan Documents. (b) ASSIGNMENT BY LENDERS. Each Lender may, with the consent of the Agents and ACC, which consents shall not be unreasonably withheld, assign to one or more Eligible Assignees all or a portion of its interests, rights and obligations under this Agreement (including, without limitation, all or a portion of the Loans at the time owing to it and the Notes held by it); PROVIDED that: (i) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Lender's rights and obligations under this Agreement; (ii) the Commitment so assigned shall not be less than $5,000,000; (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance in the form of EXHIBIT E attached hereto (an "Assignment and Acceptance"), together with any Note or Notes subject to such assignment; (iv) such assignment shall not, without the consent of the applicable Borrower, require such Borrower to file a registration statement with the Securities and Exchange Commission or apply to or qualify the Loans or the Notes under the blue sky laws of any state; and (v) the assigning Lender shall pay to the Administrative Agent an assignment fee of $2,500 upon the execution by such Lender of the Assignment and Acceptance; PROVIDED that no such fee shall be payable upon any assignment by a Lender to an Affiliate thereof. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five (5) Business Days after the execution thereof, (A) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereby and (B) the Lender thereunder shall, to the extent provided in such assignment, be released from its obligations under this Agreement. (c) RIGHTS AND DUTIES UPON ASSIGNMENT. By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrowers or their Subsidiaries or the performance or observance by the Borrowers and their Subsidiaries of any of their obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 5.1(o) and the most recent financial statements delivered to the Assignor pursuant to Section 6.1 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon any Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to such Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (d) REGISTER. The Administrative Agent shall maintain a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders and the amount of the Extensions of Credit with respect to each Lender from time to time (the "Register"). The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrowers, the Agents and the Lenders may treat each person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrowers or Lender at any reasonable time and from time to time upon reasonable prior notice. (e) ISSUANCE OF NEW NOTES. Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Eligible Assignee together with any Note or Notes subject to such assignment and the written consent to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is substantially in the form of EXHIBIT E: (i) accept such Assignment and Acceptance; (ii) record the information contained therein in the Register; (iii) give prompt notice thereof to the Lenders and the Borrowers; and (iv) promptly deliver a copy of such Assignment and Acceptance to ACC. Within five (5) Business Days after receipt of notice, ACC shall execute and deliver to the Administrative Agent, in exchange for the surrendered Note or Notes, a new Note or Notes to the order of such Eligible Assignee in amounts equal to the Commitment assumed by it pursuant to such Assignment and Acceptance and a new Note or Notes to the order of the assigning Lender in an amount equal to the Commitment retained by it hereunder. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of the assigned Notes delivered to the assigning Lender. Each surrendered Note or Notes shall be canceled and returned to ACC. (f) PARTICIPATIONS. Each Lender may, with the consent of the Agents and ACC, which consents shall not be unreasonably withheld, sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment and its Extensions of Credit and the Notes held by it); PROVIDED that: (i) each such participation shall be in an amount not less than $5,000,000; (ii) such Lender's obligations under this Agreement (including, without limitation, its Commitment) shall remain unchanged; (iii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations; (iv) such Lender shall remain the holder of the Notes held by it for all purposes of this Agreement; (v) the Borrowers, the Agents and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement; (vi) such Lender shall not permit such participant the right to approve any waivers, amendments or other modifications to this Agreement or any other Loan Document other than waivers, amendments or modifications which would reduce the principal of or the interest rate on any Loan, extend the term or increase the amount of the Commitment of such participant, reduce the amount of any fees to which such participant is entitled, extend any scheduled payment date for principal or, except as expressly contemplated hereby or thereby, release any Collateral or Security Document; and (vii) any such disposition shall not, without the consent of the applicable Borrower, require such Borrower to file a registration statement with the Securities and Exchange Commission to apply to qualify the Loans or the Notes under the blue sky law of any state. (g) DISCLOSURE OF INFORMATION; CONFIDENTIALITY. The Agents and the Lenders shall hold all non-public information obtained pursuant to the Loan Documents in accordance with their customary procedures for handling confidential information. Any Lender may, in connection with any assignment, proposed assignment, participation or proposed participation pursuant to this Section 13.10, disclose to the assignee, participant, proposed assignee or proposed participant, any information relating to the Borrowers furnished to such Lender by or on behalf of the Borrowers; PROVIDED, that prior to any such disclosure, each such assignee, proposed assignee, participant or proposed participant shall agree with the Borrowers or such Lender (which in the case of an agreement with only such Lender, the Borrowers shall be recognized as third party beneficiaries thereof) to preserve the confidentiality of any confidential information relating to the Borrowers received from such Lender. (h) CERTAIN PLEDGES OR ASSIGNMENTS. Nothing herein shall prohibit any Lender from pledging or assigning any Note to any Federal Reserve Bank in accordance with Applicable Law. SECTION 13.11 AMENDMENTS, WAIVERS AND CONSENTS; RENEWAL. (a) Except as set forth below, any term, covenant, agreement or condition of this Agreement or any of the other Loan Documents may be amended or waived by the Lenders, and any consent given by the Lenders, if, but only if, such amendment, waiver or consent is in writing signed by the Required Lenders (or by the Administrative Agent with the consent of the Required Lenders) and delivered to the Administrative Agent and, in the case of an amendment, signed by the Borrowers; PROVIDED, that no amendment, waiver or consent shall (i) increase the amount or extend the time of the obligation of the Lenders to make Loans, (ii) extend the originally scheduled time or times of payment of the principal of any Loan or the time or times of payment of interest on any Loan, (iii) reduce the rate of interest or fees payable on any Loan, (iv) permit any subordination of the principal or interest on any Loan, (v) release any Collateral or Security Document (other than as specifically permitted in this Agreement or the applicable Security Document) or (vi) amend the provisions of this Section 13.11 or the definition of Required Lenders, without the prior written consent of each Lender. In addition, no amendment, waiver or consent to the provisions of Article XIII shall be made without the written consent of the affected Agents. SECTION 13.12 PERFORMANCE OF DUTIES. The Borrowers' obligations under this Agreement and each of the Loan Documents shall be performed by the applicable Borrower at its sole cost and expense. SECTION 13.13 INDEMNIFICATION. The Borrowers agree to reimburse each Agent and the Lenders for all reasonable costs and expenses, including reasonable counsel, appraisal, or other expert or consultant fees and disbursements incurred, and to indemnify and hold each Agent and the Lenders harmless from and against all losses suffered by such Agent and the Lenders in connection with (a) the exercise by the Agents or the Lenders of any right or remedy granted to them under this Agreement or any of the other Loan Documents, (b) any claim, and the prosecution or defense thereof, arising out of or in any way connected with this Agreement or any of the other Loan Documents and (c) the collection or enforcement of the Obligations or any of them; PROVIDED, that the indemnity contained herein shall not apply to the extent that such losses, claims, damages, liabilities or other expenses result from the gross negligence or willful misconduct of such indemnified person; and further provided that, promptly after the receipt by an indemnified person of notice of any pending or threatened action with respect to which the indemnified person may claim indemnification under this Agreement (an "Action"), the indemnified person shall provide written notice thereof to ACC and ACC shall then be entitled, at its sole and reasonable discretion, to assume the defense of any such Action, with counsel reasonably satisfactory to the indemnified person. After written notice to the indemnified person from ACC of its election to assume the defense of such Action, ACC shall not be liable to such indemnified person for any legal expenses or fees of other counsel or any other expense incurred by such indemnified person in connection with the defense thereof after such date, except as provided below. The indemnified person shall cooperate with all reasonable requests of ACC regarding the defense of any such Action. Notwithstanding ACC's election to assume the defense thereof, however, the indemnified person shall have the right to employ separate counsel and to participate in, but not control, the defense of such action, and ACC shall pay the reasonable fees and expenses of such separate counsel (provided that with respect to any single Action, ACC shall not be required to bear the fees and expenses of more than one such counsel in any single jurisdiction) if (a) the use of counsel chosen by ACC to represent the indemnified person would present a conflict-of-interest in the reasonable determination of the indemnified person or such counsel, or (b) the defendants in or target of any such Action include both the indemnified person and ACC, and the indemnified person reasonably concluded that there may be legal defenses available to it that differ from or are in addition to those available to ACC. ACC shall not be liable for any settlement of any action effected by an indemnified person without ACC's prior written consent (which shall not be unreasonably withheld). SECTION 13.14 ALL POWERS COUPLED WITH INTEREST. All powers of attorney and other authorizations granted to the Lenders, each Agent and any Persons designated by such Agent or Lenders pursuant to any provisions of this Agreement or any of the other Loan Documents shall be deemed coupled with an interest and shall be irrevocable so long as any of the Obligations remain unpaid or unsatisfied or the Credit Facility has not been terminated. SECTION 13.15 SURVIVAL OF INDEMNITIES. Notwithstanding any termination of this Agreement, the indemnities to which the Agents and the Lenders are entitled under the provisions of this Article XIII and any other provision of this Agreement and the Loan Documents shall continue in full force and effect and shall protect the Agents and the Lenders against events arising after such termination as well as before. SECTION 13.16 TITLES AND CAPTIONS. Titles and captions of Articles, Sections and subsections in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement. SECTION 13.17 SEVERABILITY OF PROVISIONS. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remainder of such provision or the remaining provisions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 13.18 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and shall be binding upon all parties, their successors and assigns, and all of which taken together shall constitute one and the same agreement. SECTION 13.19 ACC AS AGENT FOR OTHER BORROWERS. Each Borrower hereby appoints and authorizes ACC (a) to provide the Administrative Agent with all notices with respect to Loans for the benefit of any other Borrower and all other notices and instructions under this Agreement and (b) to take such action on behalf of such Borrowers as ACC deems appropriate to obtain Loans and to exercise such other powers as are reasonably incidental to carry out the purposes of this Agreement (including without limitation acceptance of service of process for each other Borrower and Subsidiary under Section 13.5). This appointment shall be irrevocable and coupled with an interest. SECTION 13.20 TERM OF AGREEMENT. This Agreement shall remain in effect from the Closing Date through and including the date upon which all Obligations shall have been indefeasibly and irrevocably paid and satisfied in full. No termination of this Agreement shall affect the rights and obligations of the parties hereto arising prior to such termination. C:\TPY\ACC\CRA. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers, all as of the day and year first written above. [CORPORATE SEAL] ACC CORP. By: /s/ John J. Zimmer Name:Jphn J. Zimmer Title: VP-Finance [CORPORATE SEAL] ACC LONG DISTANCE CORP. By: /s/ John J. Zimmer Name: John J. Zimmer Title:Controller [CORPORATE SEAL] ACC NATIONAL TELECOM CORP. By: /s/ John J. Zimmer Name: John J. Zimmer Title:Controller [CORPORATE SEAL] ACC LONG DISTANCE OF MASSACHUSETTS CORP. By: /s/ John J. Zimmer Name: John J. Zimmer Title:Controller [CORPORATE SEAL] ACC RADIO CORP. By: /s/ John J. Zimmer Name: John J. Zimmer Title:Controller [CORPORATE SEAL] ACC NATIONAL LONG DISTANCE CORP. By: /s/ John J. Zimmer Name: John J. Zimmer Title:Controller [CORPORATE SEAL] ACC LONG DISTANCE U.K., LTD. By: /s/ John J. Zimmer Name: John J. Zimmer Title: Attorney FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as Administrative Agent, Managing Agent and Lender By: /s/ Jim F. Redman Name: Jim F. Redman Title: Sr. VP SHAWMUT BANK CONNECTICUT, N.A., as Managing Agent and Lender By: /s/ Robert F. West Name: Robert F. West Title: Director C:\TPY\ACC\CRA. SCHEDULE 1.1: LENDERS AND COMMITMENTS
Commitment LENDER COMMITMENT PERCENTAGE First Union National Bank $17,500,000 50% of North Carolina One First Union Center, TW-19 301 S. College Street Charlotte, North Carolina 28288-0735 Attention: John Butler Telephone No.: (704) 3374-6471 Telecopy No.: (704) 374-4092 Shawmut Bank Connecticut, N.A. 777 main Street, MSN 397 Hartford, Connecticut 06115 $17,500,00 50% Attention: Wendy Klepper Telephone No.: (203) 986-1128 Telecopy No.: (203) 986-5637
C:\TPY\ACC\CRA. SCHEDULE 1.2 : SUBLIMITS
BORROWER SUBLIMIT ACC U.K. and any Additional Borrower which is a $5,000,000 U.K. Borrower ACC LEC $2,000,000 ACC, ACC U.S., ACC Mass., ACC Radio, ACC National $35,000,000 LESS outstandings to all other and any Additional Borrower who is a Domestic Borrowers Borrower
SCHEDULE 1.3: CANADIAN SUBSIDIARY SECURITY DOCUMENTS (a) Quebec Security Documents (i) Hypothec by Canadian Subsidiaries (ii) Landlord Agreement (b) Ontario Security Documents (i) Security Agreement (ii) Notice of Security Interest in Fixtures (Toronto Street Property) (iii)Leasehold Mortgage (Dundas Street) (iv) Landlord Agreement (Dundas Street) (v) Acknowledgement of Standard Charges (Dundas Street) (vi)Leasehold Mortgage (Toronto Street) (vii)Landlord Agreement (Toronto Street) (viii)Acknowledgement of Standard Charges (Toronto Street) (ix) Share Pledge by ACC Canada (x)Share Transfer Power of Attorney by ACC Canada (xi)Confirmation and Consent by ACC Ltd. to Share Pledge by ACC Canada (xii)Resolutions of directors of ACC Ltd. authorizing pledge (xiii)Share Pledge by ACC Ltd. (xiv) Share Transfer Power of Attorney By ACC Ltd. (xv)Confirmation and Consent by ACC Inc. to Share Pledge by ACC Ltd. (xvi)Resolutions of directors of ACC Inc. authorizing Pledge (xvii)Currency Indemnity Agreement (c) British Columbia Security Documents (i) Security Agreement (ii) Leasehold Mortgage (iii)Equitable Mortgage (iv) Landlord Agreement (v) Statutory Declaration by ACC (re: Leasehold Mortgage) (vi)Notice of Security Interest in Fixtures (vii)Acknowledgement of Mortgage Terms Note: The Registrant agrees to furnish supplementally to the Commission a copy of any omitted schedules or exhibits to this Agreement upon request. EX-10 6 Exhibit 10-2 EMPLOYMENT AGREEMENT AGREEMENT made by and between ACC CORP., 400 West Avenue, Rochester, New York 14611 ("ACC") and David K. Laniak, residing at 10 Harvest Lane, Rush, New York 14543 ("Employee"). 1. DEFINITIONS. The following terms shall have the following meanings in this Agreement: (a) "ACQUIRING ENTITY" shall mean any entity, whether a corporation, partnership, joint venture, etc., that, as a result of a Change In Control, either directly or indirectly has effective control over the business plans, direction and operations of ACC Corp. This term shall also include any subsidiaries or related entities over which the Acquiring Entity has control, and shall also include any entity that, within one year following a Change In Control of ACC Corp., acquires control over the entity that acquired control of ACC Corp. (b) "BENEFITS" shall mean all benefits described in Paragraph 4 hereof. The term "Benefits" does not include any amounts deemed Compensation, nor the continuation of any disability, health, dental or life insurance coverage beyond the terms of the policies for such insurance as the same may exist on the effective date of an Event of Termination. (c) "CHANGE IN RESPONSIBILITIES" shall mean that the Company's Board of Directors, in circumstances NOT involving a Change in Control, takes action so as to significantly reduce the nature or scope of Employee's authority, power, functions or duties contemplated in Paragraph 2 hereof. (d) "CHANGE IN CONTROL" shall mean a change in control of ACC Corp. of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 as in effect on the date of this Agreement or, if in the future Item 6(e) is no longer in effect, any regulations issued by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 which serve similar purposes; provided that, without limitation, a Change In Control shall be deemed to have occurred if and when: (x) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934), other than the Employee, is or becomes a beneficial owner, directly or indirectly, of securities of ACC Corp. representing a majority of the combined voting power of ACC Corp.'s then outstanding securities (excluding, however, the transfer of any shares beneficially owned by the Employee); or (y) individuals who were members of the Board of Directors of ACC Corp. immediately prior to a meeting of the shareholders of ACC Corp. involving a contest for the election of Directors shall not constitute a majority of the Board of Directors following such election. The effective date of any such Change in Control shall be the closing date of the transaction that results in the Change in Control. The terms of this subparagraph (c) shall also apply to any change in control of any entity that acquires control of an Acquiring Entity within one year following the acquisition by the Acquiring Entity of control of ACC Corp. (e) "COMMITTEE" shall mean the Executive Compensation Committee of the ACC Corp. Board of Directors. (f) "COMPANY" shall mean ACC Corp. and/or any of its subsidiaries and/or affiliates incorporated under the laws of any state of the United States as the same may exist from time to time; EXCEPT that, for purposes of Paragraphs 13 and 14 hereof, "Company" shall mean ACC Corp. and/or any of its subsidiaries and/or affiliates as the same may exist from time to time anywhere in the world, regardless of the laws under which incorporated. (g) "COMPENSATION" shall mean the Employee's salary, accrued bonuses, if any, and any stock options held by or awards granted to Employee under the Company's Employee Long Term Incentive Plan or other stock option or similar Company plan in effect from time to time, and shall expressly include the items described in Paragraph 3 hereof, but shall exclude any Benefits. (h) "DISABILITY" shall mean the Employee's total inability, due to a mental or physical illness, incapacity or injury, to render his full-time services to the Company for any period of 60 consecutive days or, if longer, such period of time as is necessary for the Employee to be deemed "totally disabled" or the equivalent thereof within the meaning of any long-term disability insurance provided by the Company and covering the Employee. (i) "EVENT OF TERMINATION" shall mean the termination of Employee's employment, whether due to a Termination For Cause, a Termination Without Cause, a Change In Control, a Change in Responsibilities or a Voluntary Termination of Employment by Employee, such that Employee is no longer employed by the Company. (j) "TERMINATION FOR CAUSE" shall mean that the Company, in its sole discretion, terminates Employee's employment due to Employee's personal dishonesty, incompetence, willful misconduct, breach of a fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, regulation or final cease and desist order, the penalty for which constitutes a felony under applicable law; or any breach of Paragraphs 13 or 14 of this Agreement. For purposes of this subparagraph 1(j), no act or failure to act on Employee's part shall be considered "intentionally done" or "willfully done" unless done or omitted to be done by Employee in bad faith and without reasonable belief that such act or omission was in the best interests of the Company. Notwithstanding the foregoing, Employee shall not be deemed to have been Terminated For Cause unless and until there shall have been delivered to him/her a copy of a resolution duly adopted by the affirmative vote of a majority of the entire Board of Directors (or, in the event that Employee is a Director, then by the affirmative vote of a majority of the non-employee Directors then in office) at a Board meeting duly called and held for that purpose (after reasonable notice to Employee and an opportunity for Employee, together with his counsel, to be heard before the Board), finding that in the good faith opinion of the Board, Employee was guilty of conduct set forth in this subparagraph 1(j) and specifying the particulars thereof in reasonable detail. (k) "TERMINATION WITHOUT CAUSE" shall mean that the Company, in its sole discretion, terminates the Employee's employment not for any reason that would constitute a Termination For Cause, nor as a result of any Change In Control, nor as a result of a Voluntary Termination of Employment by the Employee. (l) "VOLUNTARY TERMINATION OF EMPLOYMENT BY EMPLOYEE" shall mean that Employee, at his volition, leaves his employment with the Company under circumstances not involving a Termination Without Cause, a Termination For Cause, a Change In Control or a Change in Responsibilities. 2. EMPLOYMENT AND DUTIES. The Company hereby employs Employee, and Employee hereby accepts such employment and agrees to perform the duties as hereinafter set forth. Employee shall serve as the Chief Executive Officer of the Company responsible for the overall business and strategic planning, management and control of the Company, and as an officer of any of the Company's subsidiaries or affiliates as the same may exist from time to time during the "Term" of this Agreement, as defined below. Employee shall devote his entire working time and attention to the business of the Company, and shall perform his duties in a diligent, effective and loyal manner. 3. COMPENSATION. The Company shall compensate Employee for all services to be rendered by him pursuant to this Agreement in the following manner: (a) A base salary of $300,000 per year, to be paid on a weekly basis during the Term of this Agreement. (b) A bonus payable annually in addition to Employee's base salary, the amount of which shall be determined by the Company's Board of Directors, on the recommendation of the Committee, based upon the Company's Annual Incentive Plan. (c) As additional consideration for entering into this Agreement, the Committee shall grant Employee options to purchase a total of 68,000 shares of the Company's Class A Common Stock all with an exercise price equal to $17.25 per share (the closing price for the Company's Common Stock in Nasdaq trading on October 4, 1995) under its Employee Long Term Incentive Plan. Of this total, (i) 17,391 shall be Incentive Stock Options, one-third of which shall vest immediately upon their date of grant, an additional one-third of which shall vest on the first anniversary of their date of grant, and the last one-third of which shall vest on the second anniversary of their date of grant; and (ii) 50,609 options shall be non-qualified stock options, one-half of which shall become exercisable in full at such time as the closing price for the Company's stock in Nasdaq trading is at or above a level that represents a 25% increase over the exercise price of such options for a period of 15 consecutive trading days, and the balance of which shall become exercisable in full at such time as the closing price for the Company's stock in Nasdaq trading is at or above a level that represents a 50% increase over the exercise price of such options for a period of 15 consecutive trading days. 4. BENEFITS. During the Term of this Agreement as defined below, Employee shall be entitled to receive the following benefits: (a) Four weeks of paid vacation per year, or such greater period as may be approved from time to time by the Committee; (b) paid holidays as customarily provided to the Company's other employees; (c) coverage in accordance with their terms of any pension or profit-sharing plans now existing or hereafter established by the Company; (d) life insurance coverage in such amounts and on such terms as are provided from time to time to the Company's senior executives; (e) reimbursement of miscellaneous medical, legal, and financial planning expenses, up to $4,000 per year; (f) payment of Employee's business and professional dues as reasonably requested by Employee, plus the initiation fees and membership dues and expenses related to membership at the Genesee Valley Club; and (g) reimbursement of reasonable and customary business expenses incurred on the Company's behalf, upon presentation of documentation of such expenses reasonably acceptable to the Company. 5. TERM. This Agreement shall be effective for a period of two years from the execution date hereof (the "Term"). 6. TERMINATION OF EMPLOYMENT FOR CAUSE. In the event that the Employee's employment is Terminated For Cause, he shall not be entitled to receive any payments hereunder. Under these circumstances, the Employee shall only be entitled to receive his accrued but unpaid salary and any other nonforfeitable Compensation and Benefits accrued as of the effective date of such Event of Termination. 7. TERMINATION OF EMPLOYMENT WITHOUT CAUSE. In the event that the Company terminates Employee's employment Without Cause, the Employee shall be entitled to receive his then-current Compensation and Benefits for the remainder of the Term of this Agreement; PROVIDED, however, that the Employee is and at all times hereunder remains in compliance with Paragraphs 13 and 14 hereof. For purposes of this Paragraph, the term "Compensation" shall also include the payment (in a lump sum at the end of such year or in equal monthly installments over the course of the next succeeding year, at the Company's election and in either case without interest) of the pro-rated amount of the bonus, if any, that Employee would receive for the calendar year in which this Event of Termination occurs as determined under the Company's Annual Incentive Plan as established by the Committee in advance for that calendar year; such amount to be pro-rated by multiplying the amount of such bonus for the full year by a fraction the numerator of which is the number of months worked by the Employee during that calendar year through the effective date of this Event of Termination and the denominator of which is 12. Such payments shall be made on the Company's normal payroll schedule, EXCEPT THAT at any time during such period, Employee may give notice to the Company or an Acquiring Entity, as the case may be, requesting payment of the remaining amount of his Compensation and Benefits in a lump sum payment, which request the Company or the Acquiring Entity may, at their sole discretion, agree to or reject. If this request is agreed to by the Company or the Acquiring Entity, as the case may be, then such lump sum payment shall be paid to Employee within 30 days following receipt of such notice, subject to the Company's receipt of an executed release from Employee, substantially in the form attached as Exhibit A hereto, prior to the payment of any such lump sum payment. In any event, should Employee commence other employment within such period, he shall promptly notify the Company or the Acquiring Entity of such event and the Company or the Acquiring Entity may at its option, within 30 days following receipt of such notice, pay the Employee the remaining amount of his Compensation and Benefits in a lump sum payment. If Employee's employment is Terminated Without Cause at any time within one year following a Change in Control, such termination shall automatically be deemed to be a Termination in the Event of a Change in Control, and Employee shall be entitled to all rights set forth in Paragraph 10 hereof. If Employee should commence other employment with an entity that the Company deems a competitor as described in subparagraph 13(c) below, then the Company shall have the right to stop further payment of any and all Compensation and Benefits that may be payable to Employee hereunder. 8. VOLUNTARY TERMINATION OF EMPLOYMENT BY EMPLOYEE. In the event of a Voluntary Termination of Employment by the Employee, he shall not be entitled to receive any payments hereunder. Under such circumstances, the Employee shall only be entitled to receive his accrued but unpaid salary and any other nonforfeitable Compensation and Benefits accrued as of the effective date of such Event of Termination. 9. TERMINATION BY EMPLOYEE DUE TO CHANGE IN RESPONSIBILITIES. Employee may elect to terminate his employment during the Term hereof in the event of a Change in Responsibilities. In such event, Employee shall be entitled to receive his then-current Compensation and Benefits for the remainder of the Term of this Agreement; PROVIDED, however, that the Employee is and at all times hereunder remains in compliance with Paragraphs 13 and 14 hereof. For purposes of this Paragraph, the term "Compensation" shall also include the payment (in a lump sum by the end of such year or in equal monthly installments over the course of the next succeeding year, at the Company's election and in either case without interest) of the pro-rated amount of the bonus, if any, that Employee would receive for the calendar year in which this Event of Termination occurs as determined under the Company's Annual Incentive Plan as established by the Committee in advance for that calendar year; such amount to be pro-rated by multiplying the amount of such bonus for the full year by a fraction the numerator of which is the number of months worked by the Employee during that calendar year through the effective date of this Event of Termination and the denominator of which is 12. Such payments shall be made on the Company's normal payroll schedule. If Employee should commence other employment with an entity that the Company deems a competitor as described in subparagraph 13(c) below, then the Company shall have the right to stop further payment of any and all Compensation and Benefits that may be payable to Employee hereunder. 10. TERMINATION OF EMPLOYEE'S EMPLOYMENT IN THE EVENT OF A CHANGE IN CONTROL. If, in connection with preparing for, or within one year following, a Change In Control: (i) the Employee's employment with the Company or the Acquiring Entity is Terminated Without Cause by the Company or the Acquiring Entity; or (ii) the Employee resigns his employment with the Company or with the Acquiring Entity upon the occurrence of any of the following: (a) A significant change in the nature or scope of Employee's employment duties or authority including, but not limited to, without Employee's prior written consent assigning Employee duties inconsistent with his status within the Company or substantially altering Employee's duties and responsibilities so as to render his position to be of less dignity, responsibility or scope; (b) Employee being required by the Company or the Acquiring Entity, as a condition of employment, to take up permanent residence outside of or to spend more than 25% of his time in any location that is more than a 50 mile radius from the Rochester, New York metropolitan area (except for required travel on Company business to an extent substantially consistent with Employee's customary business travel obligations); (c) A reduction in Employee's Compensation or Benefits as in effect on the execution date hereof or as the same may be increased from time to time, excluding, however, (i) reductions in bonuses paid from year to year when such bonuses are based upon objective performance criteria (E.G., increases in earnings per share, return on equity, etc.) established in advance by the Board of Directors or Executive Compensation or comparable Committee of the Board of ACC Corp. or an Acquiring Entity, as the case may be; and (ii) proportional across-the- board Compensation or Benefits reductions similarly affecting all executives and/or key employees of the Company or the Acquiring Entity, as the case may be; provided, however, that in no event shall Employee's Compensation be reduced below its current annual amount as in effect on the execution date hereof without Employee's prior written consent; (d) Failure to grant Employee an annual salary increase reasonably necessary to maintain such salary as comparable to salaries of key employees holding positions equivalent to Employee's in the industry in which the Company's then-principal business activity is conducted; (e) Failure by the Company or an Acquiring Entity, as the case may be, to continue in effect any compensation plan, program or arrangement in which Employee then participates unless an equitable arrangement reasonably acceptable to Employee and embodied in an ongoing substitute or alternative plan, program or arrangement has been made with respect to such plan, or the failure to continue Employee's participation therein; (f) Any material reduction by the Company or an Acquiring Entity, as the case may be, of any of the Benefits enjoyed by Employee under any of the Company's pension, retirement, profit sharing, savings, life insurance, medical, health and accident, disability or other employee benefit plans, programs or arrangements as in effect from time to time, the taking of any action by the Company or an Acquiring Entity, as the case may be, that would directly or indirectly materially reduce any of such Benefits or deprive Employee of any such Benefits, or the failure by the Company or an Acquiring Entity, as the case may be, to provide Employee with the number of paid vacation days to which he/she is entitled on the basis of years of service with the Company in accordance with its normal vacation policy; provided, however, that this subparagraph shall not apply to any proportional across-the-board reduction or action similarly affecting all executives and/or key employees of the Company or an Acquiring Entity, as the case may be; (g) Failure of the Company to obtain a satisfactory agreement from any Acquiring Entity to assume and agree to perform this Agreement; then Employee shall be entitled to receive his then-current Compensation and Benefits as were in effect immediately prior to any such Change In Control for the remainder of the Term of this Agreement; PROVIDED, however, that Employee is and at all times hereunder remains in compliance with Paragraphs 13 and 14 hereof. For purposes of this Paragraph, the term "Compensation" shall also include the payment (in a lump sum by the end of such year or in equal monthly installments over the course of the next succeeding year, at Employee's election and in either case without interest) of the amount of the bonus that Employee would receive for the full calendar year in which this Event of Termination occurs based on the "Maximum" amount of such bonus as determined under the Company's Annual Incentive Plan as established by the Committee in advance for that calendar year. Such payments shall be made on the normal payroll schedule of the Company or the Acquiring Entity, as the case may be, EXCEPT THAT at any time during such period, Employee shall have the right, upon notice to the Company or an Acquiring Entity, as the case may be, to elect to be paid the remaining amount of his Compensation and Benefits in a lump sum payment, which the Company or the Acquiring Entity must then pay to Employee within 30 days following receipt of such notice, subject to receipt by the Company or the Acquiring Entity of an executed release from Employee, substantially in the form attached as Exhibit A hereto, prior to the payment of such lump sum payment. In no event shall the compensation to which Employee is entitled under this Paragraph be less than the greater of (i) Employee's then- current Compensation and Benefits as were in effect immediately prior to the effective date of such resignation or Termination Without Cause, or (ii) Employee's then-current Compensation and Benefits as were in effect immediately prior to the date of the Change In Control. 11. ADDITIONAL TERMINATION PAYMENTS. In the event that Employee is Terminated Without Cause, or in connection with a Change in Control, or Employee elects to terminate his employment due to a Change in Responsibilities, then he shall also be entitled to the following additional payments and benefits: (i) On the effective date of any such Event of Termination, all Incentive Stock Options that shall have been granted to Employee through such date under the Company's Employee Long Term Incentive Plan shall be deemed fully vested and exercisable on such date and for a period of one year following such date, and all Non-Qualified Stock Options that shall have been granted to Employee under this Plan AND which shall have vested as to exercisability through such date shall remain exercisable for a period of one year following such date, all in accordance with the other terms of such Plan. 12. DEATH. In the event that Employee shall die before the end of the Term hereof, the obligation to accrue further benefits under this Agreement shall cease as of the date of death, save for any benefits accrued but unpaid as of the date of death, which benefits shall remain payable to Employee's estate. 13. COVENANT NOT TO COMPETE. Employee hereby covenants and agrees that (i) during the Term of this Agreement, (ii) if no Event of Termination occurs during the Term hereof, then for one year following the Term of this Agreement, and (iii) should an Event of Termination occur during the second year of the Term hereof, then for one year following the effective date of such Event of Termination: (a) He will not, for himself or on behalf of any other person, firm, partnership or corporation call upon any customer of the Company for the purpose of soliciting or providing to such customer any products or services which are the same as or substantially similar to those provided to customers by the Company. For purposes of this Agreement, "customers of the Company" shall include, but not be limited to, all customers contacted or solicited by the Company or Employee within 12 months prior to the end of the Term of this Agreement. (b) Employee will not, directly or through another person or entity, for himself or on behalf of any other person, firm, partnership or corporation, directly or indirectly, seek to persuade any Director, officer, or employee of the Company to discontinue that individual's status or employment with the Company. (c) Employee will not, directly or indirectly, alone or as an employee, independent contractor of any type, partner, officer, director, creditor, substantial (i.e., 5% or greater) stockholder or holder of any option or right to become a substantial stockholder in any entity or organization, engage (i) in the long distance telecommunications business as conducted by the Company in the United States, Canada and Europe during the term of this Covenant Not To Compete or (ii) in substantial and direct competition with any other business operation actively conducted by the Company during the term of this Covenant Not To Compete, in any business pertaining to the sale, distribution, manufacture, marketing, production or provision of products or services similar to or in competition with any products or services produced, designed, manufactured, sold, distributed or rendered, as the case may be, by the Company; nor for the same period of time, within the same area and under the same conditions as previously set forth, shall Employee advance credit, lend money, furnish quarters or give advice, directly or indirectly, to any person, corporation or business entity of any kind (other than the Company) which is engaged in any such business or operation, nor shall he, directly or indirectly, ship or cause to be shipped or have any part in the shipping of such products to any point within said area for the purposes of resale; provided, however, that nothing contained in this Paragraph shall prevent Employee from investing in corporate securities which are traded on a recognized stock exchange (subject to a 5% ceiling on any such investment as referenced in the first sentence of this subparagraph). (d) If any of the restrictions on competitive activities contained in this Paragraph 13 shall for any reason be held by a court of competent jurisdiction to be excessively broad as to duration, geographical scope, activity or subject, such restrictions shall be construed so as to be enforceable to the extent compatible with applicable law as it shall then exist; it being understood that by the execution of this Agreement the parties hereto regard such restrictions as reasonable and compatible with their respective rights and expectations. (e) Additionally, if any conduct prohibited by this Paragraph 13 is approved by the ACC Corp. Board of Directors, then such conduct shall not constitute a breach of this Agreement. 14. TRADE SECRETS; NON DISPARAGEMENT. Except as may be required by his employment with the Company, Employee will not at any time or in any manner, directly or indirectly, divulge, disclose or communicate to any person, firm, corporation, organization or entity any information concerning matters affecting or relating to the services, marketing, contractual relationships, long range plans, products, processes, formulas, inventions, discoveries, devices or other business of the Company or of its customers. Employee will likewise hold inviolate and keep secret all knowledge or information acquired by him concerning the names of the Company's customers, their addresses, the prices the Company obtains or has obtained from them for its goods or services, all knowledge or information acquired by him concerning the products, formulas, processes, methods of manufacture and distribution and all other trade secrets of such customers. In addition, Employee shall make no disclosure, directly or indirectly, of any financial information, contractual relationships, policies, past or contemplated future actions or policies of the Company, personnel matters, marketing or sales data, technical data or specifications and written or oral communications of any sort of the Company or any of its customers which have not previously been disclosed to the general public with the Company's consent or without first obtaining the consent of the Company for such disclosure. Upon the occurrence of any Event of Termination, Employee or his representatives shall immediately deliver to the Company all notes, notebooks, letters, papers, drawings, memos, communications, blueprints or other writings or data relating to the business of the Company or its customers. Additionally, Employee shall not in any way publicly disparage the Company at any time or he shall not be entitled to receive payment of any further Compensation and Benefits otherwise payable hereunder. Likewise, neither the Company nor any Acquiring Entity shall in any way publicly disparage Employee at any time. (For purposes of this Agreement, however, the commencement of any legal proceedings involving matters such as Employee's performance, conduct, etc., shall not constitute "disparagement.") 15. INJUNCTIVE RELIEF. (a) Because Employee shall acquire by reason of his employment and association with the Company an extensive knowledge of its trade secrets, customers, procedures, and other confidential information, the parties hereto recognize that in the event of a breach or threat of breach by Employee of the terms and provisions contained in Paragraphs 13 or 14, compensation alone to the Company would not be a adequate remedy for a breach of those terms and provisions. Therefore, it is agreed that in the event of a breach or threat of a breach of the provisions of Paragraphs 13 or 14 by Employee, the Company shall be entitled, in addition to (i) terminating further payment of any Compensation and Benefits that may be payable to Employee hereunder and (ii) provable damages and reasonable attorneys' fees, to an immediate injunction from any court of competent jurisdiction restraining Employee from committing or continuing to commit a breach of such provisions without the showing or proving of actual damages. Any preliminary injunction or restraining order shall continue in full force and effect until any and all disputes between the parties regarding this Agreement have been finally resolved on the merits by settlement or by a court of law.(b)In the event of a breach or threat of a breach of the provisions of Paragraphs 13 or 14 by the Employee, the Company can terminate further payment of any and all Compensation and Benefits that may be payable to the Employee hereunder, regardless of whether the Company seeks or obtains injunctive relief under subparagraph 15(a) above. 16. SPECIAL PROVISIONS IN EVENT OF DISABILITY. (a) During the Term hereof, in the event that the Employee becomes Disabled as defined in this Agreement, but for meeting the requirement that such a condition persist for a minimum of 60 consecutive days, then the Company agrees that it will not, except in a situation constituting a Termination For Cause, terminate the Employee's employment or otherwise act so as to deprive the Employee of his eligibility to receive benefits under any Company-provided disability insurance policy. In all such circumstances, however, the Company retains the right to Terminate the Employee For Cause, at any time. (b) If the Employee is Terminated Without Cause after he begins receiving disability insurance payments under any Company-provided disability insurance policy, then he shall also be entitled to receive his Compensation and Benefits payable in the event of a Termination Without Cause, LIMITED, HOWEVER, to the net amount, if any, by which such termination payments, on a monthly basis, exceed the monthly benefits payable to the Employee under such disability insurance policy. (c) Except as otherwise specifically provided in this Paragraph, the provisions of this Paragraph 16 shall not apply in the event that any Event of Termination under this Agreement shall first occur. Additionally, the Employee shall only be entitled to receive the Benefits provided by this Paragraph 16 if he is and at all times hereunder remains in compliance with Paragraphs 13 and 14 hereof. 17. ABSENCE OF RESTRICTIONS. Employee represents and warrants that he is not prevented or restricted from entering into an employment relationship with the Company by any agreement with or obligation to any person, firm or entity or by any other disability or restraint, including, but not limited to, the order, judgment or decree of any court or governmental agency. Employee hereby agrees to indemnify and hold the Company harmless from any and all expenses, losses or damages it may incur, including, but not limited to, all expenses of defense and attorneys' fees, caused by reason of Employee's breach of the covenants contained in this Paragraph. 18. SURVIVAL. The provisions of Paragraph 13, COVENANT NOT TO COMPETE, shall survive for one year following the Term of this Agreement; the provisions of Paragraph 14, TRADE SECRETS, shall indefinitely survive the Term of this Agreement, and the provisions of Paragraphs 15, INJUNCTIVE RELIEF, and 19, GENERAL TERMS, shall survive the Term of this Agreement for so long as necessary to enable the Company to enforce any of the provisions of Paragraphs 13, 14 or 15 hereof. 19. GENERAL TERMS. (a) NOTICES. Any notice required or desired to be given hereunder shall be in writing and shall be deemed to have been duly given (i) upon hand delivery, or (ii) on the third day following delivery to the U.S. Postal Service as certified mail, return receipt requested and postage prepaid, or (iii) on the first day following delivery to a recognized overnight courier service, fee prepaid, return receipt or other confirmation of delivery requested. Any such notice shall be delivered or directed to a party at its address previously set forth in this Agreement or to such other address as a party may specify by notice given to the other party hereto in accordance with the provisions of this paragraph. (b) BINDING EFFECT. This Agreement and the rights and obligations contained herein shall be binding upon and inure to the benefit of the Company, its successors and assigns, including any Acquiring Entity, and upon Employee, his legal representatives, heirs and distributees. (c) ASSIGNMENT. This Agreement may not be assigned, in whole or in part, by either party hereto without the prior written consent of the other party. (d) ENTIRE AGREEMENT. This Agreement contains the entire understanding between the parties hereto and supersedes any prior understanding, memoranda or other written or oral agreements between them respecting the within subject matter. There are no representations, agreements, arrangements or understandings, oral or written, between the parties relating to the subject matter of this Agreement which are not fully expressed herein. (e) MODIFICATIONS; WAIVER. Any modification or waiver of this Agreement must be in writing and signed by both parties to be effective. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature. No course of dealing between the parties hereto will be deemed effective to modify, amend or discharge any part of this Agreement or the rights or obligations of either party hereunder. (f) PARTIAL INVALIDITY. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted. (g) APPLICABLE LAW. This Agreement shall be construed and enforced in accordance with the laws of the State of New York applicable to contracts made and to be performed wholly within New York State, without giving effect to conflict of laws principles. (h) JURISDICTION AND VENUE. In the event that any legal proceedings are commenced in any court with respect to any matter arising under this Agreement, the parties hereto specifically consent and agree that the courts of the State of New York and/or the Federal Courts located in the State of New York shall have jurisdiction over each of the parties hereto and over the subject matter of any such proceedings, and the venue of any such action shall be in Monroe County, New York and/or the U.S. District Court for the Western District of New York. (i) HEADINGS. The headings contained in this Agreement are inserted for convenience only and do not constitute a part of this Agreement. (j) COUNTERPARTS. This Agreement may be executed in more than one counterpart, each one of which will be deemed an original and all of which shall constitute one and the same instrument. (k) ARBITRATION. In the event that any disagreement or dispute should arise between the parties hereto with respect to this Agreement, then such disagreement or dispute shall be submitted to arbitration in Rochester, New York in accordance with the rules then pertaining to the American Arbitration Association with respect to commercial disputes. Judgment upon any resulting award may, after its rendering, be entered in any court of competent jurisdiction by either party. After any demand for arbitration pursuant to this Agreement and prior to any scheduled arbitration date, either party to such arbitration proceedings shall be entitled to discovery according to the provisions and within the time limits prescribed in Article 31 of the New York Civil Practice Law and Rules with respect to all materials and records in the possession of either party hereto, or in the possession of others, which are relevant to the matter or matters to be arbitrated. (l) REMEDIES. All rights and remedies of the Company or Employee, whether provided for herein or by operation of law, are cumulative and may be exercised singularly or concurrently, and the exercise of any such remedy shall not be deemed an election of remedies so as to preclude the election of any other remedy. (m) NAMED FIDUCIARY. The Board of Directors of ACC Corp. or of an Acquiring Entity, as the case may be, is hereby designated as the named fiduciary ("Named Fiduciary") under this Agreement. The Named Fiduciary shall have authority to operate and administer this Agreement, and it shall be responsible for establishing and carrying out a funding policy, if any, and method consistent with the objectives of this Agreement. (n) CLAIMS PROCEDURE. The Named Fiduciary shall make all determinations regarding disputes between the Company or the Acquiring Entity, as the case may be, and Employee as to Employee's rights under this Agreement. Any such determination by the Named Fiduciary shall be stated in writing and delivered or mailed to Employee or his estate, as the case may be, within 30 days following the Company or the Acquiring Entity becoming aware of such dispute. This communication shall set forth the specific reason(s) for the determination, written to the best of the Named Fiduciary's ability in a manner that can be understood without legal or actuarial counsel. In addition, the Named Fiduciary shall afford a reasonable opportunity to Employee or his estate, as the case may be, for a full and fair review of the determination. If Employee or his estate disagrees with the determination, or any part thereof, or if a determination is not received by Employee or his estate within the 30 day period set forth above, then Employee or his estate may seek judicial relief. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of October 6, 1995. EMPLOYEE ACC CORP. /s/ David K. Laniak By: /s/ Michael R. Daley Title: EVP & CFO EXHIBIT A [Date] [Name and Address of Employee] Dear : You and ACC Corp. (the "Company") are parties to an Employment Agreement dated ___________, 199_ (the "Employment Agreement"). You have requested a lump-sum payment of all remaining Compensation and Benefits (as those terms are defined in the Employment Agreement) payable to you under the terms of the Employment Agreement, pursuant to either Paragraph 7 or Paragraph 10 thereof. In consideration for the receipt of such lump-sum payment from the Company, you hereby agree to the following: 1) This Agreement is intended to settle fully and finally all claims, controversies, disputes and other matters between you and the Company. Accordingly, as a material inducement to the Company to enter into this Agreement and in consideration for the above lump-sum payment, you agree to forever release, acquit and discharge the Company, and its employees, officers, representatives, attorneys, directors and shareholders and their predecessors, successors and assigns from and against any and all charges, complaints, claims, liabilities, obligations, promises, agreements, controversies, damages, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses of any nature whatsoever, known or unknown, suspected or unsuspected and all claims for attorney's fees, costs, disbursements, and expert witness fees which you now have, own or hold or claim to have, own or hold or which you owned or claimed to have, own or hold, including, but not limited to those relating to or arising out of: (a) your employment with the Company; (b) your termination of employment with the Company; (c) claims relating to wages, payments and benefits except as set forth herein; (d) the New York Labor Law, the New York State Human Rights Law, the New York State Lawful Activities Act, Title VII of the Civil Rights Act of 1964, Title IX of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Equal Pay Act, the Employee Retirement Income Security Act of 1974, the Age Discrimination in Employment Act of 1967, as amended, the Older Workers Benefit Protection Act of 1990, the Rehabilitation Act of 1973, the Fair Labor Standards Act, the Occupational Safety and Health Act, the Americans with Disabilities Act, Federal Executive Order 11246 and all amendments thereto, the Family and Medical Leave Act, New York Civil Rights Law
70-a, and all regulations pertaining to all such laws; (e) any other federal, state or local law, rule or regulation; and (f) all tort claims and all claims of wrongful or unjust termination, defamation, prima facia tort, breach of or interference with contract, promissory estoppel, intentional infliction of emotional distress or breach of any express or implied covenant of good faith and fair dealings. You agree that the Company shall not have any obligation to you other than as set forth in the Employment Agreement for any other monies or benefits including, but not limited to, salary, benefits, bonus, or vacation or any other obligation or agreement with the Company, whether such agreement may be express or implied. 2. This Agreement shall not in any way be construed as an admission by the Company that it or its officers, directors or employees have acted wrongfully with respect to you or that you have any rights whatsoever against the Company or its officers, directors or employees. This Agreement shall not in any way be construed as an admission by you of any wrongdoing. 3. If you breach this Agreement, you acknowledge that all monies to be paid by the Company hereunder shall immediately cease, and you shall immediately return all monies paid pursuant to this Agreement or the Employment Agreement. These rights are in addition to all other rights or remedies provided to the Company in law or in equity by reason of your breach. 4. You are hereby advised of your right to consult with an attorney before signing this Agreement and acknowledge that you have been given the opportunity to consult with an attorney before signing it. Further, you acknowledge that, as this Agreement was an Exhibit to the Employment Agreement at the time you signed the Employment Agreement, you have had a draft of this Agreement for more than 21 days to review it and consider its terms. Additionally, you understand that you can revoke this Agreement at any time within seven days following your execution of it, by written revocation notice to the Company sent certified mail, return receipt requested. Therefore, you understand and agree that the Company will not make any payment of the lump- sum you have hereby requested until 28 days have passed from the date the Company receives this Agreement signed by you. Your signature below indicates your acceptance of this Agreement and shall cause this Agreement to be binding upon you, your heirs, representatives and assigns. Your signature shall also signify that you have read and understand the Agreement, and that you either have reviewed it with your attorney or have elected not to do so. Very truly yours, ACC Corp. By:________________________________ Title: ______________________________ Accepted and Agreed to on this day of , 199_ _________________________ Employee EX-10 7 EXHIBIT 10-3 SALARY CONTINUATION AND DEFERRED COMPENSATION AGREEMENT AGREEMENT made by and between ACC CORP., 400 West Avenue, Rochester, New York 14611 and RICHARD T. AAB, residing at 29 Woodstone Rise, Pittsford, NY 14534 ("Employee"). R E C I T A L S: WHEREAS, Employee has served as the Chairman and Chief Executive Officer of ACC Corp. (the "Company") for more than twelve years; and WHEREAS, Employee is stepping down as ACC Corp.'s Chief Executive Officer, but plans to remain as its Chairman of the Board and as an employee of the Company, with the concurrence of the Company's Board of Directors; and WHEREAS, in view of the valuable contributions that the Employee has made and will continue to make to the business of the Company, ACC Corp. desires, through this Agreement, to provide both some recognition to the Employee for his many years of tireless leadership and service in his role as the Company's Chief Executive Officer and as an incentive to the Employee to continue to labor diligently on its behalf in his continuing role as a Company employee and its Chairman of the Board; NOW, THEREFORE, in consideration of the mutual promises contained herein, and other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. The following terms shall have the following meanings in this Agreement: (a) "ACQUIRING ENTITY" shall mean any entity, whether a corporation, partnership, joint venture, etc., that, as a result of a Change In Control, either directly or indirectly has effective control over the business plans, direction and operations of ACC Corp. This term shall also include any subsidiaries or related entities over which the Acquiring Entity has control. (b) "CHANGE IN CONTROL" shall mean a change in control of ACC Corp. of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 as in effect on the date of this Agreement or, if in the future Item 6(e) is no longer in effect, any regulations issued by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 which serve similar purposes; provided that, without limitation, a Change In Control shall be deemed to have occurred if and when: (x) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934), other than the Employee, is or becomes a beneficial owner, directly or indirectly, of securities of ACC Corp. representing a majority of the combined voting power of ACC Corp.'s then outstanding securities (excluding, however, the transfer of any shares beneficially owned by the Employee); or (y) individuals who were members of the Board of Directors of ACC Corp. immediately prior to a meeting of the shareholders of ACC Corp. involving a contest for the election of Directors shall not constitute a majority of the Board of Directors following such election. (c) "COMPANY" shall mean ACC Corp. and/or any of its subsidiaries and/or affiliates as the same may exist from time to time anywhere in the world, regardless of the laws under which incorporated. (d) "DISABILITY" shall mean the Employee's total inability, due to a mental or physical illness, incapacity or injury, to render his services to the Company for any period of 60 consecutive days or if the Employee shall be deemed "totally disabled" or the equivalent thereof within the meaning of any long-term disability insurance policy provided by the Company and covering the Employee. (e) "EVENT OF TERMINATION" shall mean the termination of the Employee's employment and his status as the Chairman of the Board of ACC Corp. for whatever reason, except if due to a Termination For Cause, including but not limited to his termination without cause, his termination as the result of a Change in Control, or his voluntarily termination of employment, such that the Employee is no longer employed by the Company nor serving as the Chairman of the Board of ACC Corp. This definition shall also include a termination of Employee's employment that occurs if, as a condition precedent to, as a result of, or within one year following, a Change In Control of ACC Corp.: (i) the Employee's employment with the Company is terminated for cause or without cause by the Company or the Acquiring Entity; or (ii) the Employee resigns his employment with the Company or with the Acquiring Entity upon the occurrence of either of the following events: (1) A reduction in Employee's total compensation as the same existed immediately prior to the Change In Control; or (2) Employee is no longer serving as the Chairman of the ACC Corp. Board of Directors. (f) "TERMINATION FOR CAUSE" shall mean that the Company, in its sole discretion, terminates the Employee's employment for any of the following reasons: Employee fails to perform his assigned duties as an officer and/or employee of the Company in a satisfactory manner due to dishonesty, fraud, gross neglect, or use of alcohol or drugs; or any breach of Paragraphs 5 or 6 of this Agreement. Employee shall not be deemed to be in breach of this Agreement nor to have been Terminated For Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of a three-fourths majority of the entire Board of Directors at a Board meeting duly called and held for that purpose (after reasonable notice to Employee and an opportunity for Employee, together with his counsel, to be heard before the Board), finding that in the good faith opinion of the Board, Employee was guilty of conduct set forth in this paragraph 1(f) and specifying the particulars thereof in reasonable detail. 2. BASE SALARY AND BENEFITS.Upon the execution of this Agreement, for so long as he serves as the Chairman of the Board of ACC Corp., the Employee will be entitled to receive the following compensation and benefits: (a) A base salary of $200,000 per year; (b) A bonus payable annually in addition to the Employee's base salary, the amount of which shall be determined by the Company's Board of Directors, on the recommendation of its Executive Compensation Committee, based upon the Company's Annual Incentive Plan; and (c) The following benefits: (i) Six weeks of paid vacation per year, or such greater period as may be approved from time to time by the Executive Compensation Committee of the Board of Directors; (ii) paid holidays as customarily provided to the Company's other employees; (iii) coverage in accordance with their terms of any pension or profit-sharing plans now existing or hereafter established by the Company; (iv) life insurance coverage in such amounts and on such terms as is currently provided; (v) reimbursement of miscellaneous medical, legal, and financial planning expenses, up to $12,000 per year; (vi) payment of Employee's business, professional and club dues and initiation fees as reasonably requested by Employee, specifically including membership dues and expenses related to membership at both the Genesee Valley Club and Locust Hill Country Club; and (vii) other fringe benefits as are made available from time to time by the Company to its executive employees. 3. TERMINATION OF EMPLOYMENT FOR CAUSE. In the event that the Employee's employment is Terminated For Cause, he shall not be entitled to receive any payments hereunder. Under these circumstances, the Employee shall only be entitled to receive his accrued but unpaid salary and any other nonforfeitable payments or benefits accrued as of the effective date of such Event of Termination. 4. SALARY CONTINUATION PAYMENTS UPON AN EVENT OF TERMINATION. Upon the occurrence of an Event of Termination, Employee shall be entitled to receive a payment of $1,000,000 within a three-year period beginning on the date of such termination; PROVIDED, however, that the Employee shall at all times hereunder remain in compliance with Paragraphs 5 and 6 hereof. This amount shall be paid in three equal annual installments, with the first such payment being made within five business days following the date of such Event of Termination, and the second and third such payments being made on the first and second anniversary dates of such Event of Termination; provided, however, that the unpaid balance of such payments shall be accelerated and paid in full within 30 days following a Change In Control of the Company before all such payments have been made. In addition, for a period of ten years following the date of such termination, the Employee's right to indemnification and advancement of expenses as currently provided for in Article V of the Company's Bylaws shall not be amended, modified or changed in any respect whatsoever, and any directors' and officers' liability policy then in effect under which the Employee is an insured shall be maintained; PROVIDED, however, that the Employee shall at all times hereunder remain in compliance with Paragraphs 5 and 6 hereof. 5. COVENANT NOT TO COMPETE. As a condition to receiving the payments provided for under this Agreement, the Employee must abide by the terms of his Non-Competition Agreement with the Company, dated of even date herewith. 6. TRADE SECRETS; NON-DISPARAGEMENT. (a)Except as may be required by his employment with the Company, the Employee will not ever, whether while an Employee or at any time after he is no longer an Employee, at any time or in any manner, directly or indirectly, divulge, disclose or communicate to any person, firm, corporation, organization or entity any information concerning matters affecting or relating to the services, marketing, contractual relationships, long range plans, products, processes, formulas, inventions, discoveries, devices or other business of the Company or of its customers. The Employee will likewise hold inviolate and keep secret all knowledge or information acquired by him concerning the names of the Company's customers, their addresses, the prices the Company obtains or has obtained from them for its goods or services, all knowledge or information acquired by him concerning the products, formulas, processes, methods of manufacture and distribution and all other trade secrets of such customers. In addition, the Employee shall make no disclosure, directly or indirectly, of any financial information, contractual relationships, policies, past or contemplated future actions or policies of the Company, personnel matters, marketing or sales data, technical data or specifications and written or oral communications of any sort of the Company or any of its customers which have not previously been disclosed to the general public with the Company's consent or without first obtaining the consent of the Company for such disclosure. Upon the occurrence of any Event of Termination or in the event of his Termination For Cause, the Employee or his representatives shall immediately deliver to the Company all notes, notebooks, letters, papers, drawings, memos, communications, blueprints or other writings or data relating to the business of the Company or its customers. However, nothing contained in this Agreement or in a certain Non- Competition Agreement between the Employee and the Company of even date herewith shall prohibit Employee from participating, alone or as an employee, independent contractor, partner, officer, director, creditor, or substantial (I.E. greater than 5%) owner (by reason of stock ownership or otherwise) in any entity whose business is the design, development and/or market distribution of computer systems software and/or applications software useful to any industry, including the telecommunications industry, and such conduct shall not be deemed to involve any trade secrets of the Company. (b) Additionally, the Employee shall not in any way publicly disparage the Company at any time or he shall not be entitled to receive payment of any further amounts otherwise payable hereunder. Likewise, neither the Company nor any Acquiring Entity shall in any way publicly disparage the Employee at any time. (For purposes of this Agreement, however, the commencement of any legal proceedings involving matters such as the Employee's performance, conduct, etc., shall not constitute "disparagement.") 7. INJUNCTIVE RELIEF. Because the Employee currently possesses and shall acquire by reason of his continued employment and association with the Company an extensive knowledge of the Company's trade secrets, customers, procedures, and other confidential information, the parties hereto recognize that in the event of a breach or threat of breach by the Employee of the terms and provisions contained in Paragraphs 5 or 6 hereof, compensation alone to the Company would not be a adequate remedy for a breach of those terms and provisions. Therefore, it is agreed that in the event of a breach or threat of a breach of the provisions of Paragraphs 5 or 6 by the Employee, the Company shall be entitled to an immediate injunction from any court of competent jurisdiction restraining the Employee from committing or continuing to commit a breach of such provisions without the showing or proving of actual damages. 8. SPECIAL PROVISIONS IN EVENT OF DISABILITY OR DEATH. (a) If while employed by the Company the Employee becomes Disabled as defined in this Agreement, then the Company agrees that it will not, except in a situation constituting a Termination For Cause, terminate the Employee's employment or otherwise act so as to deprive the Employee of his eligibility to receive benefits under any Company-provided disability insurance policy. In all such circumstances, however, the Company retains the right to Terminate the Employee For Cause, at any time. (b) If the Employee is terminated without cause after he begins receiving disability insurance payments under any Company-provided disability insurance policy, then he shall also be entitled to receive his compensation and benefits payable in the event of a termination without cause, LIMITED, HOWEVER, to the net amount, if any, by which such payments, on a monthly basis, exceed the monthly benefits payable to the Employee under such disability insurance policy. (c) In addition to the salary continuation benefit provided for herein, in the event that the Employee is terminated without cause while Disabled, or in the event that the Employee dies during the term of this Agreement, then the Employee or his estate, as the case may be, shall be entitled to the following benefit. Upon the occurrence of either such event, all unexercised stock options that the Employee may hold on that date under ACC Corp.'s Employee Long Term Incentive Plan shall automatically be deemed fully exercisable for a period of one year following the occurrence of such event, subject, however, to the original term of the option grant(s), if shorter (the "Exercisability Period"). If at any time or from time to time during this Exercisability Period the Employee or his estate, as the case may be, desires to exercise any of such stock options, then he or his estate shall so notify ACC Corp., stating specifically the number of options being exercised, and shall comply with the other requirements of such Plan in effecting such exercise(s). (d) The provisions of this Paragraph 8 shall not apply, except as provided above in this Paragraph 8, in the event that any Event of Termination other than Employee's termination without cause under this Agreement shall first occur. Additionally, the Employee shall only be entitled to receive the benefits provided by this Paragraph 8 if he is and at all times hereunder remains in compliance with Paragraphs 5 and 6 hereof. 9. AUTOMATIC RESIGNATION. By signing this Agreement, the Employee specifically agrees that without further action on the part of either party hereto, upon the occurrence of any Event of Termination hereunder or Employee's being Terminated For Cause hereunder, he shall automatically be deemed to have resigned as the Chairman of the Board of ACC Corp. (but NOT as a Director of ACC Corp.) and as a director and officer of all of its subsidiaries and affiliates. 10. BASE SALARY AND BENEFITS. While employed by the Company, the Employee's base salary shall not be reduced, nor shall the Employee's Company- provided benefits be reduced, except as part of a Company-wide reduction of salaries or of such benefits for all Company executives, without the Employee's consent, or the Employee may deem such reduction to constitute a termination without cause hereunder. 11. SUPERSEDING OF OUTSTANDING SEVERANCE AGREEMENT. Upon its execution, this Agreement shall be in full force and effect and shall automatically supersede and terminate the current Severance Agreement between the parties hereto, dated February 8, 1994, and each party hereto hereby waives and releases any claims it may have against the other arising under that Severance Agreement. 12. GENERAL TERMS. (a) NOTICES. Any notice required or desired to be given hereunder shall be in writing and shall be deemed to have been duly given (i) upon hand delivery, or (ii) on the third day following delivery to the U.S. Postal Service as certified mail, return receipt requested and postage prepaid, or (iii) on the first day following delivery to a recognized overnight courier service, fee prepaid, return receipt or other confirmation of delivery requested. Any such notice shall be delivered or directed to a party at its address previously set forth in this Agreement or to such other address as a party may specify by notice given to the other party hereto in accordance with the provisions of this paragraph. (b) BENEFIT. This Agreement and the rights and obligations contained herein shall be binding upon and inure to the benefit of the Company, its successors and assigns, and upon the Employee, his legal representatives, heirs and distributees. (c) WAIVER. The waiver of any party of a breach of any provision of this Agreement shall not operate as or be construed as a waiver of any subsequent breach. (d) ENTIRE AGREEMENT. This Agreement may not be altered, amended or terminated except by an instrument in writing signed by the parties hereto. (e) PARTIAL INVALIDITY. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted. (f) APPLICABLE LAW. This Agreement shall be construed and enforced in accordance with the laws of the State of New York applicable to contracts made and to be performed wholly within New York State, without giving effect to conflict of laws principles. (g) HEADINGS. The headings contained in this Agreement are inserted for convenience only and do not constitute a part of this Agreement. (h) COUNTERPARTS. This Agreement may be executed in more than one counterpart, each one of which will be deemed an original and all of which shall constitute one and the same instrument. (i) ASSIGNMENT. The Employee may not assign any of his rights, duties or obligations hereunder without the prior written consent of ACC Corp. Likewise, ACC Corp. may not assign any of its rights, duties or obligations hereunder without the prior written consent of the Employee except in the event of a merger or other acquisition of ACC Corp. in which ACC Corp. is not the surviving entity or the purchase of all or substantially all its assets, provided that such merger, acquisition or purchase is for a valid business purpose not involving this Agreement. (j) REMEDIES. All rights and remedies of the Company, whether provided for herein or by operation of law, are cumulative and may be exercised singularly or concurrently, and the exercise of any such remedy shall not be deemed an election of remedies so as to preclude the election of any other remedy. (k) RESIDENCY. In no event shall the Company nor any Acquiring Entity require the Employee to take up permanent residence outside of the Rochester, New York metropolitan area as a condition of employment or as a condition for receiving any benefits under this Agreement, nor shall the Employee's refusal to so relocate be deemed sufficient cause to enable him to be Terminated For Cause hereunder. (l) JURISDICTION AND VENUE. In the event that any legal proceedings are commenced in any court with respect to any matter arising under this Agreement, the parties hereto specifically consent and agree that the courts of the State of New York and/or the Federal Courts located in the State of New York shall have jurisdiction over each of the parties hereto and over the subject matter of any such proceedings, and the venue of any such action shall be in Monroe County, New York and/or the U.S. District Court for the Western District of New York. (m) NAMED FIDUCIARY. The Board of Directors of ACC Corp. or of an Acquiring Entity, as the case may be, is hereby designated as the named fiduciary ("Named Fiduciary") under this Agreement. The Named Fiduciary shall have authority to operate and administer this Agreement, and it shall be responsible for establishing and carrying out a funding policy, if any, and method consistent with the objectives of this Agreement. (n) CLAIMS PROCEDURE. The Named Fiduciary shall make all determinations regarding disputes between the Company or the Acquiring Entity, as the case may be, and the Employee as to the Employee's rights under this Agreement. Any such determination by the Named Fiduciary shall be stated in writing and delivered or mailed to the Employee or his estate, as the case may be, within 30 days following the Company or the Acquiring Entity becoming aware of such dispute. This communication shall set forth the specific reason(s) for the determination, written to the best of the Named Fiduciary's ability in a manner that can be understood without legal or actuarial counsel. In addition, the Named Fiduciary shall afford a reasonable opportunity to the Employee or his estate, as the case may be, for a full and fair review of the determination. If the Employee or his estate disagrees with the determination, or any part thereof, or if a determination is not received by the Employee or his estate within the 30 day period set forth above, then the Employee or his estate may seek judicial relief. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of October 6, 1995. EMPLOYEE: ACC CORP. /s/ Richard T. Aab By: /s/ Michael R. Daley Richard T. Aab Title: EVP & CFO EX-10 8 EXHIBIT 10-4 NON-COMPETITION AGREEMENT AGREEMENT made by and between ACC CORP., 400 West Avenue, Rochester, New York 14611 and RICHARD T. AAB, residing at 29 Woodstone Rise, Pittsford, NY 14534 ("Employee"). R E C I T A L S: WHEREAS, Employee has served as the Chairman and Chief Executive Officer of ACC Corp. (the "Company") for more than twelve years; and WHEREAS, Employee is stepping down as ACC Corp.'s Chief Executive Officer, but plans to remain as its Chairman of the Board and as an employee of the Company, with the concurrence of the ACC Corp. Board of Directors; and WHEREAS, the Company wishes to strengthen the terms of Employee's existing Covenant Not To Compete under his current Severance Agreement dated as of February 8, 1994, and Employee is willing to agree to such additional restrictions in consideration for the terms contained hereinafter in this Agreement; and WHEREAS, the parties desire to supersede the terms of their existing Covenant Not To Compete through their execution of this Agreement; NOW, THEREFORE, in consideration of the mutual promises contained herein, and other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. The following terms shall have the following meanings in this Agreement: (a) "ACQUIRING ENTITY" shall mean any entity, whether a corporation, partnership, joint venture, etc., that, as a result of a Change In Control, either directly or indirectly has effective control over the business plans, direction and operations of ACC Corp. This term shall also include any subsidiaries or related entities over which the Acquiring Entity has control. (b) "CHANGE IN CONTROL" shall mean a change in control of ACC Corp. of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 as in effect on the date of this Agreement or, if in the future Item 6(e) is no longer in effect, any regulations issued by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 which serve similar purposes; provided that, without limitation, a Change In Control shall be deemed to have occurred if and when: (x) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934), other than the Employee, is or becomes a beneficial owner, directly or indirectly, of securities of ACC Corp. representing a majority of the combined voting power of ACC Corp.'s then outstanding securities (excluding, however, the transfer of any shares beneficially owned by the Employee); or (y) individuals who were members of the Board of Directors of ACC Corp. immediately prior to a meeting of the shareholders of ACC Corp. involving a contest for the election of Directors shall not constitute a majority of the Board of Directors following such election. (c) "COMPANY" shall mean ACC Corp. and/or any of its subsidiaries and/or affiliates as the same may exist from time to time anywhere in the world, regardless of the laws under which incorporated. (d) "EVENT OF TERMINATION" shall mean the termination of the Employee's employment and his status as the Chairman of the Board of ACC Corp., whether due to a Termination For Cause, a Termination Without Cause, a Change In Control or a Voluntary Termination of Employment by the Employee, such that the Employee is no longer employed by the Company nor serving as its Chairman of the Board. (e) "TERMINATION OF EMPLOYEE'S EMPLOYMENT IN THE EVENT OF A CHANGE IN CONTROL" shall mean that if, as a condition precedent to, as a result of, or within one year following, a Change In Control of ACC Corp. (i) the Employee's employment with the Company is terminated for cause or without cause by the Company or the Acquiring Entity, or (ii) the Employee resigns his employment with the Company or with the Acquiring Entity upon the occurrence of either of the following events: (1) A reduction in Employee's total compensation as the same existed immediately prior to the Change In Control; or (2) Employee is no longer serving as the Chairman of the ACC Corp. Board of Directors. (f) "TERMINATION FOR CAUSE" shall mean that the Company, in its sole discretion, terminates the Employee's employment for any of the following reasons: Employee fails to perform his assigned duties as an officer and/or employee of the Company in a satisfactory manner due to dishonesty, fraud, gross neglect, or use of alcohol or drugs; or any breach the terms of this Agreement. Employee shall not be deemed to be in breach of this Agreement nor to have been Terminated For Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of a three-fourths majority of the entire Board of Directors at a Board meeting duly called and held for that purpose (after reasonable notice to Employee and an opportunity for Employee, together with his counsel, to be heard before the Board), finding that in the good faith opinion of the Board, Employee was guilty of conduct set forth in this paragraph 1(f) and specifying the particulars thereof in reasonable detail. (g) "TERMINATION WITHOUT CAUSE" shall mean that the Company, in its sole discretion, terminates the Employee's employment not for any reason that would constitute a Termination For Cause, nor as a result of any Change In Control, nor as a result of the Employee's Voluntary Termination of Employment with the Company. (h) "VOLUNTARY TERMINATION OF EMPLOYMENT BY THE EMPLOYEE" shall mean that the Employee, at his volition, leaves his employment with the Company not under a circumstance involving a Termination Without Cause, a Termination For Cause, nor a Termination of Employee's Employment in the Event of a Change In Control. 2. COVENANT NOT TO COMPETE. Employee hereby covenants and agrees that, while employed by the Company during the term of this Agreement and for three years following the occurrence of ANY Event of Termination hereunder: (a) He will not, for himself or on behalf of any other person, firm, partnership or corporation call upon any customer of the Company for the purpose of soliciting or providing to such customer any products or services which are the same as or substantially similar to those provided to customers by the Company. For purposes of this Agreement, "Customers of the Company" shall include, but not be limited to, all customers contacted or solicited by the Company or the Employee prior to the occurrence of any Event of Termination; (b) Employee will not, directly or through another person or entity, for himself or on behalf of any other person, firm, partnership or corporation, directly or indirectly, seek to persuade any director, officer, or employee of the Company to discontinue that individual's status or employment with the Company; and (c) Employee will not, directly or indirectly, alone or as an employee, independent contractor of any type, partner, officer, director, creditor, substantial (i.e., 5% or greater) stockholder or holder of any option or right to become a substantial stockholder in any entity or organization, engage in Company Business; nor for the same period of time shall the Employee advance credit, lend money, or give advice, directly or indirectly, to any person, corporation or business entity of any kind (other than the Company) with respect to Company Business or for the purpose of assisting such person, corporation or business entity to compete with the Company with respect to Company Business; provided, however, that nothing contained in this paragraph shall prevent or inhibit Employee from investing in corporate securities of companies that are competitors of the Company that are traded on a national securities exchange or other recognized stock market (subject to a 5% ceiling on any such investment as referenced in the first sentence of this subparagraph). For purposes of this Agreement, "Company Business" shall mean the business of the transport or resale of local, intrastate, interstate and international TELECOMMUNICATION SERVICES in, and only in, the following market segments: VOICE SERVICES, PACKET-SWITCHED DATA TRANSMISSION SERVICES (including frame relay services), TELEX SERVICES, TELEGRAPH SERVICES, and FACSIMILE SERVICES in or between the geographic areas of New York, Massachusetts, Canada, the United Kingdom and any other state or territory of the United States or any other country in which the Company has generated $1 million or more in gross originating traffic revenues during the fiscal year immediately preceding an Event of Termination. The underlined terms in this paragraph shall have the same definition as that attributed to them by the United States trade representatives in the "U.S. Offer and Basic Telecommunications Services" dated July 31, 1995, prepared in connection with the GATS negotiations, attached as Exhibit A hereto. The Employee further agrees that during the term of this covenant not to compete, he will not make any offers to acquire any corporation or other entity which the Company is attempting to acquire. (d) If any of the restrictions on competitive activities contained in this Paragraph 2 shall for any reason be held by a court of competent jurisdiction to be excessively broad as to duration, geographical scope, activity or subject, such restrictions shall be construed so as to thereafter be limited or reduced to be enforceable to the extent compatible with applicable law as it shall then exist; it being understood that by the execution of this Agreement the parties hereto regard such restrictions as reasonable and compatible with their respective rights and expectations. (e) Additionally, if any conduct which would otherwise be prohibited by this Paragraph 2 is approved by ACC Corp.'s Board of Directors, then such conduct shall not constitute a breach of this Agreement. (f) Nothing contained in this Agreement or in a certain Salary Continuation and Deferred Compensation Agreement between the Employee and the Company of even date herewith shall prohibit Employee from participating, alone or as an employee, independent contractor, partner, officer, director, creditor, or substantial (I.E. greater than 5%) owner (by reason of stock ownership or otherwise) in any entity whose business is the design, development and/or market distribution of computer systems software and/or applications software useful to any industry, including the telecommunications industry. 3. CONSIDERATION FOR COVENANT NOT TO COMPETE.In consideration for the terms of the Covenant Not To Compete contained in this Agreement, upon the execution of this Agreement, the Company shall pay to Employee the sum of $750,000, by certified or cashier's check payable to the order of Employee or by wire transfer of funds in accordance with instructions given by Employee. 4. INJUNCTIVE RELIEF. Because the Employee currently possesses and shall acquire by reason of his continued employment and association with the Company an extensive knowledge of the Company's trade secrets, customers, procedures, and other confidential information, the parties hereto recognize that in the event of a breach or threat of breach by the Employee of the terms and provisions contained in this Agreement, compensation alone to the Company would not be a adequate remedy for a breach of the terms and provisions hereof. Therefore, it is agreed that in the event of a breach or threat of a breach of any of the provisions of this Agreement by the Employee, the Company shall be entitled to an immediate injunction from any court of competent jurisdiction restraining the Employee from committing or continuing to commit a breach of such provisions without the showing or proving of actual damages. 5. SUPERSEDING OF OUTSTANDING NON-COMPETITION AGREEMENT. Upon its execution, this Agreement shall automatically supersede and terminate the terms of the current Covenant Not To Compete between the parties hereto, dated as of February 8, 1994, and each party hereto hereby waives and releases any claims it may have against the other arising under that Agreement. 6. GENERAL TERMS. (a) NOTICES. Any notice required or desired to be given hereunder shall be in writing and shall be deemed to have been duly given (i) upon hand delivery, or (ii) on the third day following delivery to the U.S. Postal Service as certified mail, return receipt requested and postage prepaid, or (iii) on the first day following delivery to a recognized overnight courier service, fee prepaid, return receipt or other confirmation of delivery requested. Any such notice shall be delivered or directed to a party at its address previously set forth in this Agreement or to such other address as a party may specify by notice given to the other party hereto in accordance with the provisions of this paragraph. (b) BENEFIT. This Agreement and the rights and obligations contained herein shall be binding upon and inure to the benefit of the Company, its successors and assigns, and upon the Employee, his legal representatives, heirs and distributees. (c) WAIVER. The waiver of any party of a breach of any provision of this Agreement shall not operate as or be construed as a waiver of any subsequent breach. (d) ENTIRE AGREEMENT. This Agreement may not be altered, amended or terminated except by an instrument in writing signed by the parties hereto. (e) PARTIAL INVALIDITY. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted. (f) APPLICABLE LAW. This Agreement shall be construed and enforced in accordance with the laws of the State of New York applicable to contracts made and to be performed wholly within New York State, without giving effect to conflict of laws principles. (g) HEADINGS. The headings contained in this Agreement are inserted for convenience only and do not constitute a part of this Agreement. (h) COUNTERPARTS. This Agreement may be executed in more than one counterpart, each one of which will be deemed an original and all of which shall constitute one and the same instrument. (i) ASSIGNMENT. The Employee may not assign any of his rights, duties or obligations hereunder without the prior written consent of ACC Corp. Likewise, ACC Corp. may not assign any of its rights, duties or obligations hereunder without the prior written consent of the Employee except in the event of a merger or other acquisition of ACC Corp. in which ACC Corp. is not the surviving entity or the purchase of all or substantially all its assets, provided that such merger, acquisition or purchase is for a valid business purpose not involving this Agreement. (j) REMEDIES. All rights and remedies of the Company, whether provided for herein or by operation of law, are cumulative and may be exercised singularly or concurrently, and the exercise of any such remedy shall not be deemed an election of remedies so as to preclude the election of any other remedy. (k) JURISDICTION AND VENUE. In the event that any legal proceedings are commenced in any court with respect to any matter arising under this Agreement, the parties hereto specifically consent and agree that the courts of the State of New York and/or the Federal Courts located in the State of New York shall have jurisdiction over each of the parties hereto and over the subject matter of any such proceedings, and the venue of any such action shall be in Monroe County, New York and/or the U.S. District Court for the Western District of New York. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of October 6, 1995. EMPLOYEE: ACC CORP. /s/ Richard T. Aab By: /s/ Michael R. Daley Richard T. Aab Title: EVP & CFO Note: The Registrant agrees to furnish supplementally to the Commission a copy of any omitted schedule or exhibit to this Agreement upon request. EX-27 9
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACC CORP.'S SEPTEMBER 30, 1995 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000783233 ACC CORP. 1,000 U.S. DOLLARS 9-MOS DEC-31-1995 JAN-1-1995 SEP-30-1995 1 1,672 0 34,526 2,659 160 40,902 75,781 24,789 113,074 50,776 23,445 127 8,997 0 24,549 113,074 119,268 127,241 79,163 128,913 0 2,191 3,666 (5,447) 538 (5,760) 0 0 0 (5,760) (0.77) 0 Total long term debt
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