<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period year ended: March 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the transition period from to
Commission file number: 1-10831
ALC COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 38-2643582
(State of incorporation) (IRS Employer ID No.)
30300 Telegraph Road, Bingham Farms, Michigan 48025-4510
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (810) 647-4060
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
----- ------
As of May 1, 1995, the registrant had 33,846,357 shares of Common Stock
outstanding.
<PAGE> 2
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
----------- ------------
(Unaudited)
(In Thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 3,016 $ 41,412
Accounts receivable, less allowance for doubtful accounts of
$4,641,000 and $4,192,000 103,791 81,214
Other current assets 13,112 7,121
------------ -------------
Total Current Assets $ 119,919 $ 129,747
Fixed Assets:
Communication systems $ 110,247 $ 91,140
Building and other equipment 40,186 36,842
Construction in progress 3,747 8,690
------------ -------------
$ 154,180 $ 136,672
Less accumulated depreciation and amortization 81,003 77,514
------------ -------------
Total Fixed Assets $ 73,177 $ 59,158
Cost in excess of net assets acquired 89,092 47,267
Deferred income taxes 10,429 10,429
Customer bases 35,210 30,444
Other assets 13,045 7,680
------------ -------------
Total Assets $ 340,872 $ 284,725
============ ==============
</TABLE>
See notes to consolidated financial statements
<PAGE> 3
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---------- -------------
(Unaudited)
(In Thousands)
<S> <C> <C>
Current Liabilities:
Accounts payable $ 4,315 $ 2,018
Accrued liabilities 40,409 20,864
Accrued network costs 59,279 51,672
Taxes other than income 13,986 13,425
Capitalized leases and other long-term debt 237 232
------------ --------------
Total Current Liabilities $ 118,226 $ 88,211
Long-term Liabilities:
Line of Credit $ 5,000
Capitalized leases and other long-term debt 4,084 $ 3,048
Senior Subordinated Notes 79,430 79,418
------------ --------------
Total Long-Term Liabilities $ 88,514 $ 82,466
------------ --------------
Total Liabilities $ 206,740 $ 170,677
Stockholders' Equity:
Preferred Stock, par value $0.01; authorized -- 14,784,000
shares; issued and outstanding -- none
Common Stock, par value $0.01; authorized -- 200,000,000
shares; issued and outstanding -- 33,719,000
and 33,712,000 shares $ 337 $ 337
Capital in excess of par value 140,387 140,278
Paid-in capital -- Warrants 11,715 11,715
Accumulated deficit (18,307) (38,282)
------------ --------------
Total Stockholders' Equity $ 134,132 $ 114,048
------------ --------------
Total Liabilities and Stockholders' Equity $ 340,872 $ 284,725
============ ==============
</TABLE>
See notes to consolidated financial statements
<PAGE> 4
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------
March 31, March 31,
1995 1994
--------- ---------
(In Thousands Except Per Share Amounts)
<S> <C> <C>
Revenue $ 177,753 $ 129,789
Operating Expenses:
Cost of communication services and equipment sales $ 99,845 $ 70,010
Sales, general and administrative 38,812 31,231
Depreciation and amortization 5,952 4,027
----------- -----------
Total Operating Expenses $ 144,609 $ 105,268
----------- -----------
Operating Income $ 33,144 $ 24,521
Interest expense 1,294 1,626
----------- -----------
Income Before Income Taxes $ 31,850 $ 22,895
Income taxes 11,875 8,250
----------- -----------
Net Income $ 19,975 $ 14,645
=========== ===========
Net income per Common and Common equivalent share $ 0.52 $ 0.38
=========== ===========
Weighted average Common and Common equivalent shares 38,154 38,301
=========== ===========
</TABLE>
See notes to consolidated financial statements
<PAGE> 5
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1995 1994
---------- ----------
(In Thousands)
<S> <C> <C>
Operating Activities
Net income $ 19,975 $ 14,645
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 3,486 2,667
Amortization of intangible assets and bond discount 2,467 1,372
Provision for deferred income taxes (98)
Increase in accounts receivable and
other current assets (4,170) (9,818)
Increase in current liabilities 15,786 15,817
------------ -----------
Net Cash Provided by Operating Activities $ 37,544 $ 24,585
Financing Activities
Net Proceeds from Revolving Credit Facility $ 5,000
Payments on long-term debt (226) $ (243)
Proceeds from issuance of stock 109 1,665
------------ -----------
Net Cash Provided by Financing Activities $ 4,883 $ 1,422
Investing Activities
Expenditures for fixed assets $ (2,000) $ (4,706)
Acquisition of ConferTech International, Inc. (64,054)
Proceeds from sale of fixed assets 120
Change in other non-current assets (3,590) 301
Purchase of customer bases (11,179) (2,372)
------------ -----------
Net Cash Used in Investing Activities $ (80,823) $ (6,657)
------------ -----------
Increase (Decrease) in Cash and Cash Equivalents $ (38,396) $ 19,350
Cash and cash equivalents at beginning of period 41,412 1,819
------------ -----------
Cash and cash equivalents at end of period $ 3,016 $ 21,169
============ ===========
Interest paid $ 162 $ 61
============ ===========
Income taxes paid $ 1,129 $ 1,531
============ ===========
</TABLE>
See notes to consolidated financial statements
<PAGE> 6
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Three Months Ended March 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Paid-in capital
Common Stock Capital in -- Warrants
--------------------------- excess of -----------------
Shares Amount par value Shares
------ ------ ---------- ------
(In Thousands)
<S> <C> <C> <C> <C>
Balance, December 31, 1994 33,712 $337 $140,278 3,852
Exercise of stock options 7 54
Tax benefit from exercise of stock
options 55
Net income for the three months
ended March 31, 1995
------- ----- -------- ------
Balance March 31, 1995 33,719 $337 $140,387 3,852
======= ===== ======== ======
<CAPTION>
Paid-in capital
-- Warrants
--------------- Accumulated
Amount deficit Total
------ ------------ -----
(In Thousands)
<S> <C> <C> <C>
Balance, December 31, 1994 $11,715 ($38,282) $114,048
Exercise of stock options 54
Tax benefit from exercise of stock
options 55
Net income for the three months
ended March 31, 1995 19,975 19,975
-------- -------- --------
Balance March 31, 1995 $11,715 ($18,307) $134,132
======== ======== ========
</TABLE>
See notes to consolidated financial statements
<PAGE> 7
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 1995 and 1994
NOTE A -- MANAGEMENT'S REPRESENTATION
The consolidated financial statements included herein have been prepared by ALC
management, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and note 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. Certain prior year amounts have been reclassified to
conform to current year presentation. In the opinion of ALC management, all
adjustments considered necessary for a fair presentation have been included and
are of a normal recurring nature, and the accompanying consolidated financial
statements present fairly the financial position as of March 31, 1995 and
December 31, 1994, and the results of operations and cash flows for the three
month periods ended March 31, 1995 and 1994.
The balance sheet at December 31, 1994 has been derived from the audited
financial statements at that date but does not include all of the information
and accompanying footnotes required by generally accepted accounting principles
for complete financial statements. It is suggested that these consolidated
financial statements be read in conjunction with the financial statements and
notes included in the Company's Form 10-K for the fiscal year ended December
31, 1994.
NOTE B -- DEFINITIVE MERGER AGREEMENT
ALC Communications Corporation entered into a definitive agreement dated April
10, 1995, to merge with Frontier Corporation ("Frontier"). The combined
company, which will operate under the name Frontier Corporation, will become
the fifth largest long distance company in the United States. The combined
company will have total consolidated long distance, local and cellular annual
revenues approximating $2 billion. Under the terms of the merger agreement,
shareholders of ALC will receive 2.0 shares of Frontier for each share of ALC
stock for a total of approximately 78.7 million shares. The merger is intended
to qualify as a tax-free reorganization and a "pooling of interests" for
accounting purposes. The merger is subject to various conditions including
approval of the shareholders of the two companies and various regulatory
approvals. Completion of the transaction is anticipated in the third quarter
of 1995.
NOTE C -- CONFERTECH ACQUISITION
During late February 1995, ALC completed a tender offer and, by mid-March 1995,
had acquired all the shares of ConferTech International, Inc. ("ConferTech").
The financial statements reflect the transaction effective March 1, 1995. ALC
financed the purchase price, $66.4 million or $8.00 per share, through
cash from operations as well as utilizing its line of credit. ConferTech is a
leading provider of teleconferencing services and audio bridge equipment.
The purchase price has been allocated between the value of the assets acquired
and the cost in excess of net assets acquired which is being amortized over
40 years.
The following unaudited proforma summary presents the Company's revenue and
income as if the transaction occurred at the beginning of the periods presented.
The proforma financial data is not necessarily indicitive of the results that
actually would have occurred had the transaction taken place on the dates
presented and do not project the Company's results of operations.
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1995 1994
---------- ----------
<S> <C> <C>
Revenue $ 185,100 $ 140,187
Net income $ 20,038 $ 14,507
Earnings per Common and Common
equivalent share $0.53 $0.38
</TABLE>
NOTE D -- REVOLVING CREDIT FACILITY
In January 1995, the Company entered into a $105 million unsecured credit
facility with First Union National Bank of North Carolina and Bank One,
Columbus, NA as Co-Managing Agents. Under the facility, which expires December
31, 1999, the Company is able to minimize interest expense by structuring
borrowings under either of two alternatives. Each alternative has a varying
interest rate associated with it. A 0.25% per annum commitment fee is charged
on the unused portion of the line. As of March 31, 1995, the Company had
borrowings of $5.0 million under the facility.
<PAGE> 9
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company reported net income of $20.0 million on revenue of $177.8 million
for the three month period ended March 31, 1995. This compares to net income
of $14.6 million on revenue of $129.8 million for the same period in 1994.
Gross margin as a percent of net revenue decreased slightly from 46.1% to 43.8%
for the three months ended March 31, 1995 compared to the year earlier period.
The improved operating results were due primarily to an increase in long
distance traffic and a reduction of sales, general and administrative expenses
as a percentage of revenue. The Company's continued strong performance was
reflected by the increase in operating income of $8.6 million for the three
months ended March 31, 1995 over the same period one year earlier.
OPERATING RESULTS AS A PERCENT OF REVENUE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
1995 1994
--------- ----------
<S> <C> <C>
Revenue 100.0% 100.0%
Cost of communication services and
equipment sales (56.2) (53.9)
------ ------
Gross Margin 43.8% 46.1%
Sales, general and administrative (21.8) (24.1)
Depreciation and amortization (3.4) (3.1)
------ ------
Operating Income 18.6% 18.9%
====== ======
</TABLE>
Billable minutes have increased since the third quarter of 1990 when compared
to the same quarter in the prior year. Sequentially, billable minutes have
reached record levels for the seventh consecutive quarter. The increase
results from traffic growth generated by new customers, including strong growth
in reseller traffic, as well as increased sales productivity, the introduction
of new products and increased minutes per customer partially offset by billable
minutes lost through attrition of existing customers. The results of
operations for the three months ended March 31, 1995 reflect a continuation of
the trend of strong financial performance as indicated by a 36.4% increase in
net income from the comparable quarter of 1994.
During late February 1995, ALC completed a tender offer and, by mid-March
1995, had acquired all the shares of ConferTech International, Inc.
("ConferTech"). The financial statements reflect the transaction effective
March 1, 1995. ALC financed the purchase price, $66.4 million or $8.00 per
share, through cash from operations as well as utilizing its line of credit.
ConferTech is a leading provider of teleconferencing services and audio bridge
equipment. Operating income for 1995 relating to ConferTech totaled $0.5 million
or approximately 1.6% of total operating income.
<PAGE> 10
DEFINITIVE MERGER AGREEMENT
ALC Communications Corporation entered into a definitive agreement dated April
9, 1995, to merge with Frontier Corporation ("Frontier"). The combined
company, which will operate under the name Frontier Corporation, will become
the fifth largest long distance company in the United States. The combined
company will have total consolidated long distance, local and cellular annual
revenues approximating $2 billion. Under the terms of the merger agreement,
shareholders of ALC will receive 2.0 shares of Frontier for each share of ALC
stock for a total of approximately 78.7 million shares. The merger is intended
to qualify as a tax-free reorganization and a "pooling of interests" for
accounting purposes. The merger is subject to various conditions including
approval of the shareholders of the two companies and various regulatory
approvals. Completion of the transaction is anticipated in the third quarter
of 1995.
REVENUE
Revenue increased by 37.0% for the three months ended March 31, 1995 from the
comparable period of 1994. Billable minutes again reached the highest level in
the history of the Company, increasing by 50.5% for the three months ended
March 31, 1995 over the comparable period in 1994. The first full month
revenue from new sales in the first quarter of 1995 has increased from the same
period one year earlier. The Company's base revenue per minute of 16.0 cents
continues to be strong, though it has decreased from the prior year quarter
level primarily due to changes in the sales mix. Revenue from the ConferTech
acquisition totaled $4.6 million (one month) and represented 2.6% of the total
growth in revenue from the same quarter in the prior year.
Reseller revenue has continued to grow significantly from prior year periods
reaching over 30% of net revenue for the three months ended March 31, 1995.
Although reseller revenue per minute (between 11 cents and 12 cents) is lower
than regular commercial traffic the increased reseller traffic has a positive
impact on operating income due to low incremental sales, general and
administrative costs. Growth was also impacted positively by a major reseller
customer whose revenue has increased substantially in the last several months
and comprises approximately 16.0% of total revenue for 1995 to date. It is
ALC's understanding that this reseller, through a joint venture, will be
installing long distance switching capacity during 1995 which, as completed,
would result in over half of this traffic gradually moving to the joint venture
network. However, the joint venture has in turn entered into a three year
contract with Allnet effective as of April 1, 1995. Allnet will terminate the
joint venture traffic which cannot be terminated on the venture's own network.
Allnet also obtained provisions regarding exclusivity and minimums.
The provision for uncollectible revenue was 1.5% of gross revenue for the three
months ended March 31, 1995 and 1.8% for the same period of 1994. Strong
controls and procedures in the collection and credit risk detection processes
have enabled the Company to sustain a low bad debt rate.
OPERATING EXPENSES
The Company's primary cost is for communication services, which represents the
costs of originating and terminating calls via local exchange carriers
(primarily Bell Operating Companies). Also included in communication services
are the costs of owning and leasing long-haul transmission capacity as well as
bridges and the cost of providing conferencing services.
The cost of communication services and equipment sales increased $29.8 million
during the three month period ended March 31, 1995 compared to the same period
in 1994. This cost increased as a percent of net revenue for the comparable
periods, due in part to the significant concentration of reseller traffic which
has a lower rate per minute than regular commercial traffic. However, by the
use of high volume fixed price leased facilities to transmit traffic and lower
prevailing unit prices for such capacity, the Company has reduced its long-haul
transmission costs to less than 7% of revenue.
<PAGE> 11
Sales, general and administrative expense increased by 24.3% for the three
month period ended March 31, 1995 from the same period one year earlier (but
decreased to 21.8% of revenue). The dollar increase reflects increased
salaries and other expenses related to greater sales activity as well as the
costs incurred by ConferTech in 1995. Results for 1994 include a $1.2 million
cost reduction, recorded in the first quarter of the year, resulting from the
favorable settlement of a state telecommunications excise tax dispute.
Depreciation and amortization increased 47.8% from the first three months of
1995 compared to the same period in 1994. This increase is the result of
depreciation on newly acquired fixed assets and amortization of intangible
assets associated with the purchase of ConferTech and various customer bases.
INTEREST EXPENSE
Net interest expense decreased 20.4% for the three months ended March 31, 1995
compared to the same period in 1994 due to improved cash flow from operations
and interest income. Additionally, a $5.0 million redemption of the 1993 Notes
was made in April 1994. These positive factors were somewhat offset by
increased interest expense due to borrowings made during late February and
March under the Revolving Credit Facility ("Facility") to finance the
ConferTech acquisition.
INCOME TAXES
The effective tax rate increased from 36.0% for the first three months of 1994
to 37.3% for the first three months of 1995, due to the increase in income
(which results in a decrease in the favorable impact of the Company's annual
available $10 million net operating loss carryforward on the effective tax
rate).
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended March 31, 1995 and 1994, the Company generated
positive cash flow from operations of $37.5 million and $24.6 million,
respectively. The positive cash flow reflects nineteen consecutive quarters of
increased revenue and operating profits compared to prior year comparable
quarters.
The Company's working capital was $1.7 million at March 31, 1995 compared to
$41.5 million at December 31, 1994. The decrease in working capital is largely
the result of the $38.3 million decrease in the cash balance resulting from the
use of funds for the acquisition of ConferTech and the $27.2 million increase
in accrued liabilities and network costs attributable to increased volume,
offset by the $22.6 million increase in accounts receivable due to the increase
in revenue.
Evidence of the Company's strong liquidity position was its ability to finance
the purchase of ConferTech during March of 1995. ALC paid an aggregate
purchase price of $66.4 million dollars, financing the purchase through cash
from operations as well as utilizing its Revolving Credit Facility. As of
March 31, 1995, the Company had borrowings of only $5.0 million remaining under
the Facility and the balance was paid completely in early May.
In addition to the positive cash flow from operations, the Company's liquidity
position is further strengthened by the availability under the Revolving Credit
Facility. The Facility provides for borrowings up to $105.0 million and
expires December 31, 1999. Under this Facility, the Company is able to
minimize interest expense by structuring the borrowings under either of two
alternatives. Each alternative has a varying interest rate associated with it.
As of March 31, 1995, the Company had $100.0 million available under the line.
<PAGE> 12
Because the Company has chosen to lease rather than own its transmission
facilities, the Company's requirements for capital expenditures are modest.
Capital expenditures totaled $2.0 million for the first three months of 1995
and are expected to be approximately $30 million for the year ended December
31, 1995 (without factoring in the potential impact of the pending Frontier
merger). Capital expenditures year to date 1995 included projects for enhanced
efficiency and technical advancement in the network, information systems and
customer service. Future investment requirements for capital expenditures
relate directly to traffic growth which necessitates the purchase of switching
and related equipment. In addition, a major component of the capital budget
relates to technological advancements as the Company continually updates its
network capabilities to offer enhanced products and services.
Management believes that the Company's cash flow from operations will provide
adequate sources of liquidity to meet the Company's anticipated short and long
term liquidity needs.
<PAGE> 13
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Immediately following the announcement of the merger (the "Merger") of
Frontier Subsidiary One, Inc., a wholly owned subsidiary of Frontier
Corporation ("Frontier"), with and into ALC Communications Corporation ("ALC"),
three individuals who are alleged to be shareholders of ALC filed separate
purported class action complaints in the Court of Chancery, in and for New
Castle County, Delaware. These actions, styled Mayers v. Irwin, et al., C.A.
No. 14196; Cohen v. Irwin, et al., C.A. No. 14197 and Tovar v. Irwin, et al.,
C.A. No. 14216 all name as defendants ALC and each member of the Board of
Directors of ALC. In addition, both the Mayers and Cohen actions name Frontier
as a defendant.
Each of the three actions is substantially similar, and each asserts,
among other things, that the consideration to be paid to shareholders of ALC in
the Merger is grossly inadequate and unfair, is not the result of a fully
informed deliberative process by the Board of Directors of ALC, and constitutes
a breach of duty by each individual defendant, which according to the
complaints, was motivated by the desire of the three officer directors of ALC
to protect their compensation and positions with ALC. In addition, the Tovar
action complains that ALC's shareholder rights plan is being used to thwart a
possible acquisition of ALC by any other potential acquiror, and the Mayers and
Cohen actions also allege that Frontier has aided and abetted the alleged
breach of fiduciary duty by the ALC directors.
All three actions seek, among other things, an injunction to prohibit
the consummation of the Merger, rescission of the Merger if completed, damages
and attorney's fees. In addition, the Mayers complaint also seeks an order
requiring the Board of Directors of ALC "to place the Company up for auction
and/or to conduct a market-check."
The Board of Directors of ALC believes the actions to be without merit
and intends to defend against them vigorously.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-K
EXHIBIT INDEX
[refer to definitions at end of Index]
<TABLE>
<CAPTION>
Incorporated Page
Exhibit Filed Herein by Number
Number Description Herewith Reference to: Herein
- ------- ----------- -------- ------------- -------
<S> <C> <C> <C> <C>
2.1 Agreement and Exhibit
Plan of Merger Form 8-K
FSO, ALC, April 10, 1995
Frontier
April 9, 1995
4.1 Amendment to Rights X
Plan
10.1 Short Term Incentive X
Program
</TABLE>
1
<PAGE> 14
<TABLE>
<S> <C> <C>
10.2 Form Severance X
Agreement, amended/
restated April 9, 1995
11.1 Computation of Per X
Share Earnings
27.1 Financial Data Schedule X
</TABLE>
DEFINITIONS: ALLNET: Allnet Communication Services, Inc.
ALC: ALC Communications Corporation
FRONTIER: Frontier Corporation
FSO: Frontier Subsidiary One, Inc.
The Registrant hereby agrees to furnish the Commission a copy of each of the
Indentures or other instruments defining the rights of security holders of the
long-term debt securities of the Registrant and any of its subsidiaries for
which consolidated or unconsolidated financial statements are required to be
filed.
(b) Reports on Form 8-K
Reports on Form 8-K were filed by ALC on: (i) April 13, 1995 to describe the
announcement that ALC, Frontier and FSO have entered into an Agreement and Plan
of Merger; and (ii) May 1, 1995, a Report on Form 8-K/A including financial
statements with respect to the acquisition of ConferTech International, Inc.
2
<PAGE> 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ALC COMMUNICATIONS CORPORATION
(Registrant)
By:/s/ Marvin C. Moses
--------------------------------
Marvin C. Moses, Executive
Vice President and Chief
Financial Officer
By:/s/ Marilyn M. Price
--------------------------------
Marilyn M. Price, Vice
President, Controller and
Chief Accounting Officer
Dated: May 12, 1995
3
<PAGE> 1
EXHIBIT 4.1
AMENDMENT TO RIGHTS AGREEMENT
THIS AMENDMENT TO RIGHTS AGREEMENT (the "Amendment"), dated as
of April 9, 1995, is between ALC Communications Corporation, a Delaware
corporation, (the "Company") and Mellon Bank, N.A. (the "Rights Agent").
WHEREAS, the Company and the Rights Agent are parties to a
Rights Agreement dated as of January 12, 1995 (the "Rights Agreement").
WHEREAS, pursuant to Section 27 of the Rights Agreement, the
Company and the Rights Agent desire to amend the Rights Agreement as set forth
below.
ACCORDINGLY, the parties agree as follows:
1. Amendment of Section 1(k). Section 1(k) if the Rights
Agreement is amended to read in its entirety as follows:
"(a) "Exempt Person" shall mean (i) the Company or any
Subsidiary (as such term is hereinafter defined) of the
Company, in each case including, without limitation, in its
fiduciary capacity, or any employee benefit plan of the
Company or of any Subsidiary of the Company, or any entity or
trustee holding Common Stock for or pursuant to the terms of
any such plan or for the purpose of funding any such plan or
funding other employee benefits for employees of the Company
or of any Subsidiary of the Company, and (ii) Frontier
Corporation, a New York corporation ("Frontier") and any
Subsidiary of Frontier, so long as neither Frontier nor any
subsidiary of Frontier is the Beneficial Owner of any capital
stock of the Company other than capital stock of the Company
of which Frontier or any Subsidiary of Frontier is the
Beneficial 0wner solely by reason of the Agreement and Plan of
Merger (as the same may be amended from time to time, the
"Merger Agreement") dated as of April 9, 1995 between
Frontier, Frontier Subsidiary One, Inc. and the Company.
Notwithstanding any provision of this Rights Agreement to the
contrary, no Distribution Date, Stock Acquisition Date or
Triggering Event shall be deemed to have occurred, neither
Frontier nor any of its Subsidiaries shall be deemed to have
become an Acquiring Person and no holder of Rights shall be
entitled to exercise such Rights under or be entitled to any
rights pursuant to Section 7(a), 11(a) or 13(a) of this Rights
Agreement solely by reason of the approval, execution or
delivery of the Merger Agreement, or solely by reason of the
consummation of the Merger (as defined in the Merger
Agreement); provided, that in the event that Frontier or any
Subsidiary of Frontier becomes the Beneficial Owner of any
shares of Common Stock other than pursuant to the Merger
Agreement, the provisions of this sentence (other than this
proviso) shall not be applicable."
<PAGE> 2
2. Amendment of Section 7(a). Section 7(a) of the Rights
Agreement is amended to read in its entirety as follows:
"(a) Except as otherwise provided herein, the Rights
shall become exercisable on the Distribution Date, and
thereafter the registered holder of any Right Certificate may,
subject to Section 11 (a)(ii) hereof and except as otherwise
provided herein, exercise the Rights evidenced thereby in
whole or in part upon surrender of the Right Certificate, with
the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the office or agency of
the Rights Agent designated for such purpose, together with
payment of the aggregate Purchase Price with respect to the
total number of one-hundredths of a share of Preferred Stock
(or other securities, cash or other assets, as the case may
be) as to which the Rights are exercised, at any time which
is both after the Distribution Date and prior to the time (the
"Expiration Date") that is the earliest of (i) the Close of
Business on January 12, 2005 (the "Final Expiration Date"),
(ii) the time at which the Rights are redeemed as provided in
Section 23 hereof (the "Redemption Date"), (iii) the time at
which such Rights are exchanged as provided in Section 24
hereof, or (iv) the time immediately prior to the effective
time of the merger of the Company and Frontier Subsidiary One,
Inc. pursuant to the Merger Agreement."
3. Effectiveness. This Amendment shall be deemed effective as
of April 9, 1995, as if executed on such date. Except as amended hereby, the
Rights Agreement shall remain in full force and effect and shall be otherwise
unaffected hereby.
4. Miscellaneous. This Amendment shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such state.
This Amendment may be executed in any number of counterparts, each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument. If
any term, provision, covenant or restriction of this Amendment is held by a
court of competent jurisdiction or other authority to be invalid, illegal, or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Amendment shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and attested, all as of the day and year first
above written.
Attest: ALC Communications Corporation
By Connie R. Gale By John M. Zrno
------------------------------- -----------------------------
Name: Connie R. Gale Name: John M. Zrno
Title: Vice President, General Counsel Title: President and CEO
and Secretary
Attest: Mellon Bank, N.A.
By Jacqueline M. Wadsworth By James D. Aramanda
------------------------------- -----------------------------
Name: Jacqueline M. Wadsworth Name: James D. Aramanda
Title: Assistant Vice President Title: Senior Vice President
<PAGE> 1
EXHIBIT 10.1
ALLNET COMMUNICATION SERVICES, INC.
1995 SHORT TERM INCENTIVE PROGRAM
FOR DIRECTORS AND OFFICERS
Subject to Board of Directors approval, the Short Term Incentive (STI) program
for Directors and Vice Presidents is being renewed. The target awards are a
percentage of base salary. The percentage of base salary varies according to
the participant's level and whether or not he or she is separately compensated
based upon a sales compensation plan. Applicable target awards, shown as
percentages of base salary, are displayed in the table below:
<TABLE>
<CAPTION>
TARGET AWARD AS
STI PARTICIPANT'S LEVEL AND CATEGORY % OF BASE PAY
------------------------------------ ---------------
<S> <C>
Directors and Allnet(R) level Vice Presidents, not covered by a
Sales Compensation Plan........................................................ 18%
Allnet(R) level Vice Presidents, covered by a Sales Compensation Plan............ 9%
Directors, covered by a Sales Compensation Plan, and specifically
named as STI Participant in memorandum signed by CEO........................... 9%
ALC Officers, not covered by a Sales Compensation Plan........................... 30%
ALC Officers, covered by a Sales Compensation Plan............................... 15%
</TABLE>
Target awards will be prorated to the nearest full month for eligible
participants hired or promoted after January 1, 1995 and on or before October
1, 1995. Any Director, Vice President or Senior Vice President hired or
promoted into an eligible position for the first time after the beginning of
the fourth calendar quarter (on or after October 2, 1995) will not be eligible
for the 1995 STI bonus.
Participants are also required to continue active employment with the Company
through the time of the STI bonus payout. This payout will likely occur in
February or March of 1996 (provided STI goals are achieved). To the extent
that special circumstances need to be taken into consideration (such as periods
of extended leave, job changes and so forth), eligibility for the STI program
must be specifically negotiated with the Chief Executive Officer.
Participation will be subject to the CEO's approval, at his sole discretion.
1995 SHORT TERM INCENTIVE PLAN
ISSUED FEBRUARY 28, 1995
P. 1
<PAGE> 2
TARGET AWARD DOLLARS WILL BE DISTRIBUTED BETWEEN TWO CATEGORIES - ONE BASED UPON
INDIVIDUAL PERFORMANCE RELATIVE TO PROGRAMMATIC OBJECTIVES AND/OR LEADING
INDICATORS OF CUSTOMER SATISFACTION AND A SECOND ONE BASED UPON AN INDICATOR OF
SERVICE QUALITY AND CUSTOMER SATISFACTION.
The first category - based upon individual performance - is weighted most
heavily. Two thirds (67%) of each participant's target award will be based
upon his or her performance relative to three to five programmatic objectives
and/or leading indicators of customer satisfaction.
The second category - based upon corporate performance - accounts for the
remaining one third (33%) of each participant's target award. This portion of
the STI bonus will be based upon service quality and customer satisfaction as
measured by the new customer Welcome Survey.
Additionally, once bonus awards have been calculated, ACTUAL PAYOUTS (IF ANY)
WILL BE BASED UPON A MULTIPLIER DETERMINED BY THE COMPANY'S FINANCIAL
PERFORMANCE. THE FINANCIAL MULTIPLIER MAY SERVE TO INCREASE, DECREASE OR
ELIMINATE ACTUAL STI PAYOUTS.
CATEGORY 1
PROGRAMMATIC OBJECTIVES AND INTERNAL MEASURES OF CUSTOMER SATISFACTION
- TWO THIRDS (67%) OF TARGET AWARD -
This category is based upon individual performance relative to three to five
individual programmatic objectives and/or leading indicators of customer
satisfaction. STI participants reporting in line organizations (as opposed
to staff functions) are required to link their individual performance to at
least one leading indicator of customer satisfaction. Such leading indicators
must account for a minimum of 25% (up to a maximum of 100%) of the participant's
category 1 objectives. STI participants assigned staff functions are encouraged
(but not required) to link their individual performance to such leading
indicators of customer satisfaction.
Leading indicators are good internal measures of customer perceptions. They
are internal measures that assist in predicting how actions ultimately impact
customers.
Examples of leading indicators of overall customer satisfaction are:
- - Field Sales turnover
- - Number of orders returned to sales (RTS)
- - Employee satisfaction as measured by the employee opinion survey
- - Customer satisfaction regarding our strategic services
An STI participant assigned to a line position is expected to select at least
one leading indicator that is directly or indirectly under his or her control.
Participants are encouraged to contact Service
1995 SHORT TERM INCENTIVE PLAN
ISSUED FEBRUARY 28, 1995
P. 2
<PAGE> 3
Excellence for assistance in identifying and measuring leading indicators. In
establishing leading indicators, participants should use the following
framework:
1. Identify the leading indicator and describe why and how it is a useful
predictor of customer perceptions.
2. Describe how the leading indicator will be measured. Include the
sources used in the calculation.
3. Include an example of the calculation, using actual or test data.
4. State the objective for improvement. Be specific. For example:
- Reduce returned-to-sales orders from X% to Y%
- Reduce the number of network busies from X to Y
- Reduce sales force turnover from X% to Y%
- Increase the overall satisfaction (per product survey) of
customers using the Voice Mail product from X to Y
5. State when the objective will be met.
6. Describe the method(s) that will be used to achieve the objective.
7. Using a 0.00 to 1.50 scale, develop a quantitative formula for
determining percentage payout.
In addition to leading indicators of customer satisfaction, STI participants may
also establish individual strategic or programmatic objectives. Such objectives
should be designed to further the organization's strategic plan for success
through quality. The objectives should improve quality of service or
products, take advantage of economies-of-scale or in some other way directly
impact Company performance.
STI PARTICIPANTS ARE ENCOURAGED TO DEVELOP STRATEGIC CROSS FUNCTIONAL
PARTNERSHIPS IN SUPPORT OF INDIVIDUAL STI OBJECTIVES. SUCH PARTNERSHIPS CAN
AND SHOULD INCLUDE JOINT OR COMMON OBJECTIVES.
Further, strategic and/or programmatic objectives should be STRETCH objectives.
That is, they should represent efforts that go beyond baseline job
responsibilities. Objectives should be quantitative to facilitate
evaluation of the participant's performance. Qualitative measures, however,
should be used if they make more sense. The objective should be phrased so that
a naive reader can understand what the key performance indicator happens to be.
1995 SHORT TERM INCENTIVE PLAN
ISSUED FEBRUARY 28, 1995
P. 3
<PAGE> 4
Participants and their first-level reviews must agree on the participant's 1995
leading indicators and/or programmatic objectives and determine what weight
should be attached to each objective (remember, a minimum of 25% of category 1
weight must be allocated to leading indicators for STI participants assigned to
line functions). These objectives must be submitted to Bill Norris in Human
Resources, no later than the close of business March 22, 1995. Bill will
review the objectives for consistency, stretch and measurability and will
submit a summary to Senior Management.
IF CHANGING BUSINESS CONDITIONS OR OTHER EXIGENCIES NECESSITATE A MID-YEAR
RECONSIDERATION OF INDIVIDUAL PRIORITIES, STI OBJECTIVES MAY BE MODIFIED. THE
MODIFICATION MUST HAVE THE APPROVAL OF TWO LEVELS OF MANAGEMENT AND A COPY OF
THE MODIFICATION SHOULD BE FORWARDED TO BILL NORRIS.
During the first quarter of 1996, performance relative to leading indicators
and individual strategic objectives will be evaluated by each participant's
first level review based upon a scale of "0.00" to "1.50" with "1.0" indicating
that an individual achieved his or her objectives. Second level approval of
the evaluation will be required. Senior Management and Human Resources will
then check each evaluation for consistency and validity.
The individual performance rating of outstanding performers should average
about 1.00, although some participants may score as high as 1.50 or as low as
0.00 on certain individual objectives. The guidelines shown in the following
table should be used in determining scores, but evaluators are free to
interpolate between levels as appropriate.
<TABLE>
<CAPTION>
INDIVIDUAL PERFORMIANCE LEVEL RATING
----------------------------- ------
<S> <C>
Missed objective, performance unacceptable 0.00
Missed objective, perfomance acceptable 0.50
Largely achieved objective, minor shortfall 0.75
Achieved objective 1.00
Exceeded objective 1.25
Significantly exceeded objective 1.50
</TABLE>
Once each objective has been rated based upon this scale, the objectives will
be weighted and an overall rating based upon the scale will be calculated.
1995 SHORT TERM INCENTIVE PLAN
ISSUED FEBRUARY 28, 1995
P. 4
<PAGE> 5
STI bonuses for this portion of the program will be determined by multiplying a
participant's total target award by .67 (the portion of the target award
assigned to the strategic and/or programmatic objectives category) and then
multiplying that product by the participant's overall individual performance
rating.
CATEGORY 2 - CUSTOMER SATISFACTION
- ONE THIRD (33%) OF TARGET AWARD -
This portion of the Short Term Incentive program will focus on improving
results of customer perception measures and internal measures of quality of
services rendered. In the past, the overall Customer Satisfaction Survey index
has been used as the indicator of customer satisfaction.
During the first quarter of 1995, revised customer surveys have gone into use.
The surveys have changed dramatically: sampling methods, questions, response
wording and scales have all been modified. One consequence of these
improvements is that there is no prior survey data to use as a baseline for
setting goals for the revised surveys. HOWEVER, THE LACK OF A BASELINE SHOULD
NOT PROHIBIT THE SETTING OF GOALS FOR IMPROVING CUSTOMER SATISFACTION IN 1995.
The goal for customer satisfaction will be set in the spirit of continual
improvement. The objective is to continually improve the overall satisfaction
of customers throughout 1995.
Of particular concern are customers who have been with the Company for less
than three months. This group is characterized by high attrition.
Consequently, improving the overall satisfaction of this group will be the
primary aim in 1995.
The new WELCOME SURVEY (which replaces the New (Sales) Customer Survey) is
aimed at measuring the satisfaction of customers who have used the Company's
service for less than three months. Specifically, question one on this Welcome
Survey addresses the overall satisfaction of the new customer.
Throughout the year the score for this question will be plotted. Regression
analysis will then be conducted to determine a regression line (trend line).
This will enable calculation of the slope of the regression line (i.e. the
degree of incline or decline of a trend line). The slope (i.e. rate of
improvement or decline) will be used in the STI calculation to determine
payment of this portion of the STI bonus. The greater the positive slope, the
higher the payment.
Slope results will be rated using the table below:
1995 SHORT TERM INCENTIVE PLAN
ISSUED FEBRUARY 28, 1995
P. 5
<PAGE> 6
<TABLE>
<CAPTION>
SLOPE MEASURE COMPARABLE 12 MONTH RATING
POINT INCREASE (%)
EQUAL TO OR GREATER THAN LESS THAN EQUAL TO OR GREATER THAN LESS THAN
<S> <C> <C> <C> <C>
(NEGATIVE SLOPE) 0.00 (NEGATIVE) 0.00 0.00
0.00 0.0417 0.00 0.50 0.50
0.0417 0.0833 0.50 1.00 0.75
0.0833 0.1667 1.00 2.00 1.00
0.1667 0.2500 2.00 3.00 1.25
0.2500 N/A 3.00 N/A 1.50
</TABLE>
The following example is intended to help explain the above chart:
- - Assume that 80% of the Welcome Survey respondents indicate that they are
satisfied with the Company's service in the first month of the survey.
Further assume that in each of the succeeding month 11 months, the
satisfaction rate increases by a factor of 0.25% (i.e. 80.25% in the
second month, 80.5% in the third and so on). At the end of the 12 month
period, the satisfaction score would have increased to 83%. In this
example, regression analysis would not be needed because the
month-to-month increases would produce a perfect straight line. Looking
at the trend line over the course of the 12 months, the slope or rise in
the trend line line would be 0.25 per month - which would result in a
rating of 1.50 (based upon the chart shown above).
In practice, the actual results will not produce a perfect straight line.
Some months may spike high (i.e. the satisfaction rate might be particularly
high in any particular month) or spike low. Regression analysis will produce
a line of best fit through the month-to-month data points. If satisfaction
tends to increase over time, the slope will be positive. The greater the
increase over time, the steeper the trend will be which will translate into a
higher value for the slope measurement. THE KEY TO SUCCESS WILL BE TO IMPROVE
CUSTOMER SATISFACTION AS MEASURED BY THE FIRST QUESTION TO THE WELCOME SURVEY
OVER THE COURSE of 1995.
SPECIAL NOTE: Data on all other survey questions (including the Active Customer
Satisfaction Survey and the Terminated Customer Survey) will be also tracked.
TO THE EXTENT NEGATIVE TRENDS OR OTHER UNACCEPTABLE PERFORMANCE OCCURS
ADDITIONAL OR REPLACEMENT GOALS WILL BE CREATED AT THE DISCRETION OF THE CHIEF
EXECUTIVE OFFICER.
1995 SHORT TERM INCENTIVE PLAN
ISSUED FEBRUARY 28, 1995
P. 6
<PAGE> 7
FINANCIAL MULTIPLIER
The STI Bonus amount based upon a combination of Category 1 and 2 performance
will be paid out according to a financial multiplier. The financial multiplier
will be based upon the Company's actual 1995 operating income relative to
operating income goals.
This financial multiplier could double an individual's STI bonus or could
result in the elimination of the bonus depending on the results.
The Board of Directors will determine the 1995 operating income goal or goals
to be used in the financial multiplier and the performance levels that will
result in increased or decreased STI bonuses. The specifics will be
communicated to individual STI participants in a memorandum from the President
shortly after the Board of Directors makes its determination.
Distribution of the 1995 STI bonus will take place after the outside auditors
complete the fiscal year 1995 audit. This can be expected sometime in February
or March 1996.
In future years, modifications to the Short term Incentive bonus program can be
expected as the Company's financial performance and strategic plan develop.
Senior Management and the Board of
1995 SHORT TERM INCENTIVE PLAN
ISSUED FEBRUARY 28, 1995
P. 7
<PAGE> 8
Directors feel that we must continue to reward outstanding performance, but
also feel that expectations should be raised in each succeeding fiscal year.
Hard work and quality performance will help us all achieve our individual and
Company Short Term Incentive objectives in 1995. It is up to us to ensure that
the positive trend established in recent years is repeated and strengthened in
1995.
1995 SHORT TERM INCENTIVE PLAN
ISSUED FEBRUARY 28, 1995
P. 8
<PAGE> 1
EXHIBIT 10.2
[ALLNET LETTERHEAD]
April 9, 1995
"FullName"
Allnet Communication Services, Inc.
30300 Telegraph Road
Bingham Farms, MI 48025-4510
Dear "FirstName":
The purpose of this letter ("Agreement") is to state the terms and conditions
applicable to the continuation and termination of your employment by Allnet
Communication Services, Inc., ("Allnet"). Accordingly, in consideration of
services to be rendered by you in the future, we propose the following:
1) APPLICABILITY. The terms and conditions set forth in the subsequent
sections of this Agreement shall become applicable to your employment and the
termination of such employment, should such occur, during the period commencing
with April 9, 1995 and ending December 31, 1996 (the "Term").
2) EMPLOYMENT. Subject to the provisions of Section 4 hereof, during the Term,
Allnet will continue to employ you, and you will continue to serve Allnet,
either in your current capacity or in such other capacity as Allnet shall
determine from time to time.
3) COMPENSATION.
(a) SALARY AND BONUS OR INCENTIVE COMPENSATION. For your services
under this Agreement, during the Term your compensation, including both salary
and bonus or incentive compensation, shall be fixed from time to time by
Allnet, but the salary portion thereof shall not be less than in effect as of
the date of this Agreement. You will be afforded the opportunity to earn
salary increases and an annual bonus or incentive compensation on a basis
consistent with that afforded to other employees of similar stature at Allnet.
(b) BENEFITS. For your services under this Agreement, during the Term
you will continue to participate in all employee benefits or perquisites as may
be made applicable to employees of similar stature by Allnet.
<PAGE> 2
Page two
April 9, 1995
4) TERMINATION.
If your employment is terminated within the Term, the
following conditions apply:
(a) DEATH. In the event of your death, this Agreement shall terminate
as of the date of your death, provided, however, that if your death occurs
subsequent to a termination pursuant to Section 4(d), the obligations of Allnet
set forth in Section 4(d) shall remain in full force and effect.
(b) TERMINATION BY ALLNET FOR CAUSE. Allnet may terminate this
Agreement and your employment for cause immediately upon notice to you if it is
established that there has been continued and willful neglect or material breach
of your duties under this Agreement; willful misconduct by you including,
without limitation, misappropriation of funds or property of Allnet or its
affiliates, or material violation by you of Allnet's policies; or if you are
convicted of a felony.
(c) VOLUNTARY TERMINATION. You may terminate this Agreement and your
employment at any time upon at least thirty days written notice to Allnet.
After giving such notice and until the effective date of the termination
specified in such notice, you will render reasonable assistance in training a
replacement and in concluding your business affairs at Allnet.
(d) OTHER TERMINATIONS. Allnet may terminate this Agreement or your
employment at any time with or without cause. If Allnet terminates this
Agreement or your employment other than for cause as stated in Section 4(b), or
if you terminate your employment with Allnet as a result of either (a) a breach
by Allnet of this Agreement or (b) as a result of Allnet or any of its
affiliates offering you employment but requiring relocation or a substantial
decrease in your then current compensation, then Allnet agrees, for a period of
twelve months following the date of such termination:
(i) To continue to pay your basic salary to you or to your
estate at the rate in effect at the time of such termination, and in no event
less than that in effect as of the date of this Agreement and to pay you the
amount of any bonuses which you have an unconditional right to receive pursuant
to any bonus plan or incentive plan in effect at the time of such termination.
<PAGE> 3
Page three
April 9, 1995
(ii) Except as specifically set forth in Section 5 hereof, to
continue to provide you with all employee benefits to which you were entitled
prior to such termination, other than any officer perquisites, and upon
substantially the same terms and conditions including, but not limited to, Life
and Health insurance coverage; provided, however, that if you obtain full-time
employment prior to the expiration of the applicable TWELVE-month period, the
provision of these benefits shall terminate.
If you become entitled to the benefits of this Section 4(d), then such benefits
shall be in lieu of any benefits to which you would otherwise be entitled under
any policy of Allnet providing for separation payments or benefits.
5. OTHER EMPLOYEE BENEFITS. If your employment is terminated pursuant to
Section 4, you shall cease to be an employee for all purposes including, but
not limited to: (1) your participation in the 401 (K) plan; (2) your right to
exercise stock options beyond the (a) vesting schedule and (b) the term allowed
in the option for exercise, upon termination of employment; and (3) your right
to continue to participate in any ALC option or stock purchase plans,
notwithstanding the fact that other rights granted to you in this Agreement may
continue past the date on which your employment terminates.
6. WAIVER OF CLAIMS. In consideration of this Agreement, you agree to waive
the claims and otherwise hold Allnet harmless as set forth in Schedule 6,
attached hereto and made a part hereof.
7. OTHER AGREEMENTS. During such period as you continue to receive payments
from or through Allnet pursuant to Section 4 (d) (i) or 4 (d) (ii) hereof, you
agree to refrain from directly soliciting any of Allnet's and its affiliates'
customers or from suggesting, persuading or inducing any other employee of
Allnet and its affiliates to leave Allnet's or its affiliates' employ. Any
other agreements between Allnet or its affiliates and you relating to
confidentiality shall remain in effect.
8. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and, in your case, to your personal
representatives and, in the case of Allnet, to its affiliates, successors and
assigns including, but not limited to, any successor in interest by merger or
any person, firm or corporation which acquires substantially all of the assets
of Allnet.
<PAGE> 4
Page four
April 9, 1995
9. GOVERNING LAW. This Agreement shall be governed by the law of the State
of Michigan.
If the foregoing is entirely satisfactory to you, please execute one
copy of this letter in the place provided for your signature and return it to us
whereupon this letter shall constitute an agreement between us as of the date
first above written.
Very truly yours,
By:_____________________________
Accepted and Agreed to this ___day of _____________, 199__.
_________________________
<PAGE> 5
Schedule 6
WAIVER AND COMPLETE RELEASE OF ALL CLAIMS
I accept the terms and conditions of the attached letter from Allnet
Communication Services, Inc. (the "Company") to which this Waiver and Complete
Release of All Claims is attached (the "Offer"), and hereby do release the
Company, and its affiliated Companies and their current and former directors,
officers, agents and employees from and waive any claims relating to or based
in any way upon my employment with, or termination of employment from, the
Company, including but not limited to any claim or claims in contract or tort
or public policy or under any federal or state or local law dealing with
discrimination in employment including but not limited to the 1964 Civil Rights
Act, the Employee Retirement Income Security Act, the Elliott-Larson Civil
Rights Act, and the Age Discrimination in Employment Act, except claims for any
vested pension benefits to which I am entitled, if any, I understand that in
return for the promises made to me by the Company in this Offer, I am waiving
all discrimination in employment claims on the bases of race, sex, age,
national origin, religion, height, weight, pregnancy, disability, handicap, and
marital status which I have or may have against the Company and any right I
have or may have to any relief to which I might otherwise be entitled as a
result of any proceedings that are or might be instituted by the Equal
Employment Opportunity Commission or any other similar enforcement authority.
I understand that this is a binding legal document. My release and waiver is
for any relief, no matter how denominated, including but not limited to back
pay, front pay, severance pay, compensatory damages, exemplary damages,
punitive damages, and damages for pain and suffering.
I have carefully reviewed the contents of the Offer and, with a full and
complete understanding of its terms, voluntarily accept all of the terms and
conditions described. I further declare that I have been given a full and fair
opportunity to discuss this matter with any attorney or advisor of my choice
and that no promise not written in this letter has been made to me and that
this letter contains the entire agreement between me and the Company.
As a material provision of this agreement, I agree not to divulge the terms of
this agreement and its above-referenced payment to anyone except my immediate
family and, or, legal counsel or advisor of my choice. I understand and agree
that the Company may enforce this agreement and, or, stop or recover payments
or benefits provided to me because of this agreement if I do not honor my
obligations as described above.
<PAGE> 6
Page two
Waiver and Complete Release of ALL Claims
Notice: Various state and federal laws prohibit employment discrimination
based on age, sex, race, color, national origin, religion, handicap or veteran
status. These laws are enforced through the Equal Employment Opportunity
Commission, Department of Labor and State Human Rights Agencies. You may also
want to discuss this Waiver and Complete Release of All Claims with your
lawyer. In any event, you should thoroughly review and understand the effect
of this Agreement and Complete Release before acting on it. Therefore, please
take this Agreement and Complete Release home and consider it for at least five
(5) working days before you decide to sign it.
Agreed:_________________________________ date:__________________________
Notary Public:__________________________ date:__________________________
<PAGE> 1
EXHIBIT 11.1
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1995 1994
---- ----
(In thousands except per share amounts)
<S> <C> <C>
PRIMARY EARNINGS PER SHARE
Net Income Available for Common Stockholders $19,975 $14,645
======= =======
Weighted average Common shares outstanding during the period 33,714 33,061
======= =======
Earnings per Common and Common equivalent share:
Net Income $0.59 $0.44
======= =======
PRIMARY EARNINGS PER SHARE -- MODIFIED TREASURY STOCK METHOD
Net Income Available for Common Stockholders $19,975 $14,645
======= =======
Weighted average common shares outstanding during the period 33,714 33,061
Effect of Modified Treasury Stock Method:
Assumed exercise of all options and warrants 8,019 8,638
Assumed repurchase of up to 20% of Common Stock outstanding (3,579) (3,398)
------- -------
Weighted Average Common and Common Equivalent Shares 38,154 38,301
======= =======
Earnings per Common and Common equivalent share:
Net Income $0.52 $0.38
======= =======
</TABLE>
Note: This calculation is submitted in accordance with regulation S-K item
601(b)(11). The fully diluted earnings per share does not differ from the
primary earnings per share.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 3,016
<SECURITIES> 0
<RECEIVABLES> 108,432
<ALLOWANCES> 4,461
<INVENTORY> 0
<CURRENT-ASSETS> 119,919
<PP&E> 154,180
<DEPRECIATION> 81,003
<TOTAL-ASSETS> 340,872
<CURRENT-LIABILITIES> 118,243
<BONDS> 79,430
<COMMON> 337
0
0
<OTHER-SE> 133,778
<TOTAL-LIABILITY-AND-EQUITY> 340,872
<SALES> 0
<TOTAL-REVENUES> 177,753
<CGS> 0
<TOTAL-COSTS> 99,845
<OTHER-EXPENSES> 44,764
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,294
<INCOME-PRETAX> 31,850
<INCOME-TAX> 11,875
<INCOME-CONTINUING> 19,975
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,975
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.52
</TABLE>
