<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN
PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
ALC COMMUNICATIONS CORPORATION
(Name of registrant as specified in its charter)
CONNIE R. GALE
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
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<PAGE> 2
ALC COMMUNICATIONS CORPORATION
30300 TELEGRAPH ROAD, SUITE 350
BINGHAM FARMS, MICHIGAN 48025
NOTICE AND PROXY STATEMENT
FOR
THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
MAY 12, 1994
To our Shareholders:
The 1994 Annual Meeting of Shareholders of ALC Communications Corporation
(the "Company") will be held at the Southfield Marriott Hotel, 27033
Northwestern Highway, Southfield, Michigan, at 10:00 a.m., local time, on
Thursday, May 12, 1994 for the following purposes:
1. To elect six persons to the Board of Directors of the Company;
2. To approve the Company's 1994 Non-Employee Director Stock Option Plan;
and
3. To transact such other business as may properly come before the Annual
Meeting.
A Proxy Statement containing information relevant to the Annual Meeting
appears on the following pages. The record date for shareholders entitled to
receive notice of and to vote at the Annual Meeting or any adjournment thereof
is as of the close of business on March 16, 1994.
The enclosed proxy card will enable you to vote your shares on the matters
to be considered at the Annual Meeting. All you need to do is mark the proxy
card to indicate your vote, date and sign the proxy card, and then return it
promptly in the self-addressed stamped envelope provided. If you sign and return
your proxy card without specifying your choices, it will be understood that you
wish to have your shares voted in accordance with the Board of Directors
recommendations. The giving of the proxy will not affect your right to attend
the Meeting, nor, if you choose to revoke the proxy, your right to vote in
person.
Management sincerely appreciates your support. We hope to see you at the
Annual Meeting.
By Order of the Board of Directors
/s/CONNIE R. GALE
---------------------
Connie R. Gale
Secretary
April 12, 1994
<PAGE> 3
ALC COMMUNICATIONS CORPORATION
30300 TELEGRAPH ROAD
BINGHAM FARMS, MICHIGAN 48025
Proxy Statement for the 1994
Annual Meeting of Shareholders
INTRODUCTION
The 1994 Annual Meeting of Shareholders (the "Annual Meeting") of ALC
Communications Corporation ("ALC" or the "Company") will be held at 10:00 a.m.,
local time, on Thursday, May 12, 1994, at the Southfield Marriott Hotel, 27033
Northwestern Highway, Southfield, Michigan. This Proxy Statement is furnished in
connection with the solicitation of proxies to be used at the Annual Meeting and
at any adjournment or adjournments thereof.
This Proxy Statement has been prepared by ALC management ("Management") and
provides information relevant to the Annual Meeting. Only the shareholders of
record as of the close of business on March 16, 1994 (the "record date") are
entitled to receive notice of and to vote at the Annual Meeting. The Company
intends to commence distribution of this Proxy Statement and the materials
accompanying it on April 12, 1994.
Each shareholder of record is invited to use the proxy card which
accompanies this Proxy Statement to vote the shares such shareholder owned of
record on the record date with respect to each matter on which votes are to be
taken at the Annual Meeting. To do so, each shareholder should promptly sign,
date and return the enclosed proxy card. While the Notice of Annual Meeting
calls for the transaction of such other business as may properly come before the
Annual Meeting, Management has no knowledge of any matters to be presented for
action by the shareholders at the Annual Meeting other than as set forth in the
Notice. The enclosed proxy gives discretionary authority so that the person
holding the proxy may vote it in accordance with his best judgment as to any
such other business. A list of all shareholders entitled to vote at the Annual
Meeting will be available for inspection by any shareholder for any purpose
reasonably related to the Annual Meeting during ordinary business hours for a
period of ten business days prior to the Annual Meeting at the Company's
Shareholder Relations Office, 30300 Telegraph Road, Bingham Farms, Michigan. At
the record date, approximately 33,108,152 shares of ALC Common Stock were
outstanding. There are no other securities of the Company entitled to vote at
the Annual Meeting. The terms "ALC Stock" or "Common Stock" as used in this
Proxy Statement refer to the ALC Common Stock.
The person giving the enclosed proxy has the power to revoke it at any time
before it is exercised. However, such revocation must be made in writing and
received by the Secretary or Assistant Secretary of the Company at its principal
executive office at 30300 Telegraph Road, Suite 350, Bingham Farms, Michigan
48025 at or before the time and date of the Annual Meeting. A shareholder may
also attend the Annual Meeting in person and vote in person, in which event any
prior proxy given by such shareholder shall be automatically revoked. However,
attendance at the Annual Meeting will not, of itself, revoke the proxy.
The Company will pay the cost of the preparation and mailing of this Proxy
Statement and all other costs of the proxy solicitation made by the Company's
Board of Directors. The Company has retained Proxy Services Corporation to
assist in the solicitation of proxies for a fee of $1,500 plus out-of-pocket
expenses. Certain of the Company's employees may also solicit proxies but no
additional remuneration will be paid to them by the Company for the solicitation
of those proxies.
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<PAGE> 4
VOTING RIGHTS
The holders of ALC Stock are entitled to vote on the matters being
considered.
VOTING FOR DIRECTORS
The holders of the ALC Stock shall be entitled to elect seven members of
the Board of Directors. The affirmative vote of a majority of all the votes
entitled to be cast by the holders of ALC Stock (one vote per share) present in
person or by proxy is required to elect such members of the Board of Directors.
VOTING ON MATTERS RELATING TO THE 1994 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Shareholders are being asked to approve the ALC Communications Corporation
1994 Non-Employee Director Stock Option Plan. The affirmative vote of a majority
of all the votes entitled to be cast by the holders of ALC Stock (one vote per
share) present in person or by proxy shall be required to approve such Plan.
ELECTION OF DIRECTORS
The Board of Directors has nominated six individuals for election to six of
the seven positions on the Company's Board of Directors. Each director elected
at the Annual Meeting will serve for a term ending at the next general election
of directors (which is expected to occur at the next Annual Meeting anticipated
to be held in May of 1995) unless such person's service is earlier terminated by
such person's death, resignation or removal. As of the date of this Proxy
Statement, all the named nominees are currently directors of ALC. At this time,
there is no nominee identified by the Board for the seventh position.
The following list identifies: (i) each person who has been nominated by
the Company's Board of Directors for election to the Board at the Annual
Meeting, and (ii) each candidate's principal occupation for the past five years.
RICHARD D. IRWIN, age 58, has held the position of Chairman of the Board of
Directors of ALC since August 1988. Mr. Irwin is the President of Grumman Hill
Associates, Inc. ("Grumman Hill"), a merchant banking firm, having held that
position since its formation in 1985. Prior to the formation of Grumman Hill,
Mr. Irwin was a Managing Director of Dillon Read & Co. Inc. from 1983 through
1985. Mr. Irwin is also a member of the Board of Directors of Caire, Inc. and
Pharm Chem Laboratories, Inc.
JOHN M. ZRNO, age 55, has held the positions of President and Chief
Executive Officer and director since August 1988. From December 1981 until
joining ALC in mid-August 1988, Mr. Zrno held a number of executive positions
with Cable & Wireless North America, Inc., a U.S. subsidiary of a British
telecommunications company, the most recent of which was President and Chief
Executive Officer.
MARVIN C. MOSES, age 49, has held the positions of Executive Vice
President, Chief Financial Officer and Assistant Secretary of ALC since October
1988 and director since September 1989. From February 1982 until joining ALC in
October 1988, Mr. Moses held a number of executive positions with Cable &
Wireless North America, Inc., the most recent of which was Chief Financial
Officer and Senior Vice President.
WILLIAM H. OBERLIN, age 49, has held the position of Chief Operating
Officer since July 1990, the position of Executive Vice President since October
1988 and director since July 1993. From November 1983 through September 1988,
Mr. Oberlin held a number of executive positions with Cable & Wireless North
America, Inc., the most recent of which was Senior Vice President -- Sales and
Marketing.
RICHARD J. UHL, age 53, has held the position of director since September
3, 1991. Mr. Uhl is the President and a member of the Board of Directors since
1985 of Chicago Holdings, Inc. ("CHI"), a privately-owned company which manages
several lease portfolios owned by it and its subsidiaries. Since November 1990
he has also been the Chief Executive Officer and a member of the Board of
Directors of Hurrah Stores, Inc., a subsidiary of CHI. Mr. Uhl has also been
President of Steiner Financial Corporation, another subsidiary of CHI, since
December 1987. Mr. Uhl currently serves on the Board of Directors of Dealers
Alliance Credit Corp. (as Chairman of the Board) since October 1993, and of
First Merchants Acceptance Corporation since March 1991, which are both
privately-owned companies in which CHI has a significant equity investment.
2
<PAGE> 5
MICHAEL E. FAHERTY, age 59, has held the position of director since June
23, 1992. Mr. Faherty primarily works (since 1977) as a business consultant and
in the contract executive business, in connection with which he formerly served
in a number of executive positions, including Chairman of the Board and
President, with Shared Financial Systems, Inc., from January 1992 through
January 1994. Mr. Faherty is also a member of the Board of Directors of BancTec,
Inc., Biomagnetic Technology, Inc. and Davox Corporation.
The Board of Directors held eight regularly scheduled and special meetings
in the aggregate during the fiscal year from January 1, 1993 through December
31, 1993.
Several important functions of the Board of Directors of ALC have been
performed by committees comprised of members of the Board of Directors. The
Amended and Restated Bylaws of ALC (the "Bylaws") prescribe the functions and
the standards for membership on the Audit Committee. Subject to those standards,
the Board of Directors acting as a body appoints the members of the Audit
Committee at the meeting of the Board of Directors coincident with the annual
meeting of shareholders. However, the Board of Directors has the power at any
time to change the authority or responsibility delegated to the committee or the
members serving on the committee. Under the Bylaws, the Audit Committee performs
the following functions: (i) recommends to the Board of Directors annually a
firm of independent public accountants to act as auditors of the Company; (ii)
reviews with the auditors the scope of the annual audit; (iii) reviews
accounting and reporting principles, policies and practices; (iv) reviews with
the auditors the results of their audit and the adequacy of accounting,
financial and operating controls; and (v) performs such other duties as are
delegated to it by the Board of Directors. The members of the Audit Committee
during the 1993 fiscal year were Richard D. Irwin, Richard J. Uhl and Michael E.
Faherty. During 1993, the Audit Committee met four times.
The Board, pursuant to the Bylaws, also established a Compensation
Committee. The Compensation Committee has the authority to: (i) establish the
compensation (including salaries and bonuses) of the officers; (ii) establish
incentive compensation plans for the officers; (iii) administer the stock option
plans and grants of options under those plans; and (iv) perform such other
duties as are from time to time delegated to the Compensation Committee by the
Board of Directors. The members of the Compensation Committee during fiscal 1993
were Richard D. Irwin, Richard J. Uhl and Michael E. Faherty. During 1993, the
Compensation Committee met five times.
The Board of Directors does not have a standing committee responsible for
nominating individuals to become directors.
Section 16(a) of the Securities Exchange Act requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission and the American Stock Exchange. In addition, officers,
directors and greater than ten percent shareholders are required to furnish the
Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file Forms 5 for specified fiscal years, the Company
believes that all of its officers, directors, and greater than ten percent
shareholders complied with all filing requirements applicable to them with
respect to transactions during fiscal 1993 except that the Company has been
informed as follows:
Saulene M. Richer, a former director elected by holders of the Company's
Class A Preferred Stock (redeemed in 1993) and also a ten percent shareholder of
Class A Preferred Stock (the "Class A Preferred"), failed to timely file one
required report relating to one transaction in ALC Stock.
A series of five related transactions, although reported on a timely basis
by NationsBank of Texas, N.A., was not reported on a timely basis by NationsBank
Corporation (the parent corporation of NationsBank of Texas, N.A.) due to its
late filing of a required report (which transactions were otherwise properly
disclosed in the Company's reports filed under the Exchange Act).
The Trustees of General Electric Pension Trust ("General Electric") failed
to timely file three required reports relating to seventeen transactions in ALC
Stock. General Electric subsequently filed three late Forms 4 regarding such
transactions.
3
<PAGE> 6
PROPOSED ALC COMMUNICATIONS CORPORATION
1994 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Company has adopted, effective February 10, 1994, subject to
ratification by shareholders, a new Non-Employee Director Stock Option Plan (the
"Plan"). The purpose of the Plan is to enhance the Company's ability to attract
and retain the services of experienced and knowledgeable independent directors
who are not officers or employees of the Company ("Non-Employee Directors") and
to provide an additional incentive for such directors to continue to work for
the best interests of the Company and its shareholders.
The full text of the Plan is set forth as an exhibit to this proxy
statement. The following is a summary of the material features of the Plan, and
is qualified in its entirety by reference to the Plan as set forth in Appendix
A.
The operation of the Plan is automatic, and awards are granted pursuant to
a formula set forth in the Plan. Beginning with the Annual Meeting of
Shareholders to be held on May 12, 1994 (subject to ratification by shareholders
at that meeting), on the date of each Annual Meeting, each Non-Employee Director
who has served as a director for at least one year and was elected to continue
as a director at that meeting will be granted an option to purchase 5,000 shares
of Common Stock of the Company. The options awarded under the Plan will be in
addition to, and not in lieu of, the Non-Employee Director's annual retainer
fee, meeting fees, or other compensation payable as a result of his or her
service on the Company's Board of Directors.
The purchase price of each share of Common Stock which may be purchased
upon exercise of options granted under the Plan will be the fair market value on
the date of grant. No option may be exercised prior to one year from the date of
grant. Each option will become exercisable with respect to 1,250 shares one year
from the date of grant, and with respect to an additional 1,250 shares on the
second, third and fourth anniversaries of the grant. Each option shall terminate
after ten years from the date of grant or, if earlier, three months after the
optionee ceases to be a director, except in the case of death. If a Non-Employee
Director dies while a director, the right to exercise all unexercised options
would be accelerated and could be exercised by the director's beneficiary within
one year of the director's death. If a Non-Employee Director dies within the
three month period after he or she ceases to be a director, the Non-Employee
Director's beneficiary may exercise his or her options, to the extent
exercisable on the date of death, within one year after the Non-Employee
Director's death.
The options granted to Non-Employee Directors under the Plan may not be
assigned or transferred other than by will or the laws of descent and
distribution, or pursuant to the terms of a domestic relations order which
satisfies the requirements of Section 414(p)(1)(A) of the Internal Revenue Code
of 1986, as amended (the "Code"). All rights to receive options under the Plan
will terminate immediately in the event a Non-Employee Director ceases to serve
as a director.
The total number of shares of Common Stock which may be granted under the
Plan may not exceed 100,000 shares, subject to adjustments for stock dividends,
split-ups, consolidation or similar capital adjustments, and may be authorized
and unissued shares or issued shares which have been reacquired by the Company.
The Plan will remain in effect until remaining shares available are
insufficient to grant the options provided hereunder, or until earlier
terminated by action of the Board of Directors. The Board of Directors may amend
the Plan at any time, except that the provisions of the Plan regarding the
amount, price or timing of the awards to Non-Employee Directors may not be
amended more than once every six months, other than to comport with changes in
the Internal Revenue Code, ERISA or the rules issued thereunder. In addition,
the Board may not make any amendment for which shareholder approval is required
for compliance with Rule 16b-3 under the Securities and Exchange Act of 1934 or
other applicable law, unless such compliance, if discretionary, is no longer
desired. Rule 16b-3 currently requires shareholder approval of amendments which
would (i) materially increase the benefits accruing to participants under the
Plan, (ii) materially increase the number of securities under the Plan, or (iii)
materially modify the requirements as to eligibility for participation in the
Plan.
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<PAGE> 7
FEDERAL INCOME TAX CONSEQUENCES
The options granted under the Plan will be nonqualified options (options
which are not Incentive Stock Options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended) and the grant of such an option will
have no income tax consequences for either the Company or the participant
(unless the option is freely transferable and has a readily ascertainable market
value). Upon the exercise of an option by a participant, the participant will
recognize ordinary income and the Company will be entitled to a deduction in an
amount equal to the excess of the fair market value of the Common Stock
purchased over the purchase price. Such ordinary income is not subject to
withholding of tax by the Company. The subsequent sale or exchange of the Common
Stock acquired pursuant to the exercise of an option would generally give rise
to capital gain or loss.
NEW PLAN BENEFITS
The table below sets forth the dollar value and number of shares which
would have been awarded to Non-Employee Directors in 1993 if the Plan had been
in effect:
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
<TABLE>
<CAPTION>
DOLLAR NUMBER
VALUE($) OF SHARES
---------- ---------
<S> <C> <C>
Non-Executive Director Group............................. N/A 5,000
</TABLE>
The closing price of a share of the Company's Common Stock on March 16,
1994 was $35.13.
Currently, three Non-Employee Directors, Messrs. Irwin, Uhl and Faherty,
would be eligible to participate in the Plan.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE PROPOSAL
TO APPROVE THE COMPANY'S 1994 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN. PROXIES
SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS SHAREHOLDERS
OTHERWISE SPECIFY IN THEIR PROXIES.
OFFICER AND DIRECTOR COMPENSATION
Director Compensation
For 1992 and 1993, and to be continued for 1994, Richard J. Uhl and Michael
E. Faherty received or will receive remuneration of up to $20,000 per year for
their services as Board members. Of that fee, $8,000 is dependent upon per
meeting attendance at the four regularly scheduled Board meetings. Richard D.
Irwin waived his right to fees throughout his term of service on the Board. On
September 3, 1991, ALC granted Richard J. Uhl an option to purchase 40,000
shares of Common Stock at $4.25 per share, the market price at date of grant.
Mr. Uhl is entitled to exercise the option in full; it expires on the earlier of
60 days subsequent to Mr. Uhl's death, resignation or removal as a director and
September 3, 1998. On June 23, 1992, ALC granted Michael E. Faherty an option to
purchase 40,000 shares of Common Stock at $4.63 per share, the market price at
date of grant. Mr. Faherty is entitled to exercise the option in full; it
expires on the earlier of 60 days subsequent to Mr. Faherty's death, resignation
or removal as a director and June 23, 1998. It is anticipated that the Common
Stock issuable upon the exercise of the options held by Messrs. Uhl and Faherty
will be registered under the Securities Act of 1933 (the "Securities Act"). In
addition, Grumman Hill, of which Richard D. Irwin is President, entered into an
Advisory Agreement with Stock Option dated September 7, 1988 (the "Advisory
Agreement") with the Company. Pursuant to the terms of the Advisory Agreement,
Grumman Hill performs certain advisory services with respect to the management,
operation and business development activities of the Company. In exchange for
such services, Grumman Hill was initially granted a stock option to purchase at
a price of $11.25 per share 153,163 shares of Common Stock and receives an
annual fee of $100,000. In conjunction with the 1990 phase of the Refinancing,
the option was regranted at an exercise price of $3.50 per share. The option was
subsequently assigned to Grumman Hill Investments, L.P. ("Grumman Hill, L.P.")
(of which Mr. Irwin is the General Partner). Grumman Hill, L.P. is entitled to
5
<PAGE> 8
exercise the option in full. It is anticipated that the Common Stock issuable
upon the exercise of the option will be registered under the Securities Act. The
option will expire on September 7, 1998.
Executive Compensation
SUMMARY COMPENSATION TABLE
The following table summarizes the total compensation paid to the Chief
Executive Officer and the four most highly compensated executive officers at the
end of calendar year 1993 for each of the past three fiscal years during which
the named executive acted as an executive officer.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
-------------------------------------------- COMPENSATION
OTHER ------------------------
ANNUAL OPTIONS/ ALL OTHER
COMPENSATION SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) (#)(2) ($)(3)
- ------------------------------- ---- -------- -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
John M. Zrno................... 1993 $319,041 $273,000 $ 2,650(4) 300,000 $600
President, Chief Executive 1992 307,755 175,000 284,983 500
Officer, Director 1991 292,025 105,000
Marvin C. Moses................ 1993 $245,417 $210,000 240,000 $600
Executive Vice President, 1992 234,998 135,000 217,398 500
Chief Financial Officer, 1991 223,256 81,000
Assistant Secretary, Director
William H. Oberlin............. 1993 $245,417 $210,000 240,000 $600
Executive Vice President, 1992 234,893 135,000 217,398 500
Chief Operating Officer, 1991 223,172 81,000
Director
Gregory M. Jones............... 1993 $142,706 $ 37,948 860(4) 60,000 $600
Senior Vice President 1992 135,090 49,708 $ 55,092 500
1991 128,260 25,425
Connie R. Gale................. 1993 $138,000 $ 46,309 51,000 $600
Vice President, General 1992 130,250 48,280 47,385 500
Counsel and Secretary 1991 122,000 28,750 10,000
</TABLE>
- -------------------------
(1) Total perquisites for each officer were less than either $50,000 or 10% of
total salary and bonus.
(2) Options granted in 1992 include options granted in 1990 and amended in 1992
(the exercise price was not changed).
(3) Consists of Company contributions to defined contribution plan during 1993
and 1992 in the amounts of $600 and $500, respectively, for each officer.
(4) Represents gross up for income taxes relating to a perquisite.
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<PAGE> 9
STOCK OPTION GRANTS DURING LAST FISCAL YEAR
The following table sets forth information about stock option awards
granted to the Chief Executive Officer and the four most highly compensated
executive officers during 1993.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- --------------------------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SAR'S PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM*
OPTIONS/SAR'S EMPLOYEES IN PRICE EXPIRATION -------------------------
NAME GRANTED(#)(1)(2) FISCAL YEAR ($/SH) DATE(3) 5%($) 10%($)
- -------------------- ---------------- ------------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
John M. Zrno........ 300,000 18.40% $25.06 11/22/2003 $4,728,030 $11,981,756
Marvin C. Moses..... 240,000 14.72% $25.06 11/22/2003 $3,782,424 $ 9,585,405
William H. 240,000 14.72% $25.06 11/22/2003
Oberlin........... $3,782,424 $ 9,585,405
Gregory M. Jones.... 60,000 3.68% $25.06 11/22/2003 $ 945,606 $ 2,396,351
Connie R. Gale...... 51,000 3.13% $25.06 11/22/2003 $ 803,765 $ 2,036,898
</TABLE>
- -------------------------
* These amounts represent assumed rates of appreciation which may not
necessarily be achieved. The actual gains, if any, are dependent on the
market value of the Company's Common Stock at a future date as well as the
option holder's continued employment throughout the vesting period.
Appreciation reported is net of exercise price.
(1) All options were granted at market value on date of grant. The 1990 Stock
Option Plan allows the exercise price and tax withholding obligations to be
paid by delivery of already owned shares or with shares purchased pursuant
to the exercise, subject to certain conditions. Vesting may be accelerated
in the event of certain situations resulting in a change of ownership of
the Company. The Compensation Committee, as administrator of the Company's
stock option plans, has discretion to modify the terms of outstanding
options, subject to certain limitations set forth in the plans.
(2) One third of each grant will vest one third November 22, 1994, November 22,
1995 and November 22, 1996. The second third shall vest one third November
22, 1995, November 22, 1996 and November 22, 1997. The final third shall
vest one third November 22, 1996, November 22, 1997 and November 22, 1998.
(3) Unless earlier terminated due to such events as termination of employment or
death.
Note: No matter what theoretical value is placed on a stock option on the date
of grant, its ultimate value will be dependent on the market value of the
Company's Common Stock at a future date.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY END(#) FY END($)(1)
SHARES ------------- -------------
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- ---------------------------------------------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
John M. Zrno.................................. 155,000 $2,705,863 445,344 $ 11,286,522
484,655 5,681,455
Marvin C. Moses............................... 103,000 2,085,213 383,062 9,719,382
381,938 4,418,924
William H. Oberlin............................ 63,400 1,081,000 422,662 10,729,182
381,938 4,418,924
Gregory M. Jones.............................. 77,326 1,220,063 0 0
93,766 1,041,577
Connie R. Gale................................ 0 0 61,543 1,542,396
81,842 933,563
</TABLE>
- -------------------------
(1) Values are calculated by determining the difference between the fair market
value of the Common Stock at December 31, 1993 and the exercise price of
the options.
7
<PAGE> 10
EMPLOYMENT CONTRACTS AND TERMINATION OR CHANGE IN CONTROL ARRANGEMENTS
In late 1988, ALC entered into employment agreements with John M. Zrno,
Marvin C. Moses and William H. Oberlin. These arrangements had initial four year
terms and were amended in 1991 to extend for an additional two years. In January
1994, ALC and its wholly owned subsidiary, Allnet Communication Services, Inc.
("Allnet"), jointly entered into amended and restated employment agreements with
John M. Zrno, Marvin C. Moses and William H. Oberlin. These agreements provide
for a base salary of $319,041, $245,417 and $245,417, respectively, for Messrs.
Zrno, Moses and Oberlin for service provided in 1993 through 1994, beginning and
ending with the month of each officer's respective anniversary of hire.
Each of these agreements has an initial three year term and contains a
provision that, in the event the officer's employment is terminated for any
reason except death, disability, voluntary resignation or cause, such officer
will continue to receive his current salary from twelve to twenty-four months.
Should the officer be terminated without cause, the stock options granted in the
agreement would fully vest and remain exercisable for the succeeding twelve
months.
According to the employment agreements with Messrs. Zrno, Moses and
Oberlin, each officer may receive incentive compensation as determined by the
Board of Directors, based on the Board's determination of the officer's
individual achievements.
Officers below the level of Executive Vice President entered into severance
agreements wherein the Company agreed to provide salary continuation and certain
employee benefits for a period of twelve months (formerly, from six-to-twelve
months) should an officer be terminated from employment prior to December 31,
1995. These agreements, originally effective February 1990, were renewed in
February 1991, August 1992, July 1993 and January 1994.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during fiscal 1993 were Richard
D. Irwin, Richard J. Uhl and Michael E. Faherty. Richard D. Irwin, Chairman of
the Board of Directors since August 1988 and a member of the Compensation
Committee, is a former officer of the Company because, prior to March 1991, the
position of Chairman of the Board was an officer position under the Company's
Bylaws.
Grumman Hill, of which Richard D. Irwin is President, entered into the
Advisory Agreement with the Company in 1988. Pursuant to the terms of the
Advisory Agreement, Grumman Hill performs certain advisory services with respect
to the management, operation and business development activities of the Company.
In exchange for such services, Grumman Hill was initially granted a stock option
to purchase 153,163 shares of Common Stock at a price of $11.25 per share and
receives an annual fee of $100,000. In conjunction with the 1990 phase of the
Refinancing, the option was regranted at an exercise price of $3.50 per share.
The option was subsequently assigned to Grumman Hill, L.P. (of which Mr. Irwin
is the General Partner). Grumman Hill, L.P. is entitled to exercise the option
in full. It is anticipated that the Common Stock issuable upon the exercise of
the option will be registered under the Securities Act. The option will expire
on September 7, 1998.
Prior to the 1992 Note Exchange Offer (as defined in "Certain Relationships
and Related Transactions -- Banks Stock Ownership in the Company"), Grumman
Hill, L.P., the Grumman Hill Associates Pension Plan, Mr. Irwin and Mr. Irwin's
Individual Retirement Account held approximately $2.5 million, $75,000, $339,000
and $188,000, respectively, in principal amount of 11 7/8% Senior Subordinated
Debentures of ALC due December 31, 1995 (the "Replacement Debentures")
(exclusive of PIK Debentures issued or issuable in respect of certain interest
payments on the Replacement Debentures). As a consequence of the Note Exchange
Offer, prior to January 28, 1993 Mr. Irwin and Grumman Hill, L.P. and affiliates
owned $4.1 million in principal amount of 1992 Notes and owned 194,393 1992
Warrants (capitalized terms as defined in "Certain Relationships and Related
Transactions -- Banks Stock Ownership in the Company"). Mr. Irwin subsequently
purchased 40,000 shares of Common Stock in the 1992 Equity Offering, which,
together with other options and warrants, give these entities the right to
purchase in the aggregate up to 815,646 shares of Common Stock. Grumman Hill,
L.P. subsequently sold $3.3 million in principal amount of 1992 Notes. In
8
<PAGE> 11
June 1993, the 1992 Notes, including the remaining $800,000 in principal amount
held by Mr. Irwin and affiliates, were paid in full.
As of January 1994, Mr. Irwin, Mr. Faherty (as general partner of a
family-owned partnership), Mr. Uhl, Mr. Zrno and Mr. Moses own $533,000,
$600,000, $200,000, $100,000 and $100,000, respectively, in principal amount of
1993 Notes which they acquired either in the Company's May 1993 offering of
$85.0 million principal amount 9% Senior Subordinated Notes (the "1993 Note
Offering") or in open-market transactions.
TOTAL SHAREHOLDER RETURN
FIVE-YEAR PERFORMANCE COMPARISON
The graph below provides an indicator of cumulative shareholder returns for
the Company as compared with the S&P 500 Index and with the S&P Telecomm Long
Distance Index.
<TABLE>
<CAPTION>
S&P Telecomm
Measurement Period ALC Com- Long Dis-
(Fiscal Year Covered) munications S&P 500 tance
<S> <C> <C> <C>
1988 100.00 100.00 100.00
1989 76.64 131.69 168.05
1990 12.27 127.60 107.82
1991 48.00 166.47 144.12
1992 149.33 179.15 190.45
1993 309.33 197.21 215.29
</TABLE>
- -------------------------
Assumes $100.00 invested in January 1, 1988 in Common Stock, S&P 500 Index, and
the S&P Telecomm Long Distance Index.
9
<PAGE> 12
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
OVERALL POLICY:
The philosophy of the Company's compensation program is to offer internally
and externally competitive compensation opportunities for all employees based on
the individual's contribution and personal performance consistent with corporate
needs and objectives.
The compensation of the Company's three top executives (Messrs. Zrno, Moses
and Oberlin) is reviewed and approved annually by the Compensation Committee,
which is comprised entirely of non-employee Directors. The compensation policies
with respect to the Company's officer group as a whole (including Mr. Jones and
Ms. Gale) are also similarly reviewed. The Compensation Committee solicits the
input of the Chief Executive Officer, the Chief Financial Officer and the Chief
Operating Officer as well as outside sources such as consultants and
publications in making its determinations.
There are three elements in the Company's executive compensation program:
(1) base salary compensation, (2) annual incentive compensation, and (3) stock
option compensation. The Company strives to provide total compensation
opportunities which are reflective of the Company's relative performance and
competitive in the subjective viewpoint of the Committee with those offered
within our industry (although not those companies listed on the S&P Telecomm
Long Distance Index) as well as other similarly situated growth companies. In
this connection the Committee reviews various survey data and in 1993 retained a
consulting firm to assist the Committee in its duties. However, compensation is
not based primarily on the comparison with other companies nor on any specific
consultant's recommendations.
BASE SALARY COMPENSATION:
Base salary compensation is determined by a subjective assessment, which
gives relatively equal weight to the various factors, of the potential impact
the individual has on the Company, the skills and experiences required by the
job, and the quality of the performance and potential of the individual in the
job.
With respect to the base salary previously granted to Mr. John M. Zrno,
President and Chief Executive Officer, the Compensation Committee took into
account the above-stated factors. In addition, in 1988 Mr. Zrno entered into an
employment agreement with the Company which provides for a minimum annual 5%
increase over the rate paid the immediately preceding year. Mr. Zrno has waived
this provision for 1993 and did not receive a salary increase.
In addition, the Compensation Committee has approved a policy providing for
an allowance of a limited amount of additional compensation for the officers to
cover, at the discretion of the officer, leased automobiles, various
organization memberships and financial or tax counseling. The maximum allowance
is $13,333 per year for the President and Chief Executive Officer and $10,000
per year for each of the Executive Vice Presidents. All remaining officers have
a cap of $6,000 per year.
ANNUAL INCENTIVE COMPENSATION:
Annual incentive compensation is based upon percentages of base salaries
and individual performance levels. Bonuses are payable only if the individual is
employed at the time bonuses are paid. Annual incentive opportunities for Vice
Presidents are targeted at 25% of base salary with variances due to individual
and Company performance, including Company attainment of certain quality goals
relating to customer satisfaction. The Company believes that employee attention
to customer service and quality will yield in turn a positive impact with
respect to shareholder interests. Two-thirds of the award is based on individual
performance and one-third of the individual's award is based upon Company
performances measured by the monthly Customer Satisfaction Survey conducted by
the Company. The survey reviews telephone quality, customer service, sales
support, and administrative support. With respect to the Company's officers at
the level of Executive Vice President and above, at present the three
individuals at this level (Messrs. Zrno, Moses and Oberlin) are under employment
agreements which specify that incentive compensation is to be based upon
achievement of performance goals established each year with the Compensation
Committee. However, by
10
<PAGE> 13
mutual agreement, annual performance goals have not been determined. Instead, in
late 1988 when these Officers were recruited by the Company, they were asked to
develop a multi-year plan to (1) reposition the Company in the small-and
mid-sized business sector of the long distance market, (2) renegotiate
arrangements with various financial interests including network and equipment
vendors and institutional and public debt holders, and (3) revitalize employee
interest and effort in helping create a successful and motivated Company
workplace. During the period 1989-1992 the Committee concluded that specific
annual financial performance goals by themselves would be difficult to establish
and perhaps counterproductive to the long-term objectives agreed upon by the
Board and the new executive officer team. For each of these years the Committee
relied on its subjective sense of progress towards achievement of the multi-year
plan rather than on specific financial performance goals. Similarly, instead of
specific performance goals for 1993, the Committee referred to the annual
financial plan in determining senior management's progress towards achievement
of the Company's strategic objectives as noted in further detail below.
For fiscal year 1993, Mr. Zrno was awarded a bonus of $273,000. The Company
had completed the last phases of its refinancing in 1992. During 1993, the
Company focused its attention on profitably growing its customer base,
increasing its revenue and lowering its cost of financing. These strategic goals
were accomplished. The Company acquired a residential customer base through the
acquisition of Call Home America. Revenue increased by slightly over 16% from
1992 year end. The Company issued 9% Senior Subordinated Notes, the proceeds of
which were used to redeem 11 7/8% Subordinated Notes. The Company also replaced
its revolving credit facility with a larger facility at a reduced rate of
interest. Senior management met and exceeded the Company's annual financial plan
for 1993 with revenue approximately 7% over plan, operating income approximately
38% over plan and cash flow approximately 98% over plan.
STOCK OPTION COMPENSATION:
Other incentive compensation consists of stock options granted pursuant to
the Company's stock option plans. Stock options are designed to align the
interests of key employees with those of the shareholders. Stock options are
granted with an exercise price equal to the market price of the Common Stock on
the date of grant and in prior years, grants have vested over four years. This
approach is designed to provide incentives for the creation of shareholder value
over the long term since the full benefit of such compensation package cannot be
realized unless stock price appreciation occurs over a number of years. This
form of long-term incentive compensation is offered to senior management
personnel including officers. The actual awards are based on individual
performance.
With respect to Messrs. Zrno, Moses and Oberlin, the 1988 through 1992
stock option awards were part of the recruitment package and commitments to such
officers for the achievement of the multi-year plan described above. Options
granted after 1988 addressed, although only partially, the dilution to the
options originally granted to such officers. Further, certain options granted in
1990, which were contingent on the former majority shareholder selling its
holdings at differing prices ("strike prices"), were amended to eliminate such
contingency. The majority shareholder assigned its shares to its Banks so the
contingency allowing the options to be exercised was not and could not be
triggered. The strike prices for these options had been established to provide
an incentive for the officers to increase the value of the financially troubled
Company during the period of the refinancing. The Company's performance and the
increase in value of the Company stock following the refinancing exceeded
expectations and substantially exceeded the strike prices of the options. In
order to reward Management, including these three officers, for their efforts,
in 1992 the options were amended to remove the contingency and the expiration
date was extended to be consistent with the other outstanding options. The
exercise price was not changed.
As indicated, the Committee felt that the previously granted options to the
officers, and in particular to senior management, has had a major, positive
impact on the financial turnaround of the Company in the past several years.
Stock options proved to be the most valuable incentive offered to senior
management and the Committee determined to continue to aggressively use similar
stock options to maintain Management's focus on increasing shareholder value.
11
<PAGE> 14
In 1993 Mr. Zrno was granted 300,000 non-qualified stock options at an
exercise price of $25.06 per share. These "front loaded" options (i.e. the total
number which would be estimated to be otherwise granted over a three-year
period) vest as follows: one third of the grant shall vest over a three-year
period commencing November 1994; the second third shall vest over a three year
period commencing November 1995; and the final third shall vest over a
three-year period commencing November 1996. The Stock Option Plans provide for
accelerated vesting in the event of a change of control or a merger. As part of
the overall objective of senior management in achieving increased shareholder
value, senior management shall continue its efforts to position the Company to
benefit from the expected consolidation of the multi-media communications
industry.
Because the option grants were made by the Committee, and because the
exercise price for the stock is equal to the fair market value of the stock at
the date of the grant, the Committee concluded that the limitation of I.R.C.
62(m), which generally limits the Company's deduction for compensation to
$1,000,000 in the case of certain employees unless the compensation is
performance based, would not be applicable to the grants.
The foregoing report was submitted by the Compensation Committee of the
Company's Board of Directors.
Richard D. Irwin,
Chairperson
Richard J. Uhl
Michael E. Faherty
February 10, 1994
12
<PAGE> 15
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding beneficial ownership
of the stock of ALC as of February 21, 1994 by each person known by ALC to be
the beneficial owner of more than 5.0% of any class of stock, each director of
ALC and all executive officers and directors of ALC as a group. The figures
presented are based upon information available to ALC.
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF PERCENTAGE
SHARES OF OF
COMMON STOCK VOTING POWER
NAME AND ADDRESS OF (% OF OF ALL
BENEFICIAL OWNER CLASS)* STOCK*
- ------------------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
FMR Corp.(1)................................................................... 2,442,830(2) 7.4%
82 Devonshire Street (7.4%)
Boston, MA 02109
Montgomery Asset Management(3)................................................. 1,736,634 5.2%
600 Montgomery St. (5.2%)
San Francisco, CA 94111
Trustees of General Electric Pension Trust..................................... 1,714,845(4) 5.0%
c/o G.E. Investments Corp. (5.0%)
3003 Summer Street
Stamford, CT 06904
Richard D. Irwin............................................................... 815,646(5) 2.4%
15 Ketchum Street (2.4%)
Westport, CT 06880
Grumman Hill Investments, L.P. ................................................ 639,155(6) 1.9%
15 Ketchum Street (1.9%)
Westport, CT 06880
Grumman Hill Associates, Inc. ................................................. 103,490(**)(7) **
15 Ketchum Street
Westport, CT 06880
John M. Zrno................................................................... 395,908(8) 1.2%
Suite 350 (1.2%)
30300 Telegraph Road
Bingham Farms, MI 48025
Marvin C. Moses................................................................ 395,066(9) 1.2%
Suite 350 (1.2%)
30300 Telegraph Road
Bingham Farms, MI 48025
Richard J. Uhl................................................................. 40,200(**)(10) **
One Thousand RIDC Plaza
Pittsburgh, PA 15238
Michael E. Faherty............................................................. 40,000(**)(11) **
15301 Dallas Parkway, Suite 600
Dallas, TX 75248
William H. Oberlin............................................................. 420,706(12) 1.3%
Suite 350 (1.3%)
30300 Telegraph Road
Bingham Farms, MI 48025
Gregory M. Jones............................................................... 942(**) **
Suite 350
30300 Telegraph Road
Bingham Farms, MI 48025
Connie R. Gale................................................................. 65,148(**)(13) **
Suite 350
30300 Telegraph Road
Bingham Farms, MI 48025
All current executive officers and directors as group (17 persons)............. 2,350,042(14) 6.6%
(6.6%)
</TABLE>
- -------------------------
* Percentage calculation based on 33,101,601 shares of Common Stock, issued
and outstanding on February 21, 1994, plus shares of Common Stock which may
be acquired pursuant to warrants and options exercisable within sixty days
by such individual or group listed.
** Less than one percent.
(1) Based on information set forth in a Schedule 13G, dated February 14, 1994,
filed with the Securities and Exchange Commission.
13
<PAGE> 16
(2) Includes all shares held by Fidelity Management & Research Company (acting
as investment adviser) and by Fidelity Management Trust Company (acting as
investment manager), which are wholly-owned subsidiaries of FMR Corp. These
shares are deemed to be beneficially owned by Edward Johnson 3d; Mr.
Johnson is the Chairman of the Board and a member of a controlling group
with respect to FMR Corp.
(3) Based on information set forth in a Schedule 13G, dated February 2, 1994,
filed with the Securities and Exchange Commission.
(4) Includes 1,494,845 shares of ALC Stock which may be acquired pursuant to
the exercise of outstanding warrants.
(5) Includes 153,163 shares of ALC Stock which may be acquired pursuant to the
exercise of outstanding stock options held by Grumman Hill, L.P. and
622,483 shares of ALC Stock which may be acquired pursuant to the exercise
of outstanding warrants held individually and by Grumman Hill and Grumman
Hill, L.P. These Grumman Hill and Grumman Hill, L.P. shares are deemed to
be beneficially owned by Mr. Irwin, as President and Director of Grumman
Hill and as General Partner of Grumman Hill, L.P.
(6) Includes 485,992 shares of ALC Stock which may be acquired pursuant to the
exercise of outstanding warrants and 153,163 shares of ALC Stock which may
be acquired pursuant to the exercise of outstanding stock options.
(7) These shares of ALC Stock may be acquired pursuant to the exercise of
outstanding warrants.
(8) Includes 395,108 shares of ALC Stock which Mr. Zrno has the right to
acquire pursuant to the exercise of outstanding stock options, and 800
shares of ALC Stock which Mr. Zrno's wife and mother-in-law own jointly
(Mr. Zrno disclaims beneficial interest as to these shares).
(9) Includes 386,060 shares of ALC Stock which Mr. Moses has the right to
acquire pursuant to the exercise of outstanding stock options, 3,000 shares
of ALC Stock which Mr. Moses owns as custodian for his children under UGMA
and 1,000 shares of ALC Stock which Mr. Moses' daughter owns (Mr. Moses
disclaims beneficial interest as to the latter 1,000 shares).
(10) Includes 40,000 shares of ALC Stock which Mr. Uhl has the right to acquire
pursuant to the exercise of outstanding stock options.
(11) Shares of ALC Stock which Mr. Faherty has the right to acquire pursuant to
the exercise of outstanding stock options.
(12) Includes 420,666 shares of ALC Stock which Mr. Oberlin has the right to
acquire pursuant to the exercise of outstanding stock options.
(13) Includes 61,542 shares of ALC Stock which Ms. Gale has the right to acquire
pursuant to the exercise of outstanding stock options.
(14) Includes 1,663,483 shares of ALC Stock which executive officers and
directors of ALC have the right to acquire pursuant to the exercise of
outstanding stock options and 622,483 shares of ALC Stock which Mr. Irwin
has the right to acquire or is deemed to have the right to acquire pursuant
to the exercise of outstanding stock warrants held individually and by
Grumman Hill and Grumman Hill, L.P.
14
<PAGE> 17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
BANKS STOCK OWNERSHIP IN THE COMPANY
In August 1992, the Company's then majority shareholder, Communications
Transmission, Inc. ("CTI") conveyed the Common Stock, Class B Preferred Stock
(the "Class B Preferred") and Class C Preferred Stock (the "Class C Preferred")
it owned to a group of five banks (the "Banks") pro-rata in exchange for the
release of certain portions of CTI's obligations to each of the Banks. The
Banks, in the aggregate, acquired all of the Class B Preferred and Class C
Preferred, as well as 14,324,000 shares of Common Stock.
Pursuant to a Registration Rights Agreement dated June 4, 1990, the Banks,
The Prudential Insurance Company of America ("Prudential"), General Electric and
Grumman Hill and Grumman Hill, L.P. (and their transferees of securities covered
by such agreement) (the "Registration Rights Agreement") each had the right to
require ALC to register the 1990 Warrants issued in connection with the 1990
phase of the Refinancing (the "1990 Warrants"), shares of Common Stock issuable
upon exercise of such 1990 Warrants, shares of Common Stock issuable upon
conversion of the Class B Preferred and Class C Preferred, and the shares of
Common Stock previously held by the Banks, in each case held by such party, to
permit a public sale of such shares under the Securities Act and applicable
state securities laws. The parties could demand, in the aggregate, six such
registrations, and may join in an unlimited number of ALC initiated
registrations. Pursuant to the Registration Rights Agreement and an Assignment
of Rights Agreement dated August 6, 1992 among the Banks and ALC (the
"Assignment of Rights"), ALC registered and otherwise accommodated the 1992
Equity Offering and the 1993 Equity Offering through a "shelf registration."
Also in the Assignment of Rights, ALC gave the Banks the right to participate on
a preemptive basis in certain future private issuances of Common Stock by ALC.
In October 1992, the Company completed the 1992 Equity Offering for
9,863,600 shares of Common Stock, a portion of which resulted from the exchange
of the Class A Preferred held by individual shareholders and the remainder of
which was due to Common Stock held by other entities, including the Banks. The
Banks sold, in the aggregate, 3,000,000 shares of Common Stock in the 1992
Equity Offering. In the 1993 Equity Offering (which term includes all secondary
public offerings pursuant to the shelf registration in 1993), the Banks sold
8,386,216 shares of Common Stock, of which 3,796,000 were received upon
conversion of all outstanding shares of Class B Preferred and Class C Preferred.
After the 1993 Equity Offering, the Banks held an aggregate of 4,321,784 shares
of Common Stock, representing 15.0% of the then total voting power of ALC
capital stock (10.9% assuming the exercise of certain warrants and options).
Also pursuant to the shelf registration, in September 1993, the Company
completed a stock offering whereby General Electric, Prudential and a major
lessor sold an aggregate of 7,763,391 shares of Common Stock to the public. As a
result of the 1993 Equity Offering and subsequent transfers pursuant to an
escrow agreement, Prudential no longer holds a significant number of shares of
Common Stock.
Prudential agreed with a group of equipment lessors of Communications
Transmission Group, Inc. ("CTGI") to allow them to share in up to half of the
shares of ALC capital stock acquired by Prudential pursuant to a Residual Option
or received from the Banks, in each case under certain circumstances. Further,
in August 1992 the Banks agreed under certain circumstances to transfer to
Prudential 10% of the shares subject to the Residual Option upon disposition of
any shares of ALC capital stock owned by them. In addition, each Bank agreed
that after each Bank had received its pro rata portion of an amount calculated
by the formula used to determine the aggregate exercise price for the Residual
Option, plus interest thereon at 10% per annum from August 6, 1992 to the date
of determination, each Bank would pay Prudential any additional proceeds
received by it from the disposition of any shares of the ALC capital stock owned
by it as a result of the August 1992 transactions and to deliver to Prudential
any remaining shares of such ALC capital stock. In accordance with an agreement
entered into in August 1992, the Banks paid Prudential 10% of their net proceeds
from the 1992 Equity Offering, and transferred 1,412,000 shares of Common Stock
to Prudential as a consequence of the 1993 Equity Offering. Subsequently, by
March 1994, all of the Banks disposed of a sufficient number of shares to result
in such Banks receiving their respective pro rata portions of the amount of debt
of CTI released by the Banks on August 18, 1992 (plus interest), and such Banks
transferred all of their remaining shares of Common Stock to or as directed by
Prudential.
15
<PAGE> 18
In October 1993, Electra Communications Holding Corporation ("ECHC")
acquired rights from certain of CTGI's equipment lessors, including the right to
share in 30.77% of the shares of ALC Stock subsequently acquired by Prudential
from the Banks. ECHC further agreed to pledge any such shares it might receive
to Sanwa as pledge agent for Nissho Iwai American Corporation ("NIAC"), one of
CTGI's other equipment lessors. Prudential retained 282,035 shares of the
407,388 shares of ALC Stock it received from the Banks in March 1994 and
transferred the remaining 125,353 shares to ECHC, subject to ECHC's pledge to
NIAC.
Pursuant to a certain escrow agreement (the "Escrow Agreement") among
Prudential, Nissho Iwai American Corporation, as administrative lessor for
certain of CTGI's equipment lessors, and Sanwa Bank & Trust Company of New York
("Sanwa"), as Escrow Agent, on August 27, 1993, Prudential deposited 1,555,683
shares of Common Stock (the "Escrow Shares") with the Escrow Agent. Under the
terms of the Escrow Agreement, subject to contractual restrictions to which
Prudential was subject contained in one or more underwriting agreements relating
to ALC Stock, the Escrow Agent had the power to sell the Escrow Shares under
certain circumstances. These Escrow Shares were subsequently sold in the 1993
Equity Offering and the Escrow Agreement terminated in October 1993.
In August 1992, ALC had agreed with the Banks that it would not issue in
excess of 8,000,000 shares of Common Stock prior to the earlier of (a) August 6,
1994 or (b) the date on which the Banks collectively held less than 8,000,000
shares of Common Stock or Common Stock equivalents. As a result of the 1993
Equity Offering, this restriction on ALC terminated. In addition, ALC agreed
with Prudential that it would not issue in excess of 8,000,000 shares of Common
Stock prior to the earlier of (a) March 31, 1994, or (b) the expiration of the
Residual Option. As a result of the 1993 Equity Offering, this restriction on
ALC also terminated.
Also in August 1992, the Banks entered into a Stock Option Agreement (the
"Stock Option") and a Residual Stock Option Agreement (the "Residual Option"
and, together with the Stock Option, the "Options") with Prudential. By exercise
of the Options, Prudential had the ability to acquire all of the shares of Class
B Preferred, Class C Preferred and Common Stock owned by the Banks. The Stock
Option covered 1,000,000 shares of Common Stock owned by the Banks. As part of
the 1993 Equity Offering, Prudential exercised the Stock Option and sold the
1,000,000 shares of Common Stock acquired thereby.
The Residual Option covered all of the shares of Class B Preferred and
Class C Preferred, and all shares of Common Stock (other than the shares covered
by the Stock Option), owned by the Banks. The exercise price for the Residual
Option was an amount calculated by a formula that equaled the amount of the debt
of CTI released by the Banks on August 18, 1992 as adjusted according to a
formula. Upon the sale by the Banks of shares of Common Stock in the 1993 Equity
Offering, the Residual Option terminated.
TRANSACTIONS WITH GENERAL ELECTRIC AND PRUDENTIAL
General Electric and Prudential participated in the cash financing as part
of the 1990 phase of the Refinancing. As a result, General Electric held a note
issued in June 1990 (the "1990 Notes") in the original principal amount of $3.5
million and was issued 1990 Warrants to purchase up to 2,305,105 shares of the
Common Stock. In addition, prior to a note exchange offer (the "Note Exchange
Offer") pursuant to which ALC and Allnet exchanged 11 7/8% debentures previously
issued by ALC (the "Debentures") for note-warrant units (the "Units") consisting
of 11 7/8% of Subordinated Notes of Allnet due June 30, 1999 (the "1992 Notes")
and warrants to purchase shares of Common Stock (the "1992 Warrants"), General
Electric held $23.8 million in principal amount of the outstanding Original
Debentures and Replacement Debentures (exclusive of PIK Debentures issued or
issuable in respect of certain interest payments due on certain Debentures),
which constituted 43% of the total outstanding amount of those Debentures. As a
consequence of the Note Exchange Offer, General Electric owns 1,494,845 1992
Warrants. Also as a consequence of the Note Exchange Offer, General Electric
owned $31.8 million in principal amount of 1992 Notes (which the Company has
been informed were subsequently sold by General Electric).
General Electric purchased 500,000 shares of Common Stock in the 1992
Equity Offering; the Company has been informed 400,000 shares were subsequently
sold in the open-market. General Electric is also deemed to be the beneficial
owner of 120,000 shares of Common Stock which are held of record by its
investment
16
<PAGE> 19
manager. General Electric sold the 2,305,105 shares of Common Stock issued
pursuant to its 1990 Warrants in the 1993 Equity Offering and in subsequent
brokerage transactions.
Pursuant to the 1990 Note Agreement between ALC and General Electric, as
amended in August 1992, General Electric also had the right to nominate one
person for election to the Board of Directors of ALC. There was no such nominee
proposed by General Electric for election at the most recent Annual Meeting of
Shareholders and, following its participation in the 1993 Equity Offering,
General Electric no longer has equity ownership sufficient to maintain this
right. The General Electric 1990 Note was amended and replaced in August 1992.
Such amended and restated 1990 Note in the principal amount of $3,908,700 was
paid in full as of December 1992.
Prudential was the holder of a 1990 Note in the original principal amount
of $3.0 million which was paid in full as of August 1992. Prudential retained
the right to purchase up to 1,975,804 shares of Common Stock pursuant to
warrants for same. These warrants were exercised and the related shares were
sold in the 1993 Equity Offering.
FINANCIAL SERVICES
Richard D. Irwin has been a director of CTGI since June 1986 and is
President of Grumman Hill. See also "Compensation Committee Interlocks and
Insider Participation."
TRANSACTIONS WITH MANAGEMENT AND OTHERS
As of January 1994, Mr. Irwin, Mr. Faherty (as general partner of a
family-owned partnership), Mr. Uhl, Mr. Zrno and Mr. Moses own $533,000,
$600,000, $200,000, $100,000 and $100,000, respectively, in principal amount of
1993 Notes which they acquired either in the 1993 Note Offering or in
open-market transactions.
GENERAL INFORMATION
A majority of the voting power represented by the ALC Stock (with not less
than thirty-three and one-third percent of the Common Stock) outstanding on the
record date will constitute a quorum for the transaction of business at the
Annual Meeting with respect to those matters to be voted on by the shareholders.
If a quorum is not present, the holders of a majority of the voting power
represented by the ALC Stock represented at the Annual Meeting may adjourn the
Annual Meeting with respect to those matters to be voted on for which there is
no quorum from time to time without further notice to shareholders until a
quorum can be obtained. For quorum purposes, the total votes received, including
abstentions and broker votes, are counted in determining the number of shares at
the meeting. Abstentions will be treated as unvoted for purposes of determining
the approval of any matter submitted to the shareholders for a vote. If a broker
indicates on the proxy that it does not have discretionary authority as to
certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter, and a
broker non-vote will have no effect on the vote.
All shares of ALC Stock represented by any proxy in the accompanying form
which is completed as directed on the accompanying proxy or in any other manner
reasonably satisfactory to the Company and is received by the Company in time to
permit voting, are herein called a "management proxy" and will be voted as
directed on such proxy and, in the absence of such directive, will be voted (1)
FOR the election of directors of the Company of the persons nominated by the ALC
Board of Directors and (2) FOR the approval of the ALC Communications
Corporation 1994 Non-Employee Director Stock Option Plan. All management proxies
grant authority: (a) to adjourn the Annual Meeting until a quorum can be
obtained or for any other reason deemed desirable by Management; (b) to set the
time at which any subsequent Annual Meeting may be held; and (c) to vote on all
issues which may properly come before any Annual Meeting in accordance with the
directions of a majority of the incumbent members of the ALC Board of Directors.
However, the proxies cannot be voted for more than six nominees for directors.
The Board of Directors as of February 10, 1994 has appointed the accounting
firm of Ernst & Young as independent accountants to audit the financial
statements of the Company and its consolidated subsidiaries for
17
<PAGE> 20
calendar year 1994. Representatives of Ernst & Young are expected to be at the
Annual Meeting and to be available to respond to appropriate questions. Such
representatives will have the opportunity to make a statement if they desire to
do so.
The Company's 1993 Annual Report has been mailed with this Notice and Proxy
Statement or previously delivered to shareholders and does not form a part of
the material for the solicitation of proxies. If upon receipt of your proxy
material, you have not received the Annual Report, please write to Shareholder
Relations, ALC Communications Corporation, at the address listed below, and a
copy will be promptly forwarded to you.
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993 may be obtained without charge by sending a written
request addressed to Shareholder Relations, ALC Communications Corporation, at
the address listed below.
In order for a proposal by any shareholder to be included in the 1995 Proxy
Statement and proxy to be issued in connection with the 1995 Annual Meeting of
Shareholders, the shareholder's proposal must be delivered in writing to the
Company's Secretary at 30300 Telegraph Road, Suite 350, Bingham Farms, Michigan,
48025 not later than December 13, 1994. In addition, any such proposal must also
satisfy the conditions established by the Securities and Exchange Commission as
necessary to entitle such proposal to be included in the Company's Proxy
Statement and form of proxy. Shareholders will be notified in a timely manner if
the date of the 1995 Annual Meeting is advanced by more than 30 days or delayed
by more than 90 days from May 11, 1995 and will also be provided with a new
deadline for the submission of proposals.
By Order of the Board of Directors
/s/CONNIE R. GALE
--------------------
Connie R. Gale
Secretary
Dated: April 12, 1994
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<PAGE> 21
APPENDIX A
ALC COMMUNICATIONS CORPORATION
1994 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
ARTICLE I.
PURPOSE AND ADOPTION OF THE PLAN
1.01 PURPOSE. The purpose of the ALC Communications Corporation
Non-Employee Director Stock Option Plan is to attract and retain the services of
experienced and knowledgeable independent directors of ALC Communications
Corporation (the "Company") and to provide an additional incentive for such
directors to continue to work for the best interests of the Company and its
stockholders.
1.02 ADOPTION AND TERM. The Plan has been approved by the Board and is
effective as of February 10, 1994 subject to approval of the Company's
stockholders on or before February 9, 1995, and will remain in effect until all
shares authorized under the terms of the Plan have been issued, unless earlier
terminated or abandoned by action of the Board.
ARTICLE II.
DEFINITIONS
2.01 BENEFICIARY means (a) an individual, trust or estate who or which, by
will or by operation of the laws of descent and distribution, succeeds to the
rights and obligations of the Non-Employee Director under the Plan and Option
Agreement upon the Non-Employee Director's death; or (b) an individual, who by
designation of the Non-Employee Director, succeeds to the rights and obligations
of the Non-Employee Director under the Plan and Option Agreement upon the
Non-Employee Director's death.
2.02 BOARD means the Board of Directors of the Company.
2.03 CODE means the Internal Revenue Code of 1986, as amended. References
to a section of the Code shall include that section and any comparable section
or sections of any future legislation that amends, supplements or supersedes
that section.
2.04 COMPANY means ALC Communications Corporation, a Delaware corporation.
2.05 COMPANY COMMON STOCK means the Common Stock of the Company, par value
$0.01.
2.06 DATE OF GRANT means the date of the Annual Meeting of stockholders of
the Company on which an Option is granted as provided in Section 5.01.
2.07 DIRECTOR means a member of the Board of Directors of the Company.
2.08 EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
2.09 EXPIRATION DATE means the date specified in an Option Agreement as
the expiration date of such Award.
2.10 FAIR MARKET VALUE means, on any given date, the average of the
highest and lowest selling price for the Company Common Stock on the American
Stock Exchange as reported in The Wall Street Journal, or, if there were no
sales on such date, the average of the highest and lowest selling price for the
most recent date upon which a sale was reported.
2.11 NON-EMPLOYEE DIRECTOR means a Director who is not an employee of the
Company or a Subsidiary.
2.12 NON-QUALIFIED STOCK OPTION means a stock option which is not an
Incentive Stock Option as described in Section 422 of the Code.
2.13 OPTION means a Non-Qualified Stock Option granted at any time under
the Plan.
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2.14 OPTION AGREEMENT means a written agreement between the Company and
the optionholder evidencing the grant of an Option and setting forth the terms
and conditions of the Option.
2.15 PLAN means the ALC Communications Corporation 1994 Non-Employee
Director Stock Option Plan, as described herein and as it may be amended from
time to time.
2.16 PURCHASE PRICE, with respect to options, shall have the meaning set
forth in Section 5.02.
2.17 RULE 16B-3 means Rule 16b-3 promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act, as currently in effect
and as it may be amended from time to time, and any successor rule.
2.18 SUBSIDIARY shall have the meaning set forth in Section 424(f) of the
Code.
ARTICLE III.
COMPANY COMMON STOCK ISSUABLE PURSUANT TO THE PLAN
3.01 SHARES ISSUABLE. Shares to be issued under the Plan may be authorized
and unissued shares or issued shares which have been reacquired by the Company.
Except as provided in Section 3.03, the Options granted under the Plan shall be
limited so that all shares which shall be issued upon the exercise of
outstanding Options granted under the Plan shall never exceed 100,000 shares of
Company Common Stock.
3.02 SHARES SUBJECT TO TERMINATED OPTIONS. In the event that any Option at
any time granted under the Plan shall be surrendered to the Company, be
terminated or expire before it shall have been fully exercised, then all shares
formerly subject to such Option as to which such Option shall not have been
exercised shall be available for any Option subsequently granted in accordance
with the Plan.
3.03 ADJUSTMENTS TO REFLECT CAPITAL CHANGES.
(a) RECAPITALIZATION. The number and kind of shares subject to
outstanding Options, the Purchase Price for such shares, and the number and
kind of shares available for Options subsequently granted under the Plan
shall be appropriately adjusted to reflect any stock dividend, stock split,
combination or exchange of shares, merger, consolidation or other change in
capitalization with a similar substantive effect upon the Plan or the
Options granted under the Plan. The Board shall have the power to determine
the amount of the adjustment to be made in each case.
(b) SALE OR REORGANIZATION. After any reorganization, merger or
consolidation in which the Company is a surviving corporation, each
Non-Employee Director shall, at no additional cost, be entitled upon
exercise of an Option to receive (subject to any required action by
stockholders), in lieu of the number of shares of Company Common Stock
receivable or exercisable pursuant to such Option, a number and class of
shares of stock or other securities to which such Non-Employee Director
would have been entitled pursuant to the terms of the reorganization,
merger or consolidation if, at the time of such reorganization, merger or
consolidation, such Non-Employee Director had been the holder of record of
a number of shares of stock equal to the number of shares receivable or
exercisable pursuant to such Option. Comparable rights shall accrue to each
Non-Employee Director in the event of successive reorganizations, mergers
or consolidations of the character described above.
ARTICLE IV.
PARTICIPATION
ELIGIBLE INDIVIDUALS. All Non-Employee Directors of the Company shall be
eligible to receive Options under the Plan.
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ARTICLE V.
OPTION AWARDS
5.01 GRANT OF OPTIONS. Beginning with the first Annual Meeting of
stockholders of the Company which is subsequent to the date the Plan is adopted
by the Board and continuing while the Plan remains in effect and a sufficient
number of shares are available under the Plan, each year on the date of the
Annual Meeting, there shall automatically be granted to each Non-Employee
Director who has served as a Director for at least one year, and who has been
elected to serve on the Board after the Annual Meeting, a Non-Qualified Stock
Option to purchase 5,000 shares of Company Common Stock. Each Option granted
hereunder shall be evidenced by an Option Agreement, and shall be in addition
to, and not in lieu of, the Non-Employee Director's annual retainer fee, meeting
and committee fees, and any other compensation payable to each Non-Employee
Director as a result of his or her service on the Board.
5.02 PURCHASE PRICE OF OPTIONS. The Purchase Price of each share of
Company Common Stock which may be purchased upon exercise of any Option granted
under the Plan shall be the Fair Market Value on the Date of Grant.
5.03 VESTING OF OPTIONS. No Option may be exercised prior to one year from
the Date of Grant. Each Option granted pursuant to paragraph 5.01 above shall
become exercisable with respect to 1,250 shares one year from the Date of Grant,
and with respect to an additional 1,250 shares on the second, third and fourth
anniversaries of the Date of Grant.
5.04 DURATION OF OPTIONS. Options granted under the Plan shall terminate
after the first to occur of the following events:
(a) Ten years from the Date of Grant.
(b) Three months after the Optionee ceases to be a Director, except in
the case of death, as described in (c) below.
(c) In the event of the death of a Non-Employee Director while a
Director, the right to exercise all unexpired Options shall be accelerated
and shall accrue as of the date of death, and the Non-Employee Director's
Options may be exercised by his Beneficiary at any time within one year
after the date of the Non-Employee Director's death. In the event of the
death of a Non-Employee Director within the ninety day period after he or
she ceases to be a Director, the Non-Employee Director's Beneficiary may
exercise his or her Options, to the extent exercisable on the date of
death, within one year after the date of the Non-Employee Director's death.
5.05 EXERCISE PROCEDURES. Each Option granted under the Plan may be
exercised by written notice to the Company which must be received by the
Secretary of the Company on or before the Expiration Date of the Option. The
Purchase Price of shares purchased upon exercise of an Option granted under the
Plan shall be paid in full in cash by the Non-Employee Director on the date of
exercise.
5.06 RIGHTS AS A STOCKHOLDER. The Non-Employee Director or any transferee
of an Option pursuant to Section 5.04(c) or Section 5.09 shall have no rights as
a stockholder with respect to any shares of Company Common Stock covered by an
Option until the Non-Employee Director or transferee shall have become the
holder of record of any such shares, and no adjustment shall be made for
dividends and cash or other property or distributions or other rights with
respect to any such shares of Company Common Stock for which the record date is
prior to the date on which the Non-Employee Director or a transferee of the
Option shall have become the holder of record of any such shares covered by the
Option.
5.07 PLAN PROVISIONS CONTROL OPTION TERMS. The terms of the Plan shall
govern all Options granted under the Plan. In the event any provision of any
Option granted under the Plan shall conflict with any term in the Plan as
constituted on the Date of Grant of such Option, the term in the Plan as
constituted on the Date of Grant of such Option shall control. Except as
provided in Section 3.03, (i) the terms of any Option granted under the Plan may
not be changed after the granting of such Option without the express approval of
the
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<PAGE> 24
Non-Employee Director and (ii) no modification may be made to an Option granted
under the Plan except in compliance with Rule 16b-3.
5.08 TAXES. The Company shall be entitled, if the Company deems it
necessary or desirable, to withhold (or secure payment from the Non-Employee
Director in lieu of withholding) the amount of any withholding or other tax
required by law to be withheld or paid by the Company with respect to any shares
issuable upon exercise of an Option, and the Company may defer issuance of the
stock upon exercise unless indemnified to its satisfaction against any liability
for such tax.
5.09 LIMITATIONS ON TRANSFER. A Non-Employee Director's rights and
interest under the Plan may not be assigned or transferred other than by will or
the laws of descent and distribution, or pursuant to the terms of a domestic
relations order, as defined in Section 414(p)(1)(B) of the Code, which satisfies
the requirements of Section 414(p)(1)(A) of the Code (a "Qualified Domestic
Relations Order"). During the lifetime of a Non-Employee Director, only the
Non-Employee Director personally (or the Non-Employee Director's personal
representative or attorney-in-fact) or the alternate payee named in a Qualified
Domestic Relations Order may exercise the Non-Employee Director's rights under
the Plan. The Non-Employee Director's Beneficiary may exercise a Non-Employee
Director's rights to the extent they are exercisable under the Plan following
the death of the Non-Employee Director.
ARTICLE VI.
GENERAL PROVISIONS
6.01 AMENDMENT AND TERMINATION OF PLAN.
(a) AMENDMENT. The Board shall have complete power and authority to
amend the Plan at any time as it deems necessary or appropriate and no
approval by the stockholders of the Company or by any other person,
committee or entity of any kind shall be required to make any amendment;
provided, however, that the provisions set forth in the Plan regarding the
amount, price or timing of Option grants to Non-Employee Directors may not
be amended more than once every six months, other than to comport with
changes in the Code, the Employee Retirement Income Security Act of 1974,
as amended, or the rules thereunder. Further, the Board shall not, without
the requisite affirmative approval of stockholders of the Company, make any
amendment which requires stockholder approval under any applicable law,
including Rule 16b-3 or the Code, unless such compliance, if discretionary,
is no longer desired. No termination or amendment of the Plan may, without
the consent of the Non-Employee Director to whom any Option shall
theretofore have been granted under the Plan, adversely affect the right of
such individual under such Option. For the purposes of this section, an
amendment to the Plan shall be deemed to have the affirmative approval of
the stockholders of the Company if such amendment shall have been submitted
for a vote by the stockholders at a duly called meeting of such
stockholders at which a quorum was present and the majority of votes cast
with respect to such amendment at such meeting shall have been cast in
favor of such amendment, or if the holders of outstanding stock having not
less than a majority of the outstanding shares consent to such amendment in
writing in the manner provided under the Company's bylaws.
(b) TERMINATION. The Board shall have the right and the power to
terminate the Plan at any time. If the Plan is not earlier terminated, the
Plan shall terminate when all shares authorized under the Plan have been
issued. No Option shall be granted under the Plan after the termination of
the Plan, but the termination of the Plan shall not have any other effect
and any Option outstanding at the time of the termination of the Plan may
be exercised after termination of the Plan at any time prior to the
expiration date of such Option to the same extent such award would have
been exercisable if the Plan had not been terminated.
6.02 NO RIGHT TO CONTINUE AS DIRECTOR. Neither the Plan nor any action
taken hereunder shall be construed as giving any Non-Employee Director any right
to be retained as a Director, or to limit in any way the right of the
stockholders of the Company to remove such person as a Director.
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6.03 COMPLIANCE WITH RULE 16B-3. It is intended that the Plan be
established and operated so as to qualify for the exemption from Section 16 of
the Exchange Act available under Rule 16b-3, and so that the Non-Employee
Director receiving Options hereunder will qualify as "disinterested" under Rule
16b-3 for purposes of administering other stock option plans of the Company. If
any provision of the Plan would cause the Non-Employee Directors not to so
qualify, or would not comply with Rule 16b-3 if applied as written, such
provision shall not have effect as written and shall be given effect so as to
comply with Rule 16b-3 and to allow the Non-Employee Directors to so qualify, as
determined by the Board. The Board is authorized to amend the Plan and to make
any such modifications to Option Agreements to comply with Rule 16b-3, as it may
be amended from time to time, and to make any other such amendments or
modifications as it deems necessary or appropriate to better accomplish the
purposes of the Plan in light of any amendments made to Rule 16b-3.
6.04 SECURITIES LAW RESTRICTIONS. The shares of Company Common Stock
issuable pursuant to the terms of any Options granted under the Plan may not be
issued by the Company without registration or qualification of such shares under
the Securities Act of 1933, as amended, or under various state securities laws
or without an exemption from such registration requirements. Unless the shares
to be issued under the Plan have been registered and/or qualified as
appropriate, the Company shall be under no obligation to issue shares of Company
Common Stock upon exercise of an Option unless and until such time as there is
an appropriate exemption available from the registration or qualification
requirements of federal or state law as determined by the Company in its sole
discretion. The Company may require any person who is granted an award hereunder
to agree with the Company to represent and agree in writing that if such shares
are issuable under an exemption from registration requirements, the shares will
be "restricted" securities which may be resold only in compliance with
applicable securities laws, and that such person is acquiring the shares issued
upon exercise of the Option for investment, and not with the view toward
distribution.
6.05 CAPTIONS. The captions (i.e., all section headings) used in the Plan
are for convenience only, do not constitute a part of the Plan, and shall not be
deemed to limit, characterize or affect in any way any provisions of the Plan,
and all provisions of the Plan shall be construed as if no captions have been
used in the Plan.
6.06 SEVERABILITY. Whenever possible, each provision in the Plan and every
Option at any time granted under the Plan shall be interpreted in such a manner
as to be effective and valid under applicable law, but if any provision of the
Plan or any Option at any time granted under the Plan shall be held to be
prohibited or invalid under applicable law, then (a) such provision shall be
deemed amended to accomplish the objectives of the provision as originally
written to the fullest extent permitted by law and (b) all other provisions of
the Plan and every other Option at any time granted under the Plan shall remain
in full force and effect.
6.07 CHOICE OF LAW. All determinations made and actions taken pursuant to
the Plan shall be governed by the laws of Michigan and construed in accordance
therewith, to the extent not preempted by the laws of the United States.
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- --------------------------------------------------------------------------------
[LOGO]
30300 TELEGRAPH ROAD, BINGHAM FARMS, MICHIGAN 48025
PROXY
ANNUAL MEETING OF SHAREHOLDERS
OF ALC COMMUNICATIONS CORPORATION
The undersigned hereby appoints each of Richard D. Irwin and
Richard J. Uhl as Proxies, with power to appoint a substitute,
and hereby authorizes either of them to represent and to vote as
designated below all the shares of Common Stock held on record
by the undersigned on March 16, 1994, at the Annual Meeting of
Shareholders to be held on May 12, 1994 or any adjournment
thereof.
(Continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
<PAGE> 27
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF THE NOMINEES AND FOR THE PROPOSAL TO APPROVE THE ALC
COMMUNICATIONS CORPORATION 1994 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS: 2. PROPOSAL TO APPROVE ALC
COMMUNICATIONS CORPORATION
1994 NON-EMPLOYEE DIRECTOR STOCK
OPTION PLAN
John M. Zrno, Richard D. Irwin, INSTRUCTION: To withhold authority to vote
Marvin C. Moses, William H. Oberlin, for any individual nominee strike a line
Richard J. Uhl, Michael E. Faherty through the nominee's name below.
nominated by the Board of Directors John M. Zrno, Richard D. Irwin, Marvin C.
Moses, William H. Oberlin, Richard J. Uhl,
Michael E. Faherty
FOR AGAINST FOR AGAINST ABSTAIN
0 0 0 0 0
</TABLE>
3. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
Dated: ____________________________________________________ , 1994
___________________________________________________________________
Signature
___________________________________________________________________
Signature if held jointly
Please sign exactly as name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
