SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: April 10, 1995
FRONTIER CORPORATION
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 1-4166 16-061330
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
organization)
180 South Clinton Avenue, Rochester, New York 14646
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(716) 777-7100
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Item 5. Other Events.
-------------
On April 10, 1995, Frontier Corporation (the "Corporation") and ALC
Communications Corporation ("ALC") announced that they have entered
into an Agreement and Plan of Merger providing, subject to the terms and
conditions set forth therein, for the merger of a wholly-owned subsidiary
of the Corporation ("Sub") with and into ALC. Copies of the press release
and the aforementioned agreement are attached as exhibits hereto and are
incorporated herein by reference.
Item 7. Financial Statements and Exhibits
---------------------------------
(c) Exhibits
(2) Agreement and Plan of Merger dated as of April 9, 1995 among
the Corporation, Sub and ALC.
(20) Press Release.
Page 2
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FRONTIER CORPORATION
(Registrant)
Date: April 10, 1995
By: /s/ Louis L. Massaro
-----------------------------
Louis L. Massaro
Corporate Vice President-
Finance and Chief Financial Officer
Page 3
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EXHIBIT INDEX
Exhibit Sequentially
Number Description of Exhibit Numbered Page
- ------- ---------------------- -------------
(2) Agreement and Plan of Merger dated as of
April 9, 1995 among the Corporation, Sub and ALC.
(20) Press Release.
Page 4
Exhibit 2
=================================================================
AGREEMENT AND PLAN OF MERGER
dated as of April 9, 1995,
among
FRONTIER CORPORATION,
FRONTIER SUBSIDIARY ONE, INC.
and
ALC COMMUNICATIONS CORPORATION
=================================================================
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TABLE OF CONTENTS
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Page
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ARTICLE I THE MERGER
1.1 The Merger . . . . . . . . . . . . . . . . . . . 2
1.2 Closing . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effective Time of the Merger . . . . . . . . . . 2
1.4 Effects of the Merger . . . . . . . . . . . . . . 2
1.5 Certificate of Incorporation and By-Laws . . . . 3
1.6 Directors; Officers . . . . . . . . . . . . . . . 3
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock . . . . . . . . . . . . . 3
(a)Common Stock of Sub . . . . . . . . . . . . . 3
(b)Cancellation of Treasury Stock and Frontier-
Owned Stock . . . . . . . . . . . . . . . . . . 4
(c)Conversion of ALC Common Stock . . . . . . . . 4
2.2 Exchange of Certificates . . . . . . . . . . . . 4
(a) Exchange Agent . . . . . . . . . . . . . . . 4
(b) Exchange Procedures . . . . . . . . . . . . 5
(c) Distributions with Respect to Unexchanged
Shares . . . . . . . . . . . . . . . . . . . . 6
(d) No Further Ownership Rights in ALC Common
Stock . . . . . . . . . . . . . . . . . . . . . 6
(e) No Fractional Shares . . . . . . . . . . . . 7
(f) Termination of Exchange Fund . . . . . . . . 7
(g) No Liability . . . . . . . . . . . . . . . . 8
(h) Withholding Rights . . . . . . . . . . . . . 8
ARTICLE III REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of ALC . . . . . . 8
(a)Organization, Standing and Power . . . . . . . 8
(b)Capital Structure . . . . . . . . . . . . . . 9
(c)Authority . . . . . . . . . . . . . . . . . . 13
(d)SEC Documents . . . . . . . . . . . . . . . . 15
(e)Information Supplied . . . . . . . . . . . . . 16
(f)Compliance with Applicable Laws . . . . . . . 16
(g)Litigation . . . . . . . . . . . . . . . . . . 17
(h)Taxes . . . . . . . . . . . . . . . . . . . . 17
(i)Certain Agreements . . . . . . . . . . . . . . 18
(j)Benefit Plans . . . . . . . . . . . . . . . . 19
(k)Subsidiaries . . . . . . . . . . . . . . . . . 20
i
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(l)Absence of Certain Changes or Events . . . . . 20
(m)Section 203 of the DGCL Not Applicable . . . . 21
(n)Vote Required . . . . . . . . . . . . . . . . 21
(o)Accounting Matters . . . . . . . . . . . . . . 21
(p)ALC Rights Agreement . . . . . . . . . . . . . 21
(q)Properties . . . . . . . . . . . . . . . . . . 22
(r)Ownership of Frontier Common Stock . . . . . . 22
(s)Intellectual Property . . . . . . . . . . . . 23
(t)Undisclosed Liabilities . . . . . . . . . . . 23
(u)Environmental Matters . . . . . . . . . . . . 23
(v)Opinion of Financial Advisor . . . . . . . . . 24
3.2 Representations and Warranties of Frontier and
Sub . . . . . . . . . . . . . . . . . . . . . . . 24
(a)Organization, Standing and Power . . . . . . . 25
(b)Capital Structure . . . . . . . . . . . . . . 25
(c)Authority . . . . . . . . . . . . . . . . . . 28
(d)SEC Documents . . . . . . . . . . . . . . . . 29
(e)Information Supplied . . . . . . . . . . . . . 30
(f)Compliance with Applicable Laws . . . . . . . 31
(g)Litigation . . . . . . . . . . . . . . . . . . 31
(h)Taxes . . . . . . . . . . . . . . . . . . . . 32
(i)Certain Agreements . . . . . . . . . . . . . . 32
(j)Benefit Plans . . . . . . . . . . . . . . . . 33
(k)Subsidiaries . . . . . . . . . . . . . . . . . 34
(l)Absence of Certain Changes or Events . . . . . 34
(m)Section 912 of the NYBCL Not Applicable . . . 34
(n)Vote Required . . . . . . . . . . . . . . . . 34
(o)Accounting Matters . . . . . . . . . . . . . . 35
(p)Frontier Rights Agreement . . . . . . . . . . 35
(q)Properties . . . . . . . . . . . . . . . . . . 35
(r)Ownership of ALC Common Stock . . . . . . . . 36
(s)Intellectual Property . . . . . . . . . . . . 36
(t)Undisclosed Liabilities . . . . . . . . . . . 37
(u)Environmental Matters . . . . . . . . . . . . 37
(v)Opinion of Financial Advisor . . . . . . . . . 37
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of ALC and Frontier . . . . . . . . . . 38
(a)Ordinary Course . . . . . . . . . . . . . . . 38
(b)Dividends; Changes in Stock . . . . . . . . . 38
(c)Issuance of Securities . . . . . . . . . . . . 39
(d)Governing Documents . . . . . . . . . . . . . 40
(e)No Solicitations . . . . . . . . . . . . . . . 40
(f)No Acquisitions . . . . . . . . . . . . . . . 43
(g)No Dispositions . . . . . . . . . . . . . . . 44
(h)Indebtedness . . . . . . . . . . . . . . . . . 44
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(i)Other Actions . . . . . . . . . . . . . . . . 45
(j)Advice of Changes; Government Filings . . . . 45
(k)Accounting Methods . . . . . . . . . . . . . . 46
(l)Pooling and Tax-Free Reorganization
Treatment . . . . . . . . . . . . . . . . . . . 46
(m)Benefit Plans . . . . . . . . . . . . . . . . 46
(n)Tax Elections . . . . . . . . . . . . . . . . 47
(o)Network Transition . . . . . . . . . . . . . . 47
ARTICLE V ADDITIONAL AGREEMENTS
5.1 Preparation of S-4 and the Proxy Statement . . . 47
5.2 Letter of ALC's Accountants . . . . . . . . . . . 48
5.3 Letter of Frontier's Accountants . . . . . . . . 48
5.4 Access to Information . . . . . . . . . . . . . . 48
5.5 Stockholder Meetings . . . . . . . . . . . . . . 49
5.6 Legal Conditions to Merger . . . . . . . . . . . 49
5.7 Affiliates . . . . . . . . . . . . . . . . . . . 50
5.8 Stock Exchange Listing . . . . . . . . . . . . . 51
5.9 Employee Benefit Plans . . . . . . . . . . . . . 51
5.10 Stock Options and Warrants . . . . . . . . . . . 51
5.11 Brokers or Finders . . . . . . . . . . . . . . . 53
5.12 Governance . . . . . . . . . . . . . . . . . . . 54
5.13 Indemnification; Directors' and Officers'
Insurance . . . . . . . . . . . . . . . . . . . . 54
5.14 Elimination of Certain Restrictions . . . . . . . 56
5.15 Financial Reporting . . . . . . . . . . . . . . . 56
5.16 Additional Agreements . . . . . . . . . . . . . . 56
ARTICLE VI CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation To Effect
the Merger . . . . . . . . . . . . . . . . . . . 57
(a)Stockholder Approval . . . . . . . . . . . . . 57
(b)NYSE Listing . . . . . . . . . . . . . . . . . 57
(c)Other Approvals . . . . . . . . . . . . . . . 57
(d)S-4 . . . . . . . . . . . . . . . . . . . . . 58
(e)No Injunctions or Restraints; Illegality . . . 58
(f)Pooling . . . . . . . . . . . . . . . . . . . 58
(g)Burdensome Condition . . . . . . . . . . . . . 58
6.2 Conditions to Obligations of Frontier and Sub . . 59
(a)Representations and Warranties . . . . . . . . 59
(b)Performance of Obligations of ALC . . . . . . 59
(c)Consents Under Agreements . . . . . . . . . . 59
(d)Tax Opinion . . . . . . . . . . . . . . . . . 60
(e)Burdensome Condition . . . . . . . . . . . . . 60
(f)Employment Agreements . . . . . . . . . . . . 60
(g)Opinion of Financial Advisor . . . . . . . . . 61
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6.3 Conditions to Obligations of ALC . . . . . . . . 61
(a)Representations and Warranties . . . . . . . . 61
(b)Performance of Obligations of Frontier and
Sub . . . . . . . . . . . . . . . . . . . . . . 61
(c)Consents Under Agreements . . . . . . . . . . 61
(d)Tax Opinion . . . . . . . . . . . . . . . . . 62
(e)Burdensome Condition . . . . . . . . . . . . . 62
(f)Opinion of Financial Advisor . . . . . . . . . 62
ARTICLE VII TERMINATION AND AMENDMENT
7.1 Termination . . . . . . . . . . . . . . . . . . . 63
7.2 Effect of Termination . . . . . . . . . . . . . . 66
7.3 Fees, Expenses and Other Payments . . . . . . . . 66
7.4 Amendment . . . . . . . . . . . . . . . . . . . . 70
7.5 Extension; Waiver . . . . . . . . . . . . . . . . 71
ARTICLE VIII GENERAL PROVISIONS
8.1 Nonsurvival of Representations, Warranties and
Agreements . . . . . . . . . . . . . . . . . . . 71
8.2 Notices . . . . . . . . . . . . . . . . . . . . . 71
8.3 Certain Definitions . . . . . . . . . . . . . . . 73
8.4 Interpretation . . . . . . . . . . . . . . . . . 74
8.5 Counterparts . . . . . . . . . . . . . . . . . . 74
8.6 Entire Agreement; No Third Party Beneficiaries;
Rights
of Ownership . . . . . . . . . . . . . . . . . 74
8.7 Governing Law . . . . . . . . . . . . . . . . . . 75
8.8 Severability; Limitations on Remedies . . . . . . 75
8.9 Publicity . . . . . . . . . . . . . . . . . . . . 75
8.10 Assignment . . . . . . . . . . . . . . . . . . . 76
EXHIBIT 3.1(i) Form of Amended and Restated Employment Agreement
EXHIBIT 5.7 Form of Affiliate Letter
EXHIBIT 5.12 Officers
iv
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Index of Defined Terms
Page
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affiliates . . . . . . . . . . . . . . . . . . . . . . . . . 50
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ALC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ALC Benefit Plans . . . . . . . . . . . . . . . . . . . . . . 19
ALC Common Stock . . . . . . . . . . . . . . . . . . . . . . . 3
ALC Permits . . . . . . . . . . . . . . . . . . . . . . . . . 16
ALC Rights . . . . . . . . . . . . . . . . . . . . . . . . . 11
ALC Rights Agreement . . . . . . . . . . . . . . . . . . . . 11
ALC SAR . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ALC SEC Documents . . . . . . . . . . . . . . . . . . . . . . 15
ALC Series E Preferred . . . . . . . . . . . . . . . . . . . 11
ALC Stock Option . . . . . . . . . . . . . . . . . . . . . . 11
ALC Stock Plan . . . . . . . . . . . . . . . . . . . . . . . 11
ALC Warrants . . . . . . . . . . . . . . . . . . . . . . . . 10
AMEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
beneficial ownership . . . . . . . . . . . . . . . . . . . . 73
beneficially own . . . . . . . . . . . . . . . . . . . . . . 73
Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 19
Business Combination . . . . . . . . . . . . . . . . . . . . 70
Certificate of Merger . . . . . . . . . . . . . . . . . . . . . 2
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 5
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . 2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Communications Act . . . . . . . . . . . . . . . . . . . . . 15
Competing Transaction . . . . . . . . . . . . . . . . . . . . 42
Confidentiality Agreement . . . . . . . . . . . . . . . . . . 42
Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Conversion Number . . . . . . . . . . . . . . . . . . . . . . . 4
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Distribution Date . . . . . . . . . . . . . . . . . . . . . . 21
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . 2
Employment Agreements . . . . . . . . . . . . . . . . . . . . 19
Environmental Laws . . . . . . . . . . . . . . . . . . . . . 24
Environmental Liabilities . . . . . . . . . . . . . . . . . . 23
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . 14
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . 4
Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . . . 5
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Frontier . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Frontier Benefit Plans . . . . . . . . . . . . . . . . . . . 33
Frontier Class A Preferred Stock . . . . . . . . . . . . . . 25
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Frontier Common Stock . . . . . . . . . . . . . . . . . . . . . 4
Frontier Convertible Debentures . . . . . . . . . . . . . . . 26
Frontier Cumulative Preferred Stock . . . . . . . . . . . . . 25
Frontier Permits . . . . . . . . . . . . . . . . . . . . . . 31
Frontier Rights . . . . . . . . . . . . . . . . . . . . . . . 26
Frontier Rights Agreement . . . . . . . . . . . . . . . . . . 26
Frontier SEC Documents . . . . . . . . . . . . . . . . . . . 29
Frontier Series A Preferred . . . . . . . . . . . . . . . . . 40
Frontier Vote Matter . . . . . . . . . . . . . . . . . . . . 28
Governmental Entity . . . . . . . . . . . . . . . . . . . . . 14
group . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Grumman Hill Associates . . . . . . . . . . . . . . . . . . . 10
Grumman Hill Investments . . . . . . . . . . . . . . . . . . 10
Hazardous Materials . . . . . . . . . . . . . . . . . . . . . 24
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Indemnified Liabilities . . . . . . . . . . . . . . . . . . . 54
Indemnified Parties . . . . . . . . . . . . . . . . . . . . . 54
Injunction . . . . . . . . . . . . . . . . . . . . . . . . . 58
material . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
material adverse effect . . . . . . . . . . . . . . . . . . . . 9
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
NYBCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
person . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . 14
qualified stock options . . . . . . . . . . . . . . . . . . . 52
Requisite Regulatory Approvals . . . . . . . . . . . . . . . 57
S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Securities Act . . . . . . . . . . . . . . . . . . . . . . . 15
Significant Subsidiary . . . . . . . . . . . . . . . . . . . . 9
Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . 2
tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Tax return . . . . . . . . . . . . . . . . . . . . . . . . . 18
Violation . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Voting Debt . . . . . . . . . . . . . . . . . . . . . . . . . 12
Warrant Agreements . . . . . . . . . . . . . . . . . . . . . 10
vi
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AGREEMENT AND PLAN OF MERGER dated as of April 9, 1995
(this "Agreement"), among FRONTIER CORPORATION, a New York
corporation ("Frontier"), FRONTIER SUBSIDIARY ONE, INC., a
Delaware corporation and a wholly-owned subsidiary of Frontier
("Sub"), and ALC COMMUNICATIONS CORPORATION, a Delaware
corporation ("ALC").
WHEREAS, the Boards of Directors of Frontier, Sub and
ALC have approved, and deem it advisable and in the best
interests of their respective stockholders to consummate, the
business combination transaction provided for herein in which Sub
would merge with and into ALC (the "Merger");
WHEREAS, Frontier and ALC desire to make certain
representations, warranties and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
WHEREAS, for federal income tax purposes, it is
intended that the Merger shall qualify as a reorganization under
the provisions of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that
the Merger shall be accounted for as a "pooling of interests";
NOW, THEREFORE, in consideration of the foregoing and
the respective representations, warranties, covenants and
agreements set forth herein, the parties hereto agree as follows:
<PAGE>
2
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General Corporation
Law (the "DGCL"), Sub shall be merged with and into ALC at the Effective Time
(as defined in Section 1.3 below). Upon the Effective Time, the separate
existence of Sub shall cease, and ALC shall continue as the surviving
corporation (the "Surviving Corporation") and shall continue under the name "ALC
Communications Corporation".
1.2 Closing. Unless this Agreement shall have been terminated
pursuant to Section 7.1 and subject to the satisfaction or waiver of the
conditions set forth in Article VI, the closing of the Merger (the "Closing")
will take place as promptly as practicable (and in any event within two business
days) following satisfaction or waiver of the conditions set forth in Article VI
(the "Closing Date"), at the offices of Simpson Thacher & Bartlett, 425
Lexington Avenue, New York, New York 10017, unless another date, time or place
is agreed to in writing by the parties hereto.
1.3 Effective Time of the Merger. As soon as practicable following
the satisfaction or waiver of the conditions set forth in Article VI, the
Surviving Corporation shall file a certificate of merger (the "Certificate of
Merger") executed in accordance with the relevant provisions of the DGCL. The
Merger shall become effective at such time as the Certificate of Merger is duly
filed with the Secretary of State of the State of Delaware, or at such other
time thereafter as is provided in the Certificate of Merger (the "Effective
Time").
1.4 Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL.
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3
1.5 Certificate of Incorporation and By-Laws. At the Effective Time,
the Certificate of Incorporation of the Surviving Corporation shall be amended
in accordance with the DGCL such that, at the Effective Time, the Certificate of
Incorporation of the Surviving Corporation shall consist of the provisions set
forth in the Certificate of Incorporation of Sub, as in effect immediately prior
to the Effective Time, except that Article I of the Certificate of Incorporation
of the Surviving Corporation shall read in its entirety as follows: "The name
of this Corporation is 'ALC Communications Corporation'." At the Effective
Time, the By Laws of Sub, as in effect immediately prior to the Effective Time,
shall be the By-Laws of the Surviving Corporation.
1.6 Directors; Officers. (a) The directors of Sub at the Effective
Time shall be the directors of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
(b) The officers of ALC at the Effective Time shall be the officers
of the Surviving Corporation, until the earlier of their resignation or removal
or until their respective successors are duly elected and qualified, as the case
may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
Common Stock, par value $.01 per share of ALC (the "ALC Common Stock"), or any
shares of capital stock of Sub:
(a) Common Stock of Sub. Each share of common stock of Sub issued
and outstanding immediately prior to the Effective Time shall be converted
into one share
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4
of Common Stock, par value $.01 per share, of the Surviving Corporation and
shall be the issued and outstanding capital stock of the Surviving
Corporation.
(b) Cancellation of Treasury Stock and Frontier-Owned Stock. Each
share of ALC Common Stock that is owned by ALC or by any subsidiary of ALC,
and each share of ALC Common Stock that is owned by Frontier, Sub or any
other subsidiary of Frontier shall automatically be cancelled and retired
and shall cease to exist, and no stock of Frontier or other consideration
shall be delivered or deliverable in exchange therefor.
(c) Conversion of ALC Common Stock. Subject to Section 2.2(e), each
issued and outstanding share of ALC Common Stock (other than shares to be
cancelled in accordance with Section 2.1(b)) shall be converted into 2.0
(the "Conversion Number") fully paid and nonassessable shares of Common
Stock, par value $1.00 per share of Frontier (the "Frontier Common Stock").
All such shares of ALC Common Stock shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist, and
each certificate previously representing any such shares shall thereafter
represent the shares of Frontier Common Stock into which such ALC Common
Stock has been converted. Certificates previously representing shares of
ALC Common Stock shall be exchanged for certificates representing whole
shares of Frontier Common Stock issued in consideration therefor upon the
surrender of such certificates in accordance with Section 2.2, without
interest.
2.2 Exchange of Certificates. (a) Exchange Agent. As of the
Effective Time, Frontier shall deposit, or shall cause to be deposited, with a
bank or trust company designated by Frontier (and reasonably acceptable to ALC)
(the "Exchange Agent"), for the benefit of the holders of shares of ALC Common
Stock, for exchange in accordance with this Article II,
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5
through the Exchange Agent, certificates representing the shares of Frontier
Common Stock (such certificates for shares of Frontier Common Stock, together
with any dividends or distributions with respect thereto, being hereinafter
referred to as the "Exchange Fund") issuable pursuant to Section 2.1 in exchange
for outstanding shares of ALC Common Stock.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Frontier shall instruct the Exchange Agent to mail to each
holder of record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of ALC Common Stock (the
"Certificates"), (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Frontier and ALC may reasonably
specify) and (ii) instructions to effect the surrender of the Certificates in
exchange for certificates representing shares of Frontier Common Stock. Upon
surrender of one or more Certificates for cancellation to the Exchange Agent
together with such letter of transmittal, duly executed, and such other
customary or other reasonable documents as may be required pursuant to such
instructions, the holder of such Certificates shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
Frontier Common Stock which such holder has the right to receive in respect of
the Certificates surrendered pursuant to the provisions of this Article II, and
the Certificates so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of ALC Common Stock which is not registered in the
transfer records of ALC, a certificate representing the proper number of shares
of Frontier Common Stock may be issued to a transferee if the Certificate
representing such ALC Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any
<PAGE>
6
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.2, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender a certificate representing shares of Frontier Common Stock and cash in
lieu of any fractional shares of Frontier Common Stock as contemplated by this
Section 2.2.
(c) Distributions with Respect to Unexchanged Shares. No dividends
or other distributions declared or made after the Effective Time with respect to
Frontier Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Certificate with respect to the shares of
Frontier Common Stock represented thereby, and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 2.2(e)
until the holder of such Certificate shall surrender such Certificate. Subject
to the effect of applicable laws, following surrender of any such Certificate,
there shall be paid to the holder of the certificates representing whole shares
of Frontier Common Stock issued in exchange therefor, without interest, (i) at
the time of such surrender or as promptly thereafter as practicable, the amount
of any cash payable with respect to a fractional share of Frontier Common Stock
to which such holder is entitled pursuant to Section 2.2(e) and the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Frontier Common Stock, and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to surrender
and a payment date subsequent to surrender payable with respect to such whole
shares of Frontier Common Stock.
(d) No Further Ownership Rights in ALC Common Stock. All shares of
Frontier Common Stock issued upon conversion of shares of ALC Common Stock in
accordance with the terms hereof (including any cash paid pursuant to Section
2.2(c) or
<PAGE>
7
2.2(e)) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of ALC Common Stock, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of ALC Common Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be cancelled
and exchanged as provided in this Article II.
(e) No Fractional Shares. No certificates or scrip representing
fractional shares of Frontier Common Stock shall be issued upon the surrender
for exchange of Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of Frontier.
In lieu of any such fractional shares, each holder of ALC Common Stock upon
surrender of a Certificate for exchange pursuant to this Section shall be paid
an amount in cash (without interest), rounded to the nearest cent, equal to the
product obtained by multiplying the fractional share interest to which such
holder would otherwise be entitled (after taking into account all shares of ALC
Common Stock then held by such holder) by the closing price for a share of
Frontier Common Stock on the NYSE Composite Transaction Tape on the first
business day immediately preceding the Effective Time. For this purpose, shares
of any holder represented by two or more certificates may be aggregated, and in
no event shall any holder be paid any amount in respect of more than one share
of Frontier Common Stock.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the stockholders of ALC for six months after the
Effective Time shall be delivered to Frontier upon demand, and any stockholders
of ALC who have not theretofore complied with this Article II shall thereafter
look only to Frontier for payment of
<PAGE>
8
their claim for Frontier Common Stock, any cash in lieu of fractional shares of
Frontier Common Stock and any dividends or distributions with respect to
Frontier Common Stock.
(g) No Liability. Neither Frontier nor ALC shall be liable to any
holder of shares of ALC Common Stock or Frontier Common Stock, as the case may
be, for such shares (or dividends or distributions with respect thereto) or cash
from the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(h) Withholding Rights. Frontier or the Exchange Agent shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of ALC Common Stock such
amounts as Frontier or the Exchange Agent is required to deduct and withhold
with respect to the making of such payment under the Code, or any provision of
state, local or foreign tax law, or any court order. To the extent that amounts
are so withheld by Frontier or the Exchange Agent, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the holder
of the shares of ALC Common Stock in respect of which such deduction and
withholding was made by Frontier or the Exchange Agent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of ALC. ALC represents and
warrants to Frontier and Sub as follows:
(a) Organization, Standing and Power. Each of ALC and its
Significant Subsidiaries (as defined below) is a corporation, partnership or
other legal entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its
<PAGE>
9
incorporation or organization, has all requisite power and authority and all
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as it is now being conducted and is duly qualified and in
good standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary other than in such jurisdictions where the failure to be so organized,
existing or in good standing or to have such power, authority and governmental
approvals or so to qualify would not, individually or in the aggregate, have a
material adverse effect on ALC. As used in this Agreement, (i) a "Significant
Subsidiary" means any subsidiary of ALC or Frontier, as the case may be, that
would constitute a Significant Subsidiary of such party within the meaning of
Rule 1-02 of Regulation S-X of the Securities and Exchange Commission (the
"SEC"), (ii) any reference to any event, change or effect being "material" with
respect to any entity means an event, change or effect which is material in
relation to the condition (financial or otherwise), prospects, properties,
assets, liabilities, businesses or operations of such entity and its
subsidiaries taken as a whole and (iii) the term "material adverse effect"
means, with respect to ALC or Frontier, a material adverse effect on the
business, assets, prospects, results of operations or financial condition of
such party and its subsidiaries taken as a whole or on the ability of such party
(and, with respect to Frontier, of Sub) to perform its obligations hereunder.
(b) Capital Structure. (i) As of the date hereof, the authorized
capital stock of ALC consists of 200,000,000 shares of ALC Common Stock and
15,500,000 shares of Preferred Stock, par value of $.01 per share, of which
500,000 shares have been designated as Series E Participating Preferred Stock
(the "ALC Series E Preferred"). At the close of business on April 7, 1995, (A)
33,719,441 shares of ALC Common Stock were outstanding; (B) 3,851,968 shares of
ALC Common Stock were reserved for issuance upon exercise of
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10
outstanding warrants, consisting solely of (1) 660,000 shares reserved for
issuance upon exercise of outstanding warrants issued pursuant to the Warrant
Agreement dated as of December 15, 1985 between ALC and Continental Illinois
National Bank and Trust Company of Chicago, as Warrant Agent, (2) 329,300 shares
reserved for issuance upon exercise of outstanding warrants issued pursuant to
the Amended and Restated Stock Subscription Warrant to Subscribe for 329,300
Shares of Common Stock dated June 4, 1992 issued by ALC to Grumman Hill
Investments, L.P. ("Grumman Hill Investments"), (3) 98,790 shares reserved for
issuance upon exercise of outstanding warrants issued pursuant to the Amended
and Restated Stock Subscription Warrant to Subscribe for 98,790 Shares of Common
Stock dated June 4, 1992 issued by ALC to Grumman Hill Associates, Inc.
("Grumman Hill Associates") and (4) 2,763,878 shares reserved for issuance upon
exercise of outstanding warrants issued pursuant to the Warrant Agreement dated
July 1, 1992 between ALC and Star Bank, National Association (the warrants
referenced in this clause (B), collectively, the "ALC Warrants", and the
agreements referenced in this clause (B), collectively, the "Warrant
Agreements"); (C)(1) 153,163 shares of ALC Common Stock were reserved for
issuance upon exercise of outstanding stock options granted pursuant to the
Advisory Agreement with Stock Option dated September 7, 1988, as amended on June
6, 1990, May 2, 1994 and May 12, 1994, between ALC and Grumman Hill Associates
and Grumman Hill Investments, and (2) 14,000 shares of ALC Common Stock were
reserved for issuance upon exercise of outstanding stock options granted
pursuant to the Stock Option dated as of May 12, 1994 between ALC and Grumman
Hill Associates (the options and agreements referenced in this clause (C),
collectively, the "Grumman Hill Options"); (D) 3,914,374 shares were reserved
for issuance upon exercise of outstanding options granted pursuant to ALC's 1986
Stock Option Plan, as amended and restated as of May 12, 1994, ALC's 1990 Stock
Option Plan, as
<PAGE>
11
amended and restated as of May 12, 1994, and ALC's 1994 Non-Employee Director
Stock Option Plan; (E) 2,185,626 shares of ALC Common Stock were reserved for
issuance upon exercise of authorized but unissued stock options pursuant to the
plans referenced in clause (D) above; (F) 80,000 shares of ALC Common Stock were
reserved for issuance upon exercise of outstanding options granted to certain
directors of ALC not pursuant to ALC's 1994 Non-Employee Director Stock Option
Plan; (G) no shares of ALC Common Stock were held by ALC in its treasury or by
its subsidiaries; (H) no shares of ALC Preferred Stock were issued or
outstanding; and (I) 500,000 shares of ALC Series E Preferred were reserved for
issuance upon exercise of the rights (the "ALC Rights") issued to holders of ALC
Common Stock pursuant to the Rights Agreement dated as of January 12, 1995
between ALC and Mellon Bank, N.A., as Rights Agent (the "ALC Rights Agreement").
Except as set forth above, no shares of capital stock of ALC were issued,
reserved for issuance or outstanding as of April 7, 1995.
(ii) At the close of business on April 7, 1995, no stock appreciation
rights (each an "ALC SAR") or other grants, other than to the extent specified
in the foregoing clause (i), with respect to shares of ALC Common Stock were
outstanding, whether or not issued pursuant to any plan or arrangement providing
for the granting of ALC SARs or such other grants. The options listed in
clauses (C), (D) and (F) of the foregoing clause (i) (each an "ALC Stock
Option") constitute all of the options to purchase shares of ALC Common Stock
which were outstanding as of April 7, 1995, whether or not issued pursuant to
any plan or arrangement (any such plan or arrangement, together with any plan or
arrangement referred to in the preceding sentence, an "ALC Stock Plan").
(iii) As of the date hereof, no bonds, debentures, notes or other
indebtedness having the right to vote (or convertible into or exercisable for
securities having the right to
<PAGE>
12
vote) on any matters on which stockholders may vote ("Voting Debt") of ALC were
issued or outstanding. All outstanding shares of ALC capital stock are validly
issued, fully paid and nonassessable and not subject to preemptive rights.
(iv) As of the date hereof, except for this Agreement, the ALC Stock
Options, the ALC Warrants and the ALC Rights, there are no options, warrants,
calls, rights, commitments or agreements of any character to which ALC or any
subsidiary of ALC is a party or by which it is bound obligating ALC or any
subsidiary of ALC to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or any Voting Debt of ALC or of any
subsidiary of ALC or obligating ALC or any subsidiary of ALC to grant, extend or
enter into any such option, warrant, call, right, commitment or agreement.
After the Effective Time, there will be no option, warrant, call, right or
agreement obligating ALC or any subsidiary of ALC to issue, deliver or sell, or
cause to be issued, delivered or sold, any shares of capital stock or any Voting
Debt of ALC or any subsidiary of ALC, or obligating ALC or any subsidiary of ALC
to grant, extend or enter into any such option, warrant, call, right or
agreement. As of the date hereof, there are no outstanding contractual
obligations or any understandings of ALC or any of its subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of ALC or
any of its subsidiaries. True and complete copies of the Warrant Agreements
have been provided to Frontier.
(v) Except in connection with the declaration of a dividend of one ALC
Right for each outstanding share of ALC Common Stock, since December 31, 1994,
ALC has not (A) issued or permitted to be issued any shares of capital stock, or
any rights, options or warrants to acquire any capital stock, or securities
exercisable for or convertible into shares of capital stock, of ALC or any of
its Significant Subsidiaries, other than pursuant to and as required by the
terms of any ALC Stock Options or ALC Warrants that were issued and
<PAGE>
13
outstanding on such date; (B) repurchased, redeemed or otherwise acquired,
directly or indirectly through one or more subsidiaries of ALC, any shares of
capital stock of ALC or any of its Significant Subsidiaries; or (C) declared,
set aside, made or paid to the stockholders of ALC dividends or other
distributions on the outstanding shares of capital stock of ALC. For purposes
of clause (B) of this clause (iv), ALC shall be deemed to include any affiliate
or associate (as defined in the Exchange Act) of ALC or any person that ALC has
caused or requested to purchase or acquire such shares.
(c) Authority. (i) ALC has all requisite corporate power and
authority to enter into this Agreement and, subject to approval of this
Agreement by the stockholders of ALC, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of ALC, subject to approval of
this Agreement by the stockholders of ALC. This Agreement has been duly
executed and delivered by ALC and constitutes a valid and binding obligation of
ALC enforceable in accordance with its terms.
(ii) Except as set forth on Schedule 3.1(c), the execution and delivery
of this Agreement does not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or the
loss of a material benefit under, or the creation of a lien, pledge, security
interest, charge or other encumbrance on assets (any such conflict, violation,
default, right of termination, cancellation, acceleration, loss or creation, a
"Violation") pursuant to, any provision of the Certificate of Incorporation or
By-laws of ALC or any subsidiary of ALC, any provision of the Warrant
Agreements, any provision of the ALC Stock Plans or any
<PAGE>
14
provision of any agreement or understanding governing the outstanding ALC Stock
Options or ALC SARs, or, subject to obtaining or making the consents, approvals,
orders, authorizations, registrations, declarations and filings referred to in
paragraph (iii) below, result in any Violation of any loan or credit agreement,
note, mortgage, indenture, lease, Benefit Plan (as defined in Section 3.1(j)) or
other agreement, obligation, instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to ALC or any subsidiary of ALC or their respective properties or assets which
Violation would have a material adverse effect on ALC.
(iii) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission, or
entity created by rule, regulation or order of any commission or other
governmental authority or other governmental authority or instrumentality,
domestic or foreign (a "Governmental Entity"), is required by or with respect to
ALC or any subsidiary of ALC in connection with the execution and delivery of
this Agreement by ALC or the consummation by ALC of the transactions
contemplated hereby, the failure to obtain which would have a material adverse
effect on ALC, except for (A) the filing with the SEC of (1) a joint proxy
statement in definitive form relating to the meetings of ALC's and Frontier's
stockholders to be held in connection with the Merger (the "Proxy Statement")
and (2) such other filings under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as may be required in connection with this Agreement and
the transactions contemplated hereby and the obtaining from the SEC of such
orders as may be required in connection therewith, (B) the filing of the
Certificate of Merger as contemplated by Section 1.3 and appropriate documents
with the relevant authorities of states in which ALC is qualified to do
business, (C) filings pursuant to the rules of the American Stock Exchange (the
"AMEX"), (D) notices under the Hart-Scott-Rodino Antitrust
<PAGE>
15
Improvements Act of 1976, as amended (the "HSR Act"), and (E) filings under the
Communications Act of 1934, as amended (the "Communications Act"), and under
state or foreign utility or telecommunication regulatory laws.
(d) SEC Documents. ALC has made available to Frontier a true and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by ALC with the SEC since January 1, 1992 (as such
documents have since the time of their filing been amended, the "ALC SEC
Documents"), which are all the documents (other than preliminary material) that
ALC was required to file with the SEC since such date. As of their respective
dates, the ALC SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
or the Exchange Act, as the case may be, and the rules and regulations of the
SEC thereunder applicable to such ALC SEC Documents, and none of the ALC SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of ALC included in the ALC SEC
Documents comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q of the SEC) and fairly present
the consolidated financial position of ALC and its consolidated subsidiaries as
at the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended. All material agreements, contracts and other
documents required to be filed as exhibits to any of the ALC SEC Documents have
been so filed.
<PAGE>
16
(e) Information Supplied. None of the information supplied or to be
supplied by ALC for inclusion or incorporation by reference in (i) the
registration statement on Form S-4 to be filed with the SEC by Frontier in
connection with the issuance of shares of Frontier Common Stock in the Merger
(the "S-4") will, at the time the S-4 is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (ii) the Proxy Statement will, at the
date of mailing to stockholders and at the times of the meetings of stockholders
to be held in connection with the Merger, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Proxy Statement
(except for such portions thereof that relate only to Frontier) will comply as
to form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder.
(f) Compliance with Applicable Laws. ALC and its subsidiaries hold
all permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities which are material to the operation of the businesses of
ALC and its subsidiaries, taken as a whole (the "ALC Permits"), except to the
extent the failure to hold the ALC Permits will not have a material adverse
effect on ALC. ALC and its subsidiaries are in compliance with the terms of the
ALC Permits and all applicable laws and regulations, except where the failure so
to comply would not have a material adverse effect on ALC. Except as disclosed
in the ALC SEC Documents filed prior to the date of this Agreement, the
businesses of ALC and its subsidiaries are not being conducted in violation of
any law, order, ordinance or regulation of any Governmental Entity, except for
possible violations which individually or in the aggregate
<PAGE>
17
do not, and, insofar as reasonably can be foreseen, in the future will not, have
a material adverse effect on ALC. As of the date of this Agreement, to the
knowledge of ALC, no investigation by any Governmental Entity with respect to
ALC or any of its subsidiaries is pending or threatened, other than, in each
case, those the outcome of which, as far as reasonably can be foreseen, will not
have a material adverse effect on ALC.
(g) Litigation. As of the date of this Agreement, except as
disclosed in the ALC SEC Documents filed prior to the date of this Agreement,
there is no suit, action or proceeding pending or, to the knowledge of ALC,
threatened, against or affecting ALC or any subsidiary of ALC as to which there
is a reasonable possibility of an adverse determination and which, if adversely
determined, would, individually or in the aggregate, have a material adverse
effect on ALC, nor is there any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against ALC or any subsidiary
of ALC or which, insofar as reasonably can be foreseen, in the future could
have, any such effect.
(h) Taxes. ALC and each of its subsidiaries (and any consolidated,
combined, unitary or aggregate group for tax purposes of which ALC or any of its
subsidiaries is or has been a member) have timely filed all tax returns required
to be filed by any of them and have paid (or ALC has paid on their behalf), or
have set up an adequate reserve for the payment of, all taxes required to be
paid as shown on such returns, and the most recent financial statements
contained in the ALC SEC Documents reflect an adequate reserve for all taxes
payable by ALC and its subsidiaries (whether or not shown on such returns)
accrued through the date of such financial statements. Except as set forth on
Schedule 3.1(h), no material deficiencies for any taxes have been proposed,
asserted or assessed against ALC or any of its subsidiaries that are not
adequately reserved for, no audit of any tax return of ALC or any of its
subsidiaries is being conducted by a tax authority, and no extension of the
statute of
<PAGE>
18
limitations on the assessment of any taxes has been granted to ALC or any of its
subsidiaries and is currently in effect. For the purpose of this Agreement, the
term "tax" (including, with correlative meaning, the terms "taxes" and
"taxable") shall include, except where the context otherwise requires, all
federal, state, local and foreign income, profits, franchise, gross receipts,
payroll, sales, employment, use, property, withholding, excise, occupancy and
other taxes, duties or assessments (including assessments against
telecommunications providers for universal service support, disabled access,
emergency communications (911) and other purposes mandated by law, regulation or
order of any Governmental Entity) of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts, and the
term "tax return" shall mean any return, report or statement required to be
filed with any governmental authority with respect to taxes.
(i) Certain Agreements. Except as disclosed in the ALC SEC Documents
filed prior to the date of this Agreement, except as set forth on Schedule
3.1(i) hereto and except for this Agreement, as of the date of this Agreement,
neither ALC nor any of its subsidiaries is a party to any oral or written (i)
consulting agreement involving the payment of more than $250,000 per annum, or
union, guild or collective bargaining agreement which agreement covers any
employees, (ii) agreement with any executive officer or other key employee of
ALC or any subsidiary of ALC the benefits of which are contingent, or the terms
of which are materially altered, upon the occurrence of a transaction involving
ALC or any subsidiary of ALC of the nature contemplated by this Agreement and
which provides for the payment of in excess of $250,000, (iii) agreement with
respect to any executive officer of A or any subsidiary of ALC providing any
term of employment or compensation guarantee extending for a period longer than
one year and for the payment of in excess of $250,000 per annum or (iv)
agreement or plan, including any stock option plan, stock appreciation rights
plan,
<PAGE>
19
restricted stock plan or stock purchase plan, any of the benefits of which will
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement. Except as set forth on
Schedule 3.1(i) hereto and except for this Agreement, neither ALC nor any of its
subsidiaries is a party to any agreement restricting (i) the declaration or
payment of any dividends upon any of the capital stock of ALC, (ii) the
purchase, redemption, retirement or other acquisition of any shares of capital
stock of ALC, (iii) the distribution of cash, property or assets among the
holders of capital stock of ALC or (iv) the making of any change in the capital
structure of ALC. As of the date hereof, the executive officers of ALC listed
on Schedule 3.1(i) hereto have executed amended and restated employment
agreements effective as of the Effective Time (the "Employment Agreements")
substantially in the form attached hereto as Exhibit 3.1(i).
(j) Benefit Plans. (i) With respect to each employee benefit plan
(including, without limitation, any "employee benefit plan", as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (all the foregoing being herein called "Benefit Plans"), maintained
or contributed to by ALC or any member of its controlled group within the
meaning of Section 414 of the Code (the "ALC Benefit Plans"), ALC has made
available to Frontier, to the extent applicable, a true and correct copy of (A)
the most recent annual report (Form 5500) filed with the IRS, (B) such ALC
Benefit Plan (or where no formal plan exists, a written description thereof),
(C) each trust agreement relating to such ALC Benefit Plan, (D) the most recent
summary plan description for each ALC Benefit Plan for which a summary plan
description is required, (E) the most recent actuarial report or valuation
relating to an ALC Benefit Plan subject to Title IV of ERISA and (F) the
<PAGE>
20
most recent determination letter issued by the IRS with respect to any ALC
Benefit Plan qualified under Section 401 (a) of the Code.
(ii) With respect to the ALC Benefit Plans, individually and in the
aggregate, no event has occurred and, to the knowledge of ALC, there exists no
condition or set of circumstances, in connection with which ALC or any members
of its controlled group could be subject to any liability that is reasonably
likely to have a material adverse effect on ALC (except liability for benefits
claims and funding obligations payable in the ordinary course) under ERISA, the
Code or any other applicable law.
(iii) True and complete copies of the ALC Stock Plans as in effect on
the date hereof have been provided to Frontier.
(k) Subsidiaries. Schedule 3.1(k) hereto lists all of the
Significant Subsidiaries of ALC as of the date hereof, each of which is wholly-
owned by ALC. All of the shares of capital stock of each of the subsidiaries
held by ALC or by another subsidiary of ALC are fully paid and nonassessable and
are owned by ALC or a subsidiary of ALC free and clear of any claim, lien or
encumbrance.
(l) Absence of Certain Changes or Events. Except as disclosed in the
ALC SEC Documents filed prior to the date of this Agreement, since December 31,
1994, ALC and its subsidiaries have not incurred any material liability, except
in the ordinary course of their business consistent with their past practices,
nor has there been any change, or any event involving a prospective change, in
the business, prospects, financial condition or results of operations of ALC or
any of its subsidiaries which has had, or is reasonably likely to have, a
material adverse effect on ALC (other than as a result of changes in laws or
regulations of general applicability or interpretations thereof).
<PAGE>
21
(m) Section 203 of the DGCL Not Applicable. The restrictions of
Section 203 of the DGCL will not, prior to the termination of this Agreement,
assuming the accuracy of the representations contained in Section 3.2(r)
(without giving effect to the knowledge qualification thereof), apply to this
Agreement, the Merger or the transactions contemplated hereby.
(n) Vote Required. The affirmative vote of the holders of a majority
of the outstanding shares of ALC Common Stock entitled to vote thereon is the
only vote of the holders of any class or series of ALC capital stock or other
securities necessary to approve this Agreement and the transactions contemplated
hereby (assuming for purposes of this representation the accuracy of the
representations contained in Section 3.2(r), without giving effect to the
knowledge qualification thereof).
(o) Accounting Matters. Neither ALC nor, to its best knowledge, any
of its affiliates, has through the date of this Agreement, taken or agreed to
take any action that would prevent Frontier from accounting for the business
combination to be effected by the Merger as a "pooling of interests".
(p) ALC Rights Agreement. Concurrently with the execution and
delivery of this Agreement, ALC has amended the ALC Rights Agreement, to provide
that (i) none of the approval, execution or delivery of this Agreement or the
consummation of the Merger will cause (1) the ALC Rights to become exercisable
under the ALC Rights Agreement, (2) Frontier or any of its subsidiaries to be
deemed an "Acquiring Person" (as defined in the ALC Rights Agreement), or (3)
the "Stock Acquisition Date" (as defined in the ALC Rights Agreement) to occur
upon any such event and (ii) the "Expiration Date" (as defined in the ALC Rights
Agreement) of the ALC Rights shall occur immediately prior to the Effective
Time. The "Distribution Date" (as defined in the ALC Rights Agreement) has not
occurred.
<PAGE>
22
(q) Properties. Except as disclosed in the ALC SEC Documents filed
prior to the date of this Agreement, ALC or one of its subsidiaries (i) has
good, clear and marketable title to all the properties and assets reflected in
the latest audited balance sheet included in such ALC SEC Documents as being
owned by ALC or one of its subsidiaries or acquired after the date thereof which
are material to ALC's business on a consolidated basis (except properties sold
or otherwise disposed of since the date thereof in the ordinary course of
business), free and clear of all claims, liens, charges, security interests or
encumbrances of any nature whatsoever except (A) statutory liens securing
payments not yet due and (B) such imperfections or irregularities of title,
claims, liens, charges, security interests or encumbrances as do not materially
affect the use of the properties or assets subject thereto or affected thereby
or otherwise materially impair business operations at such properties and (ii)
is the lessee of all leasehold estates reflected in the latest audited financial
statements included in such ALC SEC Documents or acquired after the date thereof
which are material to its business on a consolidated basis (except for leases
that have expired by their terms since the date thereof) and is in possession of
the properties purported to be leased thereunder, and each such lease is valid
without default thereunder by the lessee or, to ALC's knowledge, the lessor.
(r) Ownership of Frontier Common Stock. As of the date hereof,
neither ALC nor, to its best knowledge, any of its affiliates or associates (as
defined under the Exchange Act), (i) beneficially own, directly or indirectly,
or (ii) are parties to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of, any shares of Frontier
Common Stock, except for shares which may be held by ALC Benefit Plans which
shares do not, in the aggregate, represent 1% or more of the outstanding shares
of Frontier Common Stock.
<PAGE>
23
(s) Intellectual Property. ALC and its Significant Subsidiaries own
or possess adequate licenses or other valid rights to use all material computer
software and firmware, patents, patent rights, trademarks, trademark rights,
trade names, trade name rights, brand names, copyrights, service marks, trade
secrets, applications for trademarks and for service marks, know-how and other
proprietary rights and information used or held for use in connection with the
business of ALC and its Significant Subsidiaries as currently conducted or as
contemplated to be conducted, and ALC is unaware of any assertion or claim
challenging the validity of any of the foregoing which, individually or in the
aggregate, would have a material adverse effect. To the best knowledge of ALC,
except as disclosed on Schedule 3.1(s) hereto, the conduct of the business of
ALC and its Significant Subsidiaries as currently conducted does not conflict in
any way with any patent, patent right, license, trademark, trademark right,
trade name, trade name right, service mark or copyright of any third party that,
individually or in the aggregate, would have a material adverse effect. To the
best knowledge of ALC, there are no infringements of any proprietary rights
owned by or licensed by or to ALC or any of its Significant Subsidiaries which,
individually or in the aggregate, would have a material adverse effect.
(t) Undisclosed Liabilities. Except as disclosed in the ALC SEC
Documents filed prior to the date of this Agreement, neither ALC nor any of its
Significant Subsidiaries has incurred any liabilities or obligations (absolute,
accrued, contingent or otherwise) other than liabilities or obligations which
would not, individually or in the aggregate, have a material adverse effect.
(u) Environmental Matters. (i) Except as disclosed in the ALC SEC
Documents filed prior to the date of this Agreement, there are no Environmental
Liabilities
<PAGE>
24
(as defined below) of ALC or any of its Significant Subsidiaries which would,
individually or in the aggregate, have a material adverse effect.
(ii) As used in this Agreement, "Environmental Laws" means any and all
federal, state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decisions, injunctions, orders, decrees, requirements of any
Governmental Entity, any and all common law requirements, rules and bases of
liability regulating, relating to or imposing liability or standards of conduct
concerning pollution, Hazardous Materials or protection of human health or the
environment, as now or may at any time hereafter be in effect. "Environmental
Liabilities" with respect to any person means any and all liabilities of or
relating to such person or any of its Significant Subsidiaries (including any
entity which is, in whole or in part, a predecessor of such person or any of
such Subsidiaries), whether vested or unvested, contingent or fixed, actual or
potential, known or unknown, which (i) arise under or relate to matters covered
by Environmental Laws and (ii) relate to actions occurring or conditions
existing on or prior to the Closing Date. "Hazardous Materials" means any
hazardous or toxic substances, materials or wastes, defined, listed, classified
or regulated as such in or under any Environmental Laws, including, without
limitation, asbestos, petroleum or petroleum products (including gasoline, crude
oil or any fraction thereof), polychlorinated biphenyls, and urea-formaldehyde
insulation.
(v) Opinion of Financial Advisor. ALC has received the opinion of
Salomon Brothers Inc dated April 9, 1995 to the effect that, as of such date,
the exchange ratio reflected in the Conversion Number is fair to the
stockholders of ALC from a financial point of view, a copy of which opinion has
been delivered to Frontier.
3.2 Representations and Warranties of Frontier and Sub. Frontier and
Sub jointly and severally represent and warrant to ALC as follows:
<PAGE>
25
(a) Organization, Standing and Power. Each of Frontier and its
Significant Subsidiaries and Sub is a corporation, partnership or other legal
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization, has all requisite power
and authority and all necessary governmental approvals to own, lease and operate
its properties and to carry on its business as it is now being conducted, and is
duly qualified and in good standing to do business in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification necessary other than in such jurisdictions where the failure
to be so organized, existing or in good standing or to have such power,
authority and governmental approvals or so to qualify would not, individually or
in the aggregate, have a material adverse effect on Frontier.
(b) Capital Structure. (i) As of the date hereof, the authorized
capital stock of Frontier consists of 300,000,000 shares of Frontier Common
Stock, 4,000,000 shares of Class A Preferred Stock, par value $100.00 per share,
of Frontier ("Frontier Class A Preferred Stock"), and 850,000 shares of
Cumulative Preferred Stock, $100.00 par value per share, of Frontier ("Frontier
Cumulative Preferred Stock"). As of the close of business on April 6, 1995, (A)
81,864,958 shares of Frontier Common Stock were outstanding; (B) 1,030,619
shares of Frontier Common Stock were reserved for issuance upon exercise of
outstanding stock options granted pursuant to the Directors Stock Option Plan of
Frontier and the Restated Executive Stock Option Plan of Frontier; (C) 1,869,516
shares of Frontier Common Stock were reserved for issuance upon exercise of
authorized but unissued stock options pursuant to the plans referenced in clause
(B) above or in connection with Frontier's dividend reinvestment and employee
stock purchase plans (such plans, together with the plans referenced in clause
(B) above, the "Frontier Stock Plans"); (D) 251,483 shares of Frontier
<PAGE>
26
Common Stock were reserved for issuance upon conversion of $5,300,000 in
principal amount of 10.46% Convertible Debentures due 2008 (the "Frontier
Convertible Debentures"); (E) 6,375 shares of Frontier Common Stock were held by
Frontier in its treasury or by its subsidiaries; (F) no shares of Frontier Class
A Preferred Stock were issued or outstanding; and (G) 200,000 shares of Frontier
Cumulative Preferred Stock were outstanding, consisting solely of 60,000 shares
of Cumulative Preferred Stock, 5% Series, 40,000 shares of Cumulative Preferred
Stock, Second 5% Series, 50,000 shares of Cumulative Preferred Stock, 5.65%
Series, and 50,000 shares of Cumulative Preferred Stock, 4.60% Series. Except
as set forth above, no shares of capital stock of Frontier were issued, reserved
for issuance or outstanding as of April 6, 1995.
(ii) As of the date hereof, no Voting Debt of Frontier was issued or
outstanding. All outstanding shares of Frontier capital stock are, and the
shares of Frontier Common Stock (A) to be issued pursuant to or as specifically
contemplated by this Agreement, and (B) when issued in accordance with this
Agreement upon exercise of the ALC Stock Options and the ALC Warrants, as the
case may be, will be, validly issued, fully paid and nonassessable and not
subject to preemptive rights.
(iii) As of the date hereof, except for this Agreement, the Frontier
Stock Plans, the Frontier Convertible Debentures and the rights (the "Frontier
Rights") to be issued to holders of Frontier Common Stock pursuant to the Rights
Agreement between Frontier and The First National Bank of Boston, as Rights
Agent (the "Frontier Rights Agreement"), substantially in the form previously
provided to ALC, there are no options, warrants, calls, rights, commitments or
agreements of any character to which Frontier or any subsidiary of Frontier is a
party or by which it is bound obligating Frontier or any subsidiary of Frontier
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital
<PAGE>
27
stock or any Voting Debt of Frontier or of any subsidiary of Frontier or
obligating Frontier or any subsidiary of Frontier to grant, extend or enter into
any such option, warrant, call, right, commitment or agreement. As of the date
hereof, there are no outstanding contractual obligations or any understandings
of Frontier or any of its subsidiaries to repurchase, redeem or otherwise
acquire any shares of capital stock of Frontier or any of its subsidiaries.
(iv) Except in connection with the declaration of a dividend of one
Frontier Right for each outstanding share of Frontier Common Stock, since
December 31, 1994, Frontier has not (A) issued or permitted to be issued any
shares of capital stock, or securities exercisable for or convertible into
shares of capital stock, of Frontier or any of its Significant Subsidiaries or
Sub, other than pursuant to and as required by the terms of Frontier's dividend
reinvestment and employee stock purchase plans, and any employee stock options
that were issued and outstanding on such date; (B) repurchased, redeemed or
otherwise acquired, directly or indirectly through one or more subsidiaries of
Frontier, any shares of capital stock of Frontier or any of its Significant
Subsidiaries or Sub; or (C) declared, set aside, made or paid to the
stockholders of Frontier dividends or other distributions on the outstanding
shares of capital stock of Frontier, other than regular quarterly cash dividends
at a rate not in excess of the regular quarterly cash dividends most recently
declared by Frontier prior to the date of this Agreement, or as required by the
terms of the Frontier Preferred Stock as in effect on the date hereof. For
purposes of clause (B) of this clause (iv), Frontier shall be deemed to include
any affiliate or associate (as defined in the Exchange Act) of Frontier or any
person that Frontier has caused or requested to purchase or acquire such shares.
(v) As of the date hereof, the authorized capital stock of Sub
consists of 100 shares of Common Stock, par value $1.00 per share, all of which
are validly issued, fully paid and nonassessable and are owned by Frontier.
<PAGE>
28
(c) Authority. (i) Frontier and Sub have all requisite corporate
power and authority to enter into this Agreement and, subject to approval by the
stockholders of Frontier of the issuance of Frontier Common Stock pursuant to
the Merger (the "Frontier Vote Matter"), to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Frontier and Sub, subject to
approval of the Frontier Vote Matter by the stockholders of Frontier. This
Agreement has been duly executed and delivered by Frontier and Sub and
constitutes a valid and binding obligation of Frontier and Sub, enforceable in
accordance with its terms.
(ii) The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, result in any
Violation pursuant to any provision of the Certificate of Incorporation or
By-laws of Frontier, Sub, or any other subsidiary of Frontier or, except as
disclosed in writing to the other party prior to the date hereof and subject to
obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph (iii) below,
result in any Violation of any loan or credit agreement, note, mortgage,
indenture, lease, Benefit Plan or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Frontier, Sub, or any other
subsidiary of Frontier or their respective properties or assets which Violation
would have a material adverse effect on Frontier.
(iii) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Frontier, Sub, or any other subsidiary of Frontier in connection with
the execution and delivery of this Agreement by Frontier or Sub or the
consummation by Frontier or Sub of the transactions contemplated
<PAGE>
29
hereby, the failure to obtain which would have a material adverse effect on
Frontier, except for (A) the filing with the SEC of (1) the S-4, (2) the Proxy
Statement and (3) such other filings under the Exchange Act as may be required
in connection with this Agreement and the transactions contemplated hereby and
the obtaining from the SEC of such orders as may be required in connection
therewith, (B) such filings and approvals as are required to be made or obtained
under the securities or blue sky laws of various states in connection with the
transactions contemplated by this Agreement, (C) the filing of the Certificate
of Merger as contemplated by Section 1.3 and appropriate documents with the
relevant authorities of states in which Frontier is qualified to do business,
(D) filings pursuant to the rules of the NYSE, (E) notices under the HSR Act and
(F) filings under the Communications Act and under state or foreign utility or
telecommunication regulatory laws.
(d) SEC Documents. Frontier has made available to ALC a true and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by Frontier with the SEC since January 1, 1992 (as such
documents have since the time of their filing been amended, the "Frontier SEC
Documents"), which are all the documents (other than preliminary material) that
Frontier was required to file with the SEC since such date. As of their
respective dates, the Frontier SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC thereunder applicable to such
Frontier SEC Documents, and none of the Frontier SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of Frontier included in the Frontier SEC Documents comply as to form
in all material respects with applicable accounting requirements and with the
published rules and
<PAGE>
30
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto or,
in the case of the unaudited statements, as permitted by Form 10-Q of the SEC)
and fairly present the consolidated financial position of Frontier and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended. All material
agreements, contracts and other documents required to be filed as exhibits to
any of the Frontier SEC Documents have been so filed.
(e) Information Supplied. None of the information supplied or to be
supplied by Frontier or Sub for inclusion or incorporation by reference in (i)
the S-4 will, at the time the S-4 is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading and (ii) the Proxy Statement will, at the
date of mailing to stockholders and at the times of the meetings of stockholders
to be held in connection with the Merger, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Proxy Statement,
except for such portions thereof that relate only to ALC, will comply as to form
in all material respects with the provisions of the Exchange Act and the rules
and regulations thereunder, and the S-4, except for such portions thereof that
relate only to ALC, will comply as to form in all material respects with the
provisions of the Securities Act and the rules and regulations thereunder.
<PAGE>
31
(f) Compliance with Applicable Laws. Frontier and its subsidiaries
hold all permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities which are material to the operation of the businesses of
Frontier and its subsidiaries, taken as a whole (the "Frontier Permits"), except
to the extent the failure to hold the Frontier Permits would not have a material
adverse effect on Frontier. Frontier and its subsidiaries are in compliance
with the terms of the Frontier Permits and all applicable laws and regulations,
except where the failure so to comply would not have a material adverse effect
on Frontier. Except as disclosed in the Frontier SEC Documents filed prior to
the date of this Agreement, the businesses of Frontier and its subsidiaries are
not being conducted in violation of any law, order, ordinance or regulation of
any Governmental Entity, except for possible violations which individually or in
the aggregate do not, and, insofar as reasonably can be foreseen, in the future
will not, have a material adverse effect on Frontier. As of the date of this
Agreement, to the knowledge of Frontier, no investigation by any Government
Entity with respect to Frontier or any of its subsidiaries is pending or
threatened, other than, in each case, those the outcome of which, as far as
reasonably can be foreseen, will not have a material adverse effect on Frontier.
(g) Litigation. As of the date of this Agreement, except as
disclosed in the Frontier SEC Documents filed prior to the date of this
Agreement, there is no suit, action or proceeding pending or, to the knowledge
of Frontier, threatened, against or affecting Frontier or any subsidiary of
Frontier as to which there is a reasonable possibility of an adverse
determination and which, if adversely determined, would, individually or in the
aggregate, have a material adverse effect on Frontier, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against Frontier or any
<PAGE>
32
subsidiary of Frontier having, or which, insofar as reasonably can be foreseen,
in the future could have, any such effect.
(h) Taxes. Frontier and each of its subsidiaries (and any
consolidated, combined, unitary or aggregate group for tax purposes of which
Frontier or any of its subsidiaries is or has been a member) have timely filed
all tax returns required to be filed by any of them and have paid (or Frontier
has paid on their behalf), or have set up an adequate reserve for the payment
of, all taxes required to be paid as shown on such returns, and the most recent
financial statements contained in the Frontier SEC Documents reflect an adequate
reserve for all taxes payable by Frontier and its subsidiaries (whether not
shown on such returns) accrued through the date of such financial statements.
Except as disclosed on Schedule 3.2(h), (i) no material deficiencies for any
taxes have been proposed, asserted or assessed against Frontier or any of its
subsidiaries that are not adequately reserved for, (ii) no audit of any tax
return of Frontier or any of its subsidiaries is being conducted by a tax
authority, and (iii) no extension of the statute of limitations on the
assessment of any taxes has been granted to Frontier or any of its subsidiaries
and is currently in effect.
(i) Certain Agreements. Except as disclosed in the Frontier SEC
Documents filed prior to the date of this Agreement, except as set forth on
Schedule 3.2(i) hereto and except for this Agreement, as of the date of this
Agreement, neither Frontier nor any of its subsidiaries is a party to any oral
or written (i) consulting agreement involving the payment of more than $250,000
per annum, or union, guild or collective bargaining agreement which agreement
covers any employees, (ii) agreement with any executive officer or other key
employee of Frontier or any subsidiary of Frontier the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving Frontier or any subsidiary of Frontier of the nature
contemplated by this Agreement and which
<PAGE>
33
provides for the payment of in excess of $250,000, (iii) agreement with respect
to any executive officer of Frontier or any subsidiary of Frontier providing any
term of employment or compensation guarantee extending for a period longer than
one year and for the payment of in excess of $250,000 per annum or (iv)
agreement or plan, including any stock option plan, stock appreciation rights
plan, restricted stock plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of the benefits of which will be accelerated,
by the occurrence of any of the transactions contemplated by this Agreement or
the value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement.
(j) Benefit Plans. (i) With respect to each Benefit Plan maintained
or contributed to by Frontier or any member of its controlled group within the
meaning of Section 414 of the Code (the "Frontier Benefit Plans"), Frontier has
made available to ALC, to the extent applicable, a true and correct copy of (A)
the most recent annual report (Form 5500) filed with the IRS, (B) such Frontier
Benefit Plan (or where no formal plan exists, a written description thereof),
(C) each trust agreement relating to such Frontier Benefit Plan, (D) the most
recent summary plan description for each Frontier Benefit Plan for which a
summary plan description is required, (E) the most recent actuarial report or
valuation relating to a Frontier Benefit Plan subject to Title IV of ERISA and
(F) the most recent determination letter issued by the IRS with respect to any
Frontier Benefit Plan qualified under Section 401(a) of the Code.
(ii) With respect to the Frontier Benefit Plans, individually and in
the aggregate, no event has occurred and, to the knowledge of Frontier, there
exists no condition or set of circumstances in connection with which Frontier or
any member of its controlled group could be subject to any liability that is
reasonably likely to have a material adverse
<PAGE>
34
effect upon Frontier (except liability for benefits claims and funding
obligations payable in the ordinary course) under ERISA, the Code or any other
applicable law.
(iii) True and complete copies of the Frontier Stock Plans as in effect
on the date hereof have been provided to A.
(k) Subsidiaries. Schedule 3.2(k) hereto lists all of the
Significant Subsidiaries of Frontier as of the date hereof, each of which is
wholly-owned by Frontier. All of the shares of capital stock of each of the
subsidiaries held by Frontier or by another subsidiary of Frontier are fully
paid and nonassessable and are owned by Frontier or a subsidiary of Frontier
free and clear of any claim, lien or encumbrance.
(l) Absence of Certain Changes or Events. Except as disclosed in the
Frontier SEC Documents filed prior to the date of this Agreement, since December
31, 1994, Frontier and its subsidiaries have not incurred any material
liability, except in the ordinary course of their business consistent with their
past practices, nor has there been any change, or any event involving a
prospective change, in the business, prospects, financial condition or results
of operations of Frontier or any of its subsidiaries which has had, or is
reasonably likely to have, a material adverse effect on Frontier (other than as
a result of changes in laws or regulations of general applicability or
interpretations thereof).
(m) Section 912 of the NYBCL Not Applicable. The provisions of
Section 912 of the New York Business Corporation Law (the "NYBCL") will not,
prior to the termination of this Agreement, assuming the accuracy of the
representations contained in Section 3.1(r) (without giving effect to the
knowledge qualification thereof), apply to this Agreement, the Merger or the
transactions contemplated hereby.
(n) Vote Required. The affirmative vote of the holders of shares of
Frontier Common Stock representing a majority of the total votes cast by the
holders of all
<PAGE>
35
outstanding shares of Frontier Common Stock is the only vote of the holders of
any class or series of Frontier capital stock necessary to approve the Frontier
Vote Matter and the transactions contemplated hereby, provided that the total
votes cast by such holders represent a majority of the outstanding shares of
Frontier Common Stock entitled to vote on the Frontier Vote Matter (assuming for
purposes of this representation (including the proviso) the accuracy of the
representations contained in Section 3.1(r) without giving effect to the
knowledge qualification thereof).
(o) Accounting Matters. Neither Frontier nor, to its best knowledge,
any of its affiliates, has through the date of this Agreement taken or agreed to
take any action that would prevent Frontier from accounting for the business
combination to be effected by the Merger as a "pooling of interests".
(p) Frontier Rights Agreement. Under the Frontier Rights Agreement,
which will be executed as promptly as practicable following the date hereof, and
assuming that no stockholder of ALC would constitute an "Acquiring Person" after
giving effect to the Merger, (i) none of the approval, execution or delivery of
this Agreement or the consummation of the Merger will cause (1) the Frontier
Rights to become exercisable, (2) ALC or any of its subsidiaries to be deemed an
"Acquiring Person" (as defined in the Frontier Rights Agreement), or (3) the
"Stock Acquisition Date" (as defined in the Frontier Rights Agreement) to occur
upon any such event. The "Distribution Date" (as defined in the Frontier Rights
Agreement) has not occurred.
(q) Properties. Except as disclosed in the Frontier SEC Documents
filed prior to the date of this Agreement or as disclosed in Schedule 3.2(q)
hereto, Frontier or one of subsidiaries (i) has good, clear and marketable title
to all the properties and assets reflected in the latest audited balance sheet
included in such Frontier SEC Documents as being owned by
<PAGE>
36
Frontier or one of its subsidiaries or acquired after the date thereof which are
material to Frontier's business on a consolidated basis (except properties sold
or otherwise disposed of since the date thereof in the ordinary course of
business), free and clear of all claims, liens, charges, security interests or
encumbrances of any nature whatsoever except (A) statutory liens securing
payments not yet due and (B) such imperfections or irregularities of title,
claims, liens, charges, security interests or encumbrances as do not materially
affect the use of the properties or assets subject thereto or affected thereby
or otherwise materially impair business operations at such properties and (ii)
is the lessee of all leasehold estates reflected in the latest audited financial
statements included in such Frontier SEC Documents or acquired after the date
thereof which are material to its business on a consolidated basis (except for
leases that have expired by their terms since the date thereof) and is in
possession of the properties purported to be leased thereunder and each such
lease is valid without default thereunder by the lessee or, to Frontier's
knowledge, the lessor.
(r) Ownership of ALC Common Stock. As of the date hereof, neither
Frontier nor, to its best knowledge, any of its affiliates or associates (as
defined under the Exchange Act), (i) beneficially own, directly or indirectly,
or (ii) are parties to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of, any shares of ALC Common
Stock, except for shares which may be held by Frontier Benefit Plans which
shares do not, in the aggregate, represent 1% or more of the outstanding shares
of ALC Common Stock.
(s) Intellectual Property. Frontier and its Significant Subsidiaries
own or possess adequate licenses or other valid rights to use all material
computer software and firmware, patents, patent rights, trademarks, trademark
rights, trade names, trade name rights, brand names, copyrights, service marks,
trade secrets, applications for trademarks and for
<PAGE>
37
service marks, know-how and other proprietary rights and information used or
held for use in connection with the business of Frontier and its Significant
Subsidiaries as currently conducted or as contemplated to be conducted, and
Frontier is unaware of any assertion or claim challenging the validity of any of
the foregoing which, individually or in the aggregate, would have a material
adverse effect. To the best knowledge of Frontier, the conduct of the business
of Frontier and its Significant Subsidiaries as currently conducted does not
conflict in any way with any patent, patent right, license, trademark, trademark
right, trade name, trade name right, service mark or copyright of any third
party that, individually or in the aggregate, would have a material adverse
effect. To the best knowledge of Frontier, there are no infringements of any
proprietary rights owned by or licensed by or to Frontier or any of its
Significant Subsidiaries which, individually or in the aggregate, would have a
material adverse effect.
(t) Undisclosed Liabilities. Except as disclosed in the Frontier SEC
Documents filed prior to the date of this Agreement, neither Frontier nor any of
its Significant Subsidiaries has incurred any liabilities or obligations
(absolute, accrued, contingent or otherwise) other than liabilities or
obligations which would not, individually or in the aggregate, have a material
adverse effect.
(u) Environmental Matters. Except as disclosed in the Frontier SEC
Documents filed prior to the date of this Agreement, there are no Environmental
Liabilities of Frontier or any of its Significant Subsidiaries which would,
individually or in the aggregate, have a material adverse effect.
(v) Opinion of Financial Advisor. Frontier has received the opinion
of Lazard Freres & Co. dated April 9, 1995, to the effect that, as of such date,
the exchange ratio
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38
reflected in the Conversion Number is fair to the stockholders of Frontier from
a financial point of view, a copy of which opinion has been delivered to ALC.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of ALC and Frontier. During the period from the date
of this Agreement and continuing until the Effective Time, ALC and Frontier each
agrees as to itself and its subsidiaries that (except as expressly contemplated
or permitted by this Agreement or to the extent that the other party shall
otherwise consent in writing):
(a) Ordinary Course. Such party and its subsidiaries shall carry on
their respective businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and use all reasonable
efforts to preserve intact their present business organizations, maintain their
rights and franchises and preserve their relationships with customers, suppliers
and others having business dealings with them to the end that their goodwill and
ongoing businesses shall not be impaired in any material respect at the
Effective Time. No party shall, or shall permit any of its subsidiaries to, (i)
enter into any new material line of business or (ii) incur or commit to any
capital expenditures or any obligations or liabilities in connection therewith
other than capital expenditures and obligations or liabilities incurred or
committed to in the ordinary course of business consistent with past practice or
as contemplated by business plans or budgets provided, or otherwise disclosed in
writing, to the other party prior to the date hereof.
(b) Dividends; Changes in Stock. Except in connection with the
declaration and issuance of the Frontier Rights by Frontier, no party shall, or
shall permit any of its Significant Subsidiaries to, or shall propose to, (i)
declare or pay any dividends on or make
<PAGE>
39
other distributions in respect of any of its capital stock, except (A) Frontier
may continue the declaration and payment of regular quarterly cash dividends not
in excess of $.2075 per share of Frontier Common Stock and regular quarterly
cash dividends as provided by and in accordance with the terms of the Frontier
Cumulative Preferred Stock, in each case with usual record and payment dates for
such dividends in accordance with Frontier's past dividend practice, and (B) for
dividends by a wholly-owned subsidiary of such party, (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (iii) repurchase, redeem or otherwise
acquire, or permit any subsidiary to purchase or otherwise acquire any shares of
its capital stock or any securities convertible into or exercisable for any
shares of its capital stock, except in the case of Frontier, as described on
Schedule 3.2(b).
(c) Issuance of Securities. No party shall, or shall permit any of
its subsidiaries to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any class, any
Voting Debt or any securities convertible into or exercisable for, or any
rights, warrants or options to acquire, any such shares or Voting Debt, or enter
into any agreement with respect to any of the foregoing, other than (i) the
issuance of Frontier Common Stock or ALC Common Stock, as the case may be, upon
the exercise of the stock options and warrants referred to in this Agreement, in
each case outstanding on the date of this Agreement, or pursuant to Frontier
Stock Plans or ALC Stock Plans, in each case in accordance with their present
terms, (ii) in the case of Frontier, grants of options to purchase shares of
Frontier Common Stock pursuant to the Frontier Stock Plans, (iii) issuances by a
wholly-owned subsidiary of its capital stock to its parent, (iv) in the case of
Frontier, the issuance of Frontier Rights and shares of Series A Junior
Participating Class A Preferred Stock of Frontier the ("Frontier Series A
Preferred") upon exercise of the Frontier
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40
Rights, in each case in accordance with the terms of the Frontier Rights
Agreement, and the reservation for issuance of shares of Frontier Series A
Preferred and (v) in the case of ALC, the issuance of ALC Rights and shares of
ALC Series E Preferred upon exercise of ALC Rights, in each case in accordance
with the terms of the ALC Rights Agreement (as amended as described in Section
3.1(p)), and the reservation for issuance of shares of ALC Series E Preferred.
(d) Governing Documents. No party shall amend or propose to amend,
or shall permit any of its Significant Subsidiaries to amend, the Certificate of
Incorporation or By-laws of such party or any of its Significant Subsidiaries
(or, in the case of Frontier, of Sub), except as contemplated by Section 5.12;
provided, however, the foregoing shall not prevent the amendment of Sub's
- -------- -------
Certificate of Incorporation to increase the number of authorized shares of its
common stock or to change the par value thereof. Frontier shall not amend the
Frontier Rights Agreement in any way adverse to ALC or its ability to consummate
the transactions contemplated hereby and ALC shall not amend the ALC Rights
Agreement (as amended as described in Section 3.1(p)) in any way adverse to
Frontier or its ability to consummate the transactions contemplated hereby. ALC
shall not amend the Warrant Agreements or the Grumman Hill Options.
(e) No Solicitations. No party shall, or shall permit any of its
subsidiaries to, directly or indirectly, through any officer, director, agent or
otherwise, initiate, solicit or knowingly encourage (including by way of
furnishing non-public information or assistance), or take any other action to
facilitate knowingly, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Competing Transaction
(as defined below), or enter into or maintain or continue discussions or
negotiate with any person in furtherance of such inquiries or to obtain a
Competing Transaction, or agree to or endorse
<PAGE>
41
any Competing Transaction, or authorize or permit any of the officers, directors
or employees of such party or any of its subsidiaries or any investment banker,
financial advisor, attorney, accountant or other representative retained by such
party or any of such party's subsidiaries to take any such action, and each
party shall notify the other party hereto orally (within twelve hours) and in
writing (as promptly as practicable), in reasonable detail, as to any inquiries
and proposals which it or any of such party's subsidiaries or any such officer,
director, employee, investment banker, financial advisor, attorney, accountant
or other representative may receive and if such inquiry or proposal is in
writing, such party shall deliver to the other party a copy of such inquiry or
proposal; provided, however, that nothing contained in this Section 4.1(e) shall
-------- -------
prohibit the Board of Directors of Frontier or ALC, as the case may be, from
(i) furnishing information to, or entering into discussions or negotiations
with, any person or entity that makes an unsolicited written, bona fide proposal
to acquire such party pursuant to a merger, consolidation, share exchange,
business combination, sale of assets, tender or exchange offer or other similar
transaction, if, and only to the extent that, (A) the Board of Directors of such
party, after consultation with and based upon the advice of independent legal
counsel (who may be such party's regularly engaged independent legal counsel),
determines in good faith that such action is required for the Board of Directors
of such party to comply with its fiduciary duties to stockholders under
applicable law and (B) prior to furnishing such information to, or entering into
discussions or negotiations with, such person, such party (x) provides
reasonable notice (no less than one business day) to the other party to the
effect that it is furnishing information to, or entering into discussions or
negotiations with, such person and (y) receives from such person an executed
confidentiality agreement in reasonably customary form on terms not more
favorable to such person than the terms contained in the letter dated September
27, 1994 between ALC and Frontier (the
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42
"Confidentiality Agreement"); provided further, that the party furnishing to any
-------- -------
such person or entity any material, non-public information not previously
delivered to the other party shall deliver to the other party copies of all such
information (provided that the party furnishing to any such person any such
--------
material, non-public information of which copies are not delivered to the other
party pursuant to the foregoing shall deliver to the other party a list of all
such information so provided), (ii) complying with Rule 14e-2 promulgated under
the Exchange Act with regard to a tender or exchange offer or (iii) failing to
make or withdrawing or modifying its recommendation referred to in Section 5.5
following the occurrence of a Competing Transaction if the Board of Directors of
such party, after consultation with and based upon the advice of independent
legal counsel (who may be such party's regularly engaged independent legal
counsel), determines in good faith that such action is required for the Board of
Directors of such party to comply with its fiduciary duties to stockholders
under applicable law. As used in this Agreement, "Competing Transaction" shall
mean any of the following (other than the transactions contemplated or permitted
by this Agreement) involving a party hereto or any of its Significant
Subsidiaries: (i) any merger, consolidation, share exchange, business
combination, or other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 20% or more of the assets of
such party and its subsidiaries, taken as a whole, in a single transaction or
series of transactions; (iii) any tender offer or exchange offer for 20% or more
of the outstanding shares of capital stock of such party or the filing of a
registration statement under the Securities Act in connection therewith; (iv)
any person or group having acquired beneficial ownership of 20% or more of the
outstanding shares of capital stock of such party; or (v) any proposal, plan or
intention to do any of the foregoing either publicly announced or otherwise
communicated to ALC or Frontier, as the case may be, or any agreement to engage
in any of the foregoing. This
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43
Section 4.1(e) shall not prohibit accurate disclosure by a party that is
required in any ALC SEC Document or Frontier SEC Document (including the Proxy
Statement and the S-4) or otherwise under applicable law in the opinion of the
Board of Directors of such party, after consultation with and based upon the
advice of independent legal counsel (who may be such party's regularly engaged
legal counsel), as of the date of such ALC SEC Document or Frontier SEC Document
or such other required disclosure as to the transactions contemplated hereby or
as to any Competing Transaction.
(f) No Acquisitions. Other than (i) acquisitions disclosed in the
ALC SEC Documents or the Frontier SEC Documents, as the case may be, (ii)
acquisitions for which a party has entered into a definitive agreement prior to
the date hereof, (iii) acquisitions for which a party has an outstanding bona
fide offer as of the date hereof and (iv) if there shall have occurred after the
date hereof a Competing Transaction with respect to either ALC or Frontier,
acquisitions in connection with which the total fair market value of the
consideration paid by the acquiror shall not exceed an aggregate of
$100,000,000, no party shall, or shall permit any of its subsidiaries to,
without the prior written consent of the other party (which shall not be
unreasonably withheld), acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets in each case which are
material, individually or in the aggregate, to such party and its subsidiaries
taken as a whole; provided, however, that the foregoing shall not prohibit (i)
internal reorganizations or consolidations involving existing subsidiaries or
(ii) the creation of new subsidiaries organized to conduct or continue
activities otherwise permitted by this Agreement.
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44
(g) No Dispositions. Other than (i) dispositions referred to in ALC
SEC Documents or Frontier SEC Documents filed prior to the date of this
Agreement or as previously disclosed in writing by a party to the other party,
or (ii) as may be required by law to consummate the transactions contemplated
hereby, no party shall, or shall permit any of its subsidiaries to, sell, lease,
encumber or otherwise dispose of, or agree to sell, lease, encumber or otherwise
dispose of any of its assets (including capital stock of subsidiaries), except,
subject to Section 4.1(l), for dispositions in the ordinary course of business
consistent with past practice or which, individually do not exceed $10,000,000
or which, in the aggregate, do not exceed $25,000,000.
(h) Indebtedness. No party shall, or shall permit any of its
subsidiaries to, incur any long-term indebtedness for borrowed money or
guarantee any such long-term indebtedness or issue or sell any long-term debt
securities or warrants or rights to acquire any long-term debt securities of
such party or any of its subsidiaries or guarantee any long-term debt securities
of others (other than such party or any of its wholly owned subsidiaries) or
enter into or amend any contract, agreement, commitment or arrangement with
respect to any of the foregoing, other than (i) in replacement for existing or
maturing debt, (ii) indebtedness of any subsidiary of a party to such party or
another subsidiary of such party, (iii) borrowings under existing lines of
credit or under commercial paper programs in the ordinary course of business
consistent with prior practice, (iv) borrowings by Rochester Telephone Corp. to
the extent that the aggregate long-term indebtedness of Rochester Telephone
Corp. does not exceed $200,000,000, (v) borrowings by either party under its
lines of credit existing on the date hereof, (vi) indebtedness assumed or
indebtedness of any person or entity acquired pursuant to any acquisitions
referred to in Section 4.1(f) or (vii) other borrowings which, in the aggregate,
do not exceed $10,000,000.
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45
(i) Other Actions. No party shall, or shall permit any of its
subsidiaries to, take any action that would or reasonably might be expected to,
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect, or in any of the conditions to
the Merger set forth in Article VI not being satisfied, or (unless such action
is required by applicable law) which would adversely affect the ability of any
of them to obtain any of the Requisite Regulatory Approvals without imposition
of a condition or restriction of the type referred to in Sections 6.1(g), 6.2(e)
or 6.3(e).
(j) Advice of Changes; Government Filings. Each party shall confer
on a regular and frequent basis with the other, report on operational matters
and promptly advise the other, orally and in writing of any change or event
having, or which, insofar as can reasonably be foreseen, could have, a material
adverse effect on such party or which would cause or constitute a material
breach of any of the representations, warrants or covenants of such party
contained herein. Frontier and ALC shall file all reports required to be filed
by each of them with the SEC between the date of this Agreement and the
Effective Time and shall deliver to the other party copies of all such reports
promptly after the same are filed. Frontier and ALC shall cooperate with each
other in determining whether any filings are required to be made with or
consents required to be obtained from, any third party or Governmental Entity
prior to the Effective Time in connection with this Agreement or the
transactions contemplated hereby, and shall cooperate in making any such filings
promptly and in seeking to obtain timely any such consents. Each party shall
promptly provide the other (or its counsel) with copies of all other filings
made by such party with any state or federal Governmental Entity in connection
with this Agreement or the transactions contemplated hereby.
<PAGE>
46
(k) Accounting Methods. Neither Frontier nor ALC shall change its
methods of accounting in effect at December 31, 1994, except as required by
changes in generally accepted accounting principles as concurred in by such
party's independent auditors. Neither Frontier nor ALC will change its fiscal
year.
(l) Pooling and Tax-Free Reorganization Treatment. Neither Frontier
nor ALC shall intentionally take or cause to be taken any action, whether before
or after the Effective Time, which would disqualify the Merger as a "pooling of
interests" for accounting purposes or as a "reorganization" within the meaning
of Section 368(a) of the Code.
(m) Benefit Plans. During the period from the date of this Agreement
and continuing until the Effective Time, each of Frontier and ALC agrees as to
itself and its subsidiaries that it will not, without the prior written consent
of the other party, (i) enter into, adopt, amend (except as may be required by
law), renew or terminate any Frontier Benefit Plan or ALC Benefit Plan, as the
case may be, or any other employee benefit plan or any agreement, arrangement,
plan or policy between such party and one or more of its directors or officers,
(ii) except for normal increases in the ordinary course of business consistent
with past practice that, in the aggregate, do not result in a material increase
in benefits or compensation expense to such party, increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay any
benefit not required by any plan and arrangement as in effect as of the date
hereof, (iii) in the case of ALC, grant any stock options, stock appreciation
rights, restricted stock, restricted stock units or performance units or shares
other than as required by existing agreements with individual employees, or
enter into any contract, agreement, commitment or arrangement to do any of the
foregoing or (iv) except for the Employment Agreements, enter into or renew any
contract, agreement, commitment or arrangement providing for the payment to any
director, officer or employee of
<PAGE>
47
such party of compensation or benefits contingent, or the terms of which are
materially altered, upon the occurrence of any of the transactions contemplated
by this Agreement.
(n) Tax Elections. Except in the ordinary course of business and
consistent with past practice, without the prior written consent of the other,
neither Frontier nor ALC shall make any material tax election or settle or
compromise any material federal, state, local or foreign income tax liability.
(o) Network Transition. Promptly following the date hereof, Frontier
and ALC shall consider and discuss the manner in which they may, to the extent
not violative of any contracts, arrangements or agreements, written or oral, to
which any party hereto or any of its subsidiaries or affiliates is a party,
cause their respective long distance subsidiaries (the "Long Distance Subs") to
take the actions reasonably necessary to begin to transition their respective
switched long distance traffic of each other for termination and obtain the
maximum network optimization and other synergies as necessary for the Long
Distance Subs' future business plans, including but not limited to joint
purchasing of transmission capacity.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of S-4 and the Proxy Statement. Frontier and ALC
shall promptly prepare and file with the SEC the Proxy Statement and Frontier
shall prepare and file with the SEC the S-4, in which the Proxy Statement will
be included as a prospectus. Each of Frontier and ALC shall use all reasonable
efforts to have the S-4 declared effective under the Securities Act as promptly
as practicable after such filing. Frontier shall also take any action (other
than qualifying to do business in any jurisdiction in which it is now not so
qualified) required to be taken under any applicable state securities laws in
connection with
<PAGE>
48
the issuance of Frontier Common Stock in the Merger and Frontier Common Stock
upon the exercise of the ALC Stock Options and the ALC Warrants, and ALC shall
furnish all information concerning ALC and the holders of ALC Common Stock, ALC
Stock Options and ALC Warrants as may be reasonably requested in connection with
any such action.
5.2 Letter of ALC's Accountants. ALC shall use its reasonable best
efforts to cause to be delivered to Frontier a letter of Ernst & Young, ALC's
independent auditors, dated a date within two business days before the date on
which the S-4 shall become effective and addressed to Frontier, in form and
substance reasonably satisfactory to Frontier and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the S-4.
5.3 Letter of Frontier's Accountants. Frontier shall use its
reasonable best efforts to cause to be delivered to ALC a letter of Price
Waterhouse, Frontier's independent auditors, dated a date within two business
days before the date on which the S-4 shall become effective and addressed to
ALC, in form and substance reasonably satisfactory to ALC and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the S-4.
5.4 Access to Information. Upon reasonable notice, ALC and Frontier
shall each (and shall cause each of their respective subsidiaries to) afford to
the officers, employees, accountants, counsel and other representatives of the
other, access, during normal business hours during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and records
and, during such period, each of ALC and Frontier shall (and shall cause each of
their respective subsidiaries to) make available to the other (a) a copy of each
report, schedule, registration statement and other document filed or received by
it during such period pursuant to the requirements of federal securities laws
and (b) all other
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49
information concerning its business, properties and personnel as such other
party may reasonably request. The parties will hold any such information which
is nonpublic in confidence to the extent required by, and in accordance with,
the provisions of the Confidentiality Agreement. No investigation by either
Frontier or ALC shall affect the representations and warranties of the other,
except to the extent such representations and warranties are by their terms
qualified by disclosures made to such first party.
5.5 Stockholder Meetings. ALC and Frontier each shall call a meeting
of its respective stockholders to be held as promptly as practicable for the
purpose of voting upon the approval of this Agreement in the case of ALC and the
Frontier Vote Matter in the case of Frontier. ALC and Frontier will, through
their respective Boards of Directors, recommend to their respective stockholders
approval of such matters, unless otherwise required under the applicable
fiduciary duties of the respective directors of ALC and Frontier, as determined
by such directors in good faith after consultation with and based upon the
advice of independent legal counsel (who may be such party's regularly engaged
independent legal counsel). ALC and Frontier shall coordinate and cooperate
with respect to the timing of such meetings and shall use their best efforts to
hold such meetings on the same day and as soon as practicable after the date on
which the S-4 becomes effective. This Section 5.5 shall not prohibit accurate
disclosure by a party that is required in any ALC SEC Document or Frontier SEC
Document (including the Proxy Statement and the S-4) or otherwise under
applicable law of the opinion of the Board of Directors of such party as of the
date of such SEC Document or such other required disclosure as to the
transactions contemplated hereby or as to any takeover proposal.
5.6 Legal Conditions to Merger. Each of ALC and Frontier shall, and
shall cause its subsidiaries to, use all reasonable efforts (i) to take, or
cause to be taken, all actions
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50
necessary to comply promptly with all legal requirements which may be imposed on
such party or its subsidiaries with respect to the Merger and to consummate the
transactions contemplated by this Agreement, subject to the appropriate vote of
stockholders of ALC and Frontier described in Section 6.1(a), and (ii) to obtain
(and to cooperate with the other party to obtain) any consent, authorization,
order or approval of, or any exemption by, any Governmental Entity and or any
other public or private third party which is required to be obtained or made by
such party or any of its subsidiaries in connection with the Merger and the
transactions contemplated by this Agreement; provided, however, that a party
shall not be obligated to take any action pursuant to the foregoing if the
taking of such action or such compliance or the obtaining of such consent,
authorization, order, approval or exemption is likely, in such party's
reasonable opinion, (x) to be materially burdensome to such party and its
subsidiaries taken as a whole or to impact in a materially adverse manner the
economic or business benefits of the transactions contemplated by this Agreement
so as to render inadvisable the consummation of the Merger or (y) to result in
the imposition of a condition or restriction on such party or on the Surviving
Corporation of the type referred to in Sections 6.1(g), 6.2(e) or 6.3(e). Each
of ALC and Frontier will promptly cooperate with and furnish information to the
other in connection with any such burden suffered by, or requirement imposed
upon, any of them or any of their subsidiaries in connection with the foregoing.
5.7 Affiliates. At least 40 days prior to the Closing Date, ALC
shall deliver to Frontier a letter identifying all persons who are, at the time
this Agreement is submitted for approval to the stockholders of ALC,
"affiliates" of ALC for purposes of Rule 145 under the Securities Act. ALC
shall use all reasonable efforts to cause each person named on the letter
delivered by it to deliver to Frontier at least 30 days prior to the Closing
Date a written agreement, substantially in the form attached as Exhibit 5.7.
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51
5.8 Stock Exchange Listing. Frontier shall use all reasonable
efforts to cause the shares of Frontier Common Stock to be issued in the Merger
and the shares of Frontier Common Stock to be reserved for issuance upon
exercise of ALC Stock Options and ALC Warrants to be approved for listing on the
NYSE, subject to official notice of issuance, prior to the Closing Date.
5.9 Employee Benefit Plans. Following the Effective Time, Frontier
shall establish, or maintain, in good faith, Benefit Plans for the Surviving
Corporation and its subsidiaries effective as of the Effective Time. Except as
otherwise provided in Section 5.10, in the case of ALC Benefit Plans under which
the employees' interests are based upon ALC Common Stock, Frontier and ALC agree
that such interests shall be based on Frontier Common Stock in an equitable
manner.
5.10 Stock Options and Warrants. (a) At the Effective Time, each
outstanding ALC Stock Option and ALC SAR, in each case whether vested or
unvested, and ALC Warrant shall be assumed by Frontier. Each ALC Stock Option
shall be deemed to constitute an option to acquire, and each ALC Warrant shall
be deemed to constitute a warrant to acquire, on the same terms and conditions
as were applicable under such ALC Stock Option or such ALC Warrant, as the case
may be, the same number of shares of Frontier Common Stock as the holder of such
ALC Stock Option or such ALC Warrant, as the case may be, would have been
entitled to receive pursuant to the Merger had such holder exercised such ALC
Stock Option or ALC Warrant in full immediately prior to the Effective Time, at
a price per share equal to (y) the aggregate exercise price for the shares of
ALC Common Stock otherwise purchasable pursuant to such ALC Stock Option or ALC
Warrant divided by (z) the number of full shares of Frontier Common Stock deemed
purchasable pursuant to such ALC Stock Option or ALC Warrant; provided, however,
that in the case of
<PAGE>
52
any option to which section 421 of the Code applies by reason of its
qualification under section 422 of the Code ("qualified stock options"), the
option price, the number of shares purchasable pursuant to such option and the
terms and conditions of exercise of such option shall be determined in order to
comply with section 424(a) of the Code. Each holder of an ALC SAR shall be
entitled to that number of stock appreciation rights of Frontier determined in
the same manner as set forth above with respect to ALC Stock Options assumed by
Frontier. As soon as practicable following the date of this Agreement, the
Board of Directors of ALC (and/or the appropriate committee thereof) shall take
all other actions necessary in order to effectuate the foregoing and to ensure
that following the Effective Time no holder of an ALC Stock Option, ALC SAR or
ALC Warrant nor any participant in any ALC Benefit Plan shall have any right
thereunder to acquire equity securities of ALC or the Surviving Corporation.
(b) ALC shall deliver to the holders of the Warrants appropriate
notices setting forth such holders' rights in connection with the Merger in
accordance with the provisions of the respective Warrant Agreements. As soon as
practicable after the Effective Time, Frontier shall deliver to the holders of
ALC Stock Options and ALC SARs appropriate notices setting forth such holders'
rights pursuant to the ALC Stock Plans in connection with the Merger. The
agreements evidencing the grants of ALC Stock Options, ALC SARs or ALC Warrants,
as the case may be, shall continue in effect on the same terms and conditions
(subject to the adjustments required by this Section 5.10 after giving effect to
the Merger and the assumption by Frontier as set forth above). If necessary,
Frontier shall use its reasonable best efforts to comply with the terms of the
ALC Stock Plans and to ensure, to the extent required by, and subject to the
provisions of, the ALC Stock Plans, that ALC Stock Options
<PAGE>
53
which qualified as qualified stock options prior to the Effective Time continue
to qualify as qualified stock options of Frontier after the Effective Time.
(c) Frontier shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Frontier Common Stock for delivery
upon exercise of ALC Stock Options and ALC Warrants assumed by it in accordance
with this Section 5.10. As soon as practicable after the Effective Time,
Frontier shall file one or more registration statements on appropriate forms
with respect to the shares of Frontier Common Stock subject to such ALC Stock
Options and, to the extent required by the respective Warrant Agreements, with
respect to the shares of Frontier Common Stock subject to such ALC Warrants, and
shall use its best efforts to maintain the effectiveness of such registration
statement or registration statements for so long as such options or warrants, as
applicable, remain outstanding.
5.11 Brokers or Finders. Except as disclosed to the other party
prior to the date hereof, each of Frontier and ALC represents, as to itself, its
subsidiaries and its affiliates, that no agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any broker's
or finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement, except Salomon Brothers Inc,
whose fees and expenses will be paid by ALC in accordance with ALC's agreement
with such firm (a copy of which has been delivered by ALC to Frontier prior to
the date of this Agreement), and Lazard Freres & Co., whose fees and expenses
will be paid by Frontier in accordance with Frontier's agreement with such firm
(a copy of which has been delivered by Frontier to ALC prior to the date of this
Agreement), and each party agrees to indemnify the other party and hold the
other party harmless from and against any and all claims, liabilities or
obligations with respect to any other fees, commissions or expenses
<PAGE>
54
asserted by any person on the basis of any act or statement alleged to have been
made by such first party or its affiliate.
5.12 Governance. (a) Frontier's Board of Directors shall take
action to cause John M. Zrno, William H. Oberlin, Richard J. Uhl and Michael E.
Faherty to be elected to Frontier's Board of Directors as of the Effective Time
or as soon thereafter as practical. Frontier's Board of Directors shall amend
Frontier's By-laws to increase the size of the Frontier Board of Directors to
the extent necessary to comply with this Section. Frontier's Board of Directors
shall also take action to cause the persons set forth on Exhibit 5.12 to be
elected to the offices specified in such Exhibit effective as of the Effective
Time.
(b) ALC shall use its reasonable best efforts to obtain the
resignation of each director of ALC effective as of the Effective Time.
5.13 Indemnification; Directors' and Officers' Insurance. (a) From
and after the Effective Time, Frontier shall, or shall cause the Surviving
Corporation to, indemnify, defend and hold harmless each person who is now, or
has been at any time prior to the date hereof or who becomes prior to the
Effective Time, an officer, director or employee of ALC or any of its
subsidiaries (the "Indemnified Parties") against (i) all losses, claims,
damages, costs, expenses, liabilities or judgments or amounts that are paid in
settlement with the approval of Frontier (which approval shall not be
unreasonably withheld) of or in connection with any claim, action, suit,
proceeding or investigation based in whole or in part on or arising in whole or
in part out of the fact that such person is or was a director, officer or
employee of ALC or any subsidiary of ALC, whether pertaining to any matter
existing or occurring at or prior to the Effective Time and whether asserted or
claimed prior to, or at or after, the Effective Time ("Indemnified Liabilities")
and (ii) all Indemnified Liabilities based in whole or in part on, or arising in
whole or in part out of, or pertaining to this Agreement
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55
or the transactions contemplated hereby, in each case to the full extent ALC
would have been permitted under Delaware law and its Certificate of
Incorporation and By-laws to indemnify such person, consistent with applicable
law (and Frontier shall pay expenses (including attorneys' fees) in advance of
the final disposition of any such action or proceeding to each Indemnified Party
to the full extent permitted by law upon receipt of any undertaking required by
applicable law). Without limiting the foregoing, in the event any such claim,
action, suit, proceeding or investigation is brought against any Indemnified
Party (whether arising before or after the Effective Time), (i) any counsel
retained by the Indemnified Parties for any period after the Effective Time
shall be reasonably satisfactory to Frontier and (ii) after the Effective Time,
Frontier will use all reasonable efforts to assist in the vigorous defense of
any such matter, provided that Frontier shall not be liable for any settlement
of any claim effected without its written consent, which consent, however, shall
not be unreasonably withheld. Any Indemnified Party wishing to claim
indemnification under this Section 5.13, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify Frontier (but the
failure so to notify Frontier shall not relieve it from any liability which it
may have under this Section 5.13 except to the extent such failure materially
prejudices Frontier), and shall deliver to Frontier any undertaking required by
applicable law. The Indemnified Parties as a group may retain only one law firm
to represent them with respect to each such matter unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified Parties.
(b) For a period of seven years after the Effective Time, Frontier
shall cause to be maintained in effect the current policies of directors' and
officers' liability insurance maintained by ALC (provided that Frontier may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are no less
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56
advantageous) with respect to claims arising from facts or events which occurred
before the Effective Time; provided, however, that Frontier shall not be
obligated to make annual premium payments for such insurance to the extent such
premiums exceed 200% of the premiums paid as of the date hereof by ALC for such
insurance. Notwithstanding anything to the contrary contained elsewhere herein,
Frontier's agreement set forth above shall be limited to cover claims only to
the extent that those claims are not covered under ALC's directors' and
officers' insurance policies (or any substitute policies permitted by this
Section 5.13(b)).
(c) The provisions of this Section 5.13 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, and his or her
heirs and representatives.
5.14 Elimination of Certain Restrictions. The parties shall make all
reasonable efforts to eliminate the application, after the Effective Time, of
certain restrictive covenants contained in the Indenture dated as of May 15,
1993 among Allnet Communication Services, Inc., ALC and Star Bank, National
Association, as Trustee, relating to ALC's 9% Senior Subordinated Notes due May
15, 2003, by such means, including without limitation, consent, amendment or
defeasance, as may be mutually agreeable.
5.15 Financial Reporting. If the Effective Time shall have occurred
in either the first or last month of a fiscal quarter of Frontier, Frontier
shall seek to accelerate the release of 30 days of combined earnings of Frontier
and the Surviving Corporation to the fullest extent reasonably practicable,
taking into account the best interests of Frontier.
5.16 Additional Agreements. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of either Sub
or ALC, the proper officers and directors of each party to this Agreement shall
take all such necessary action.
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57
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) Stockholder Approval. This Agreement shall have been approved
and adopted by the affirmative vote of the holders of a majority of the
outstanding shares of ALC Common Stock entitled to vote thereon, and the
Frontier Vote Matter shall have been approved by a majority of the votes cast
thereon by the holders of shares of Frontier Common Stock, provided that the
total votes cast by such holders shall represent a majority of the outstanding
shares of Frontier Common Stock entitled to vote thereon.
(b) NYSE Listing. The shares of Frontier Common Stock issuable to
ALC stockholders pursuant to this Agreement and such other shares required to be
reserved for issuance in connection with the Merger shall have been authorized
for listing on the NYSE upon official notice of issuance.
(c) Other Approvals. Other than the filing contemplated by Section
1.3, all authorizations, consents, orders or approvals of, or declarations or
filings with, and all expirations of waiting periods imposed by, any
Governmental Entity (all the foregoing, "Consents") which are necessary for the
consummation of the Merger, other than immaterial Consents the failure to obtain
which would have no material adverse effect on the consummation of the Merger or
on Frontier and its subsidiaries (after giving effect to the Merger), taken as a
whole, shall have been filed, occurred or been obtained (all such permits,
approvals, filings and consents and the lapse of all such waiting periods being
referred to as the "Requisite Regulatory Approvals") and all such Requisite
Regulatory Approvals shall be
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in full force and effect. Frontier shall have received all state securities or
blue sky permits and other authorizations necessary to issue the Frontier Common
Stock in exchange for ALC Common Stock and to consummate the Merger.
(d) S-4. The S-4 shall have become effective under the Securities
Act and shall not be the subject of any stop order or proceedings seeking a stop
order.
(e) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger shall be in effect, nor
shall any proceeding by any Governmental Entity seeking any of the foregoing be
pending. There shall not be any action taken, or any statute, rule, regulation
or order enacted, entered, enforced or deemed applicable to the Merger, which
makes the consummation of the Merger illegal.
(f) Pooling. Frontier and ALC shall have received letters from Price
Waterhouse and from Ernst & Young to the effect that the Merger qualifies for
"pooling of interests" accounting treatment if consummated in accordance with
this Agreement.
(g) Burdensome Condition. There shall not be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, by any federal or state Governmental Entity which, in
connection with the grant of a Requisite Regulatory Approval, imposes any
condition or restriction upon Frontier or its subsidiaries (after giving effect
to the Merger) which would so materially adversely impact the economic or
business benefits of the transactions contemplated by this Agreement as to
render inadvisable the consummation of the Merger, provided that the parties
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shall have contested in good faith the imposition of any such condition or
restriction.
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6.2 Conditions to Obligations of Frontier and Sub. The obligations
of Frontier and Sub to effect the Merger are subject to the satisfaction of the
following conditions unless waived by Frontier and Sub:
(a) Representations and Warranties. The representations and
warranties of ALC set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, except as otherwise
contemplated by this Agreement, and Frontier shall have received a certificate
signed on behalf of ALC by the President and Chief Executive Officer of ALC or
the Executive Vice President and Chief Operating Officer of ALC, and by the
Executive Vice President and Chief Financial Officer of ALC to such effect.
(b) Performance of Obligations of ALC. ALC shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Frontier shall have received a
certificate signed on behalf of ALC by the President and Chief Executive Officer
of ALC or the Executive Vice President and Chief Operating Officer of ALC, and
by the Executive Vice President and Chief Financial Officer of ALC to such
effect.
(c) Consents Under Agreements. ALC shall have obtained the consent
or approval of each person (other than the Governmental Entities referred to in
Section 6.1(c)) whose consent or approval shall be required, and filed or
delivered all certificates or other documents required (other than filings with
or deliveries to the Governmental Entities referred to in Section 6.1(c)), in
order to permit the succession by the Surviving Corporation pursuant to the
Merger to any obligation, right or interest of ALC or any subsidiary of ALC
under any loan or credit agreement, note, mortgage, indenture, lease, license or
other agreement or
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instrument, except those for which failure to obtain such consents and
approvals, or to make such filings or deliveries, would not, in the reasonable
opinion of Frontier, individually or in the aggregate, have a material adverse
effect on Frontier and its subsidiaries (after giving effect to the Merger),
taken as a whole, or upon the consummation of the transactions contemplated
hereby.
(d) Tax Opinion. Frontier shall have received the opinion of Simpson
Thacher & Bartlett, counsel to Frontier, dated on or about the date that is two
business days prior to the date the Proxy Statement is first mailed to
stockholders of Frontier and ALC, to the effect that the Merger will be treated
for federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code, and that Frontier, Sub and ALC will each be a party
to that reorganization within the meaning of Section 368(b) of the Code, which
opinion shall not have been withdrawn or modified in any material respect.
(e) Burdensome Condition. Prior to the Effective Time, there shall
not be any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Merger, by any Governmental Entity
which, in connection with the grant of a Requisite Regulatory Approval, imposes
any requirement upon Frontier or its subsidiaries (after giving effect to the
Merger) to dispose of any asset which would be deemed to constitute a
significant amount of assets to Frontier under Instruction 4 of Item 2 of Form
8-K, provided that Frontier shall have contested in good faith the imposition of
--------
any such requirement.
(f) Employment Agreements. Each of the Employment Agreements shall
be in full force and effect, and each of the employees of ALC who is a party to
an Employment Agreement shall have performed in all material respects all
obligations required to be performed by such employee under his or her
respective Employment Agreement.
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61
(g) Opinion of Financial Advisor. Lazard Freres & Co. shall not have
withdrawn its opinion referred to in Section 3.2(v).
6.3 Conditions to Obligations of ALC. The obligation of ALC to
effect the Merger is subject to the satisfaction of the following conditions
unless waived by ALC:
(a) Representations and Warranties. The representations and
warranties of Frontier and Sub set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and (except to
the extent such representations and warranties speak as of an earlier date) as
of the Closing Date as though made on and as of the Closing Date, except as
otherwise contemplated by this Agreement, and ALC shall have received a
certificate signed on behalf of Frontier by the Chairman, President and Chief
Executive Officer of Frontier or a Corporate Vice President of Frontier, and by
the Corporate Vice President-Finance of Frontier to such effect.
(b) Performance of Obligations of Frontier and Sub. Frontier and Sub
shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date, and ALC
shall have received a certificate signed on behalf of Frontier by the Chairman,
President and Chief Executive Officer of Frontier or a Corporate Vice President
of Frontier, and by the Corporate Vice President-Finance of Frontier to such
effect.
(c) Consents Under Agreements. Frontier shall have obtained the
consent or approval of each person (other than the Governmental Entities
referred to in Section 6.1(c)) whose consent or approval shall be required, and
filed or delivered all certificates or other documents required (other than
filings with or deliveries to the Governmental Entities referred to in Section
6.1(c)), in connection with the transactions contemplated hereby under any loan
or credit agreement, note, mortgage, indenture, lease, license or other
agreement or
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instrument, except those for which failure to obtain such consents and
approvals, or to make such filings or deliveries, would not, in the reasonable
opinion of ALC, individually or in the aggregate, have a material adverse effect
on Frontier and its subsidiaries (after giving effect to the Merger), taken as a
whole, or upon the consummation of the transactions contemplated hereby.
(d) Tax Opinion. ALC shall have received the opinion of Debevoise &
Plimpton, counsel to ALC dated on or about the date that is two business days
prior to the date the Proxy Statement is first mailed to stockholders of
Frontier and ALC, to the effect that the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code, and that Frontier, Sub and ALC will each be a party to that
reorganization within the meaning of Section 368(b) of the Code, which opinion
shall not have been withdrawn or modified in any material respect.
(e) Burdensome Condition. Prior to the Effective Time, there shall
not be any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Merger, by any Governmental Entity
which, in connection with the grant of a Requisite Regulatory Approval, imposes
any requirement upon ALC or its subsidiaries to dispose of any asset which would
be deemed to constitute a significant amount of assets to Frontier (after giving
effect to the Merger) under Instruction 4 of Item 2 of Form 8-K, provided that
--------
ALC shall have contested in good faith the imposition of any such requirement.
(f) Opinion of Financial Advisor. Salomon Brothers Inc shall not
have withdrawn its opinion referred to in Section 3.1(v).
ARTICLE VII
TERMINATION AND AMENDMENT
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63
7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of the matters presented
in connection with the Merger by the stockholders of ALC or Frontier:
(a) by mutual consent of Frontier and ALC in a written instrument;
(b) by Frontier, upon a wilful breach of any material representation,
warranty, covenant or agreement on the part of ALC set forth in this Agreement,
or if any such representation or warranty of ALC shall have become untrue, in
each case such that the conditions set forth in Section 6.2(a) or Section
6.2(b), as the case may be, would be incapable of being satisfied (following
notice and a reasonable opportunity to cure) by December 31, 1995;
(c) by ALC, upon a wilful breach of any material representation,
warranty, covenant or agreement on the part of Frontier set forth in this
Agreement, or if any such representation or warranty of ALC shall have become
untrue, in each case such that the conditions set forth in Section 6.3(a) or
Section 6.3(b), as the case may be, would be incapable of being satisfied
(following notice and a reasonable opportunity to cure) by December 31, 1995;
(d) by either Frontier or ALC, if any permanent injunction or action
by any Governmental Entity preventing the consummation of the Merger shall have
become final and nonappealable; provided that such right of termination shall
--------
not be available to any party if such party shall have failed to make reasonable
efforts to contest the imposition of such injunction or action and such failure
materially contributed to such imposition;
(e) by either Frontier or ALC, if the Merger shall not have been
consummated on or prior to December 31, 1995;
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64
(f) by either Frontier or ALC, if any approval of the stockholders of
ALC or of Frontier required for the consummation of the Merger shall not have
been obtained by reason of the failure to obtain the required vote at a duly
held meeting of stockholders or at any adjournment thereof;
(g) by Frontier, if (i) the Board of Directors of ALC shall have
withdrawn, modified or changed its approval or recommendation of this Agreement
or the Merger in any manner which is adverse to Frontier or Sub or shall have
resolved to do the foregoing; or (ii) the Board of Directors of ALC shall have
approved or have recommended to the stockholders of ALC a Competing Transaction
or shall have resolved to do the foregoing; or (iii) a tender offer or exchange
offer for 20% or more of the outstanding shares of ALC Common Stock is commenced
(other than by Frontier or any of its subsidiaries or affiliates), and the Board
of Directors of ALC recommends that the stockholders of ALC tender their shares
in such tender or exchange offer or otherwise fails to recommend that such
stockholders reject such tender offer or exchange offer within ten business days
of the commencement thereof; or (iv) any person (including ALC or any of its
subsidiaries or affiliates) or group (other than Frontier or any of its
subsidiaries or affiliates) shall have acquired beneficial ownership of 20% or
more of the outstanding shares of ALC Common Stock;
(h) by ALC, if the Board of Directors of ALC (i) shall fail to make
or shall withdraw or modify its recommendation of this Agreement or the Merger
if there shall exist at such time a tender offer or exchange offer or a written,
bona fide proposal by a third party to acquire ALC pursuant to a merger,
consolidation, share exchange, business combination, tender or exchange offer or
other similar transaction or (ii) recommends to ALC's stockholders approval or
acceptance of any such transaction, in each case only if the Board of Directors
of ALC, after consultation with and based upon the advice of independent legal
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65
counsel (who may be such party's regularly engaged independent legal counsel),
determines in good faith that such action is required for the Board of Directors
of ALC to comply with its fiduciary duties to stockholders under applicable law;
(i) by ALC, if (i) the Board of Directors of Frontier shall have
withdrawn, modified or changed its recommendation of the Frontier Vote Matter in
any manner which is adverse to ALC or shall have resolved to do the foregoing;
or (ii) the Board of Directors of Frontier shall have approved or recommended to
the stockholders of Frontier a Competing Transaction or shall have resolved to
do the foregoing; or (iii) a tender offer or exchange offer for 20% or more of
the outstanding shares of Frontier Common Stock is commenced, and the Board of
Directors of Frontier recommends that the stockholders of Frontier tender their
shares in such tender or exchange offer or otherwise fails to recommend that
such stockholders reject such tender offer or exchange offer within ten business
days of the commencement thereof; or (iv) any person (including Frontier or any
of its subsidiaries or affiliates) or group (other than ALC or any of its
subsidiaries or affiliates) shall have acquired beneficial ownership of 20% or
more of the outstanding share of Frontier Common Stock; and
(j) by Frontier, if the Board of Directors of Frontier (i) shall fail
to make or shall withdraw or modify its recommendation of the Frontier Vote
Matter if there shall exist at such time a tender offer or exchange offer or a
written, bona fide proposal by a third party to acquire Frontier pursuant to a
merger, consolidation, share exchange, business combination, tender or exchange
offer or other similar transaction or (ii) recommends to Frontier's stockholders
approval or acceptance of any of the foregoing, in each case only if the Board
of Directors of Frontier, after consultation with and based upon the advice of
independent legal counsel (who may be such party's regularly engaged independent
legal counsel), determines
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in good faith that such action is required for the Board of Directors of
Frontier to comply with its fiduciary duties to stockholders under applicable
law. The right of any party hereto to terminate this Agreement pursuant to this
Section 7.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
7.2 Effect of Termination. In the event of termination of this
Agreement by either ALC or Frontier as provided in Section 7.1, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of Frontier, Sub or ALC or their respective officers or directors except
(i) with respect to the penultimate sentence of Section 5.4, and Sections 5.11
and 7.3 and (ii) with respect to any liabilities or damages incurred or suffered
by a party as a result of the wilful breach by the other party of any of its
representations, warranties, covenants or agreements set forth in this Agreement
except as provided in Section 8.8; provided that, if this Agreement shall be
--------
terminated under circumstances that would require a payment to be made pursuant
to Section 7.3(b) or Section 7.3(c) contemporaneously with such termination,
then such termination by any party required to make such payment shall not be
effective until such payment shall have been made pursuant to Section 7.3(f).
7.3 Fees, Expenses and Other Payments. (a) Except as otherwise
provided in this Section 7.3, whether or not the Merger is consummated, all out-
of-pocket costs and expenses actually incurred in connection with this Agreement
and the transactions contemplated hereby (including, without limitation, fees
and disbursements of counsel, financial advisors and accountants) shall be borne
solely and entirely by the party which has incurred such costs and expenses
(with respect to such party, its "Expenses"), except that
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expenses related to printing, filing and mailing the Proxy Statement and the S-4
shall be shared equally by Frontier and ALC.
(b) ALC agrees that if this Agreement shall be terminated pursuant
to:
(i) Section 7.1(b) and (x) such termination is the result of wilful
breach of any material covenant, agreement, representation or warranty
contained herein and (y) at any time during the period commencing on the
date hereof and ending twelve umonths after the date of termination of this
Agreement, a Business Combination (as defined in Section 7.3(g) below)
involving ALC shall have occurred or ALC shall have entered into a
definitive agreement providing for such a Business Combination;
(ii) Section 7.1(e) and (x) there shall exist a Competing
Transaction with respect to ALC, (y) at any time during the period
commencing on the date hereof and ending twelve months after the date of
termination of this Agreement, a Business Combination involving ALC that is
at least as favorable to ALC and its stockholders from a financial point of
view as such Competing Transaction shall have occurred or ALC shall have
entered into a definitive agreement providing for such a Business
Combination and (z) if such termination is by Frontier, Frontier shall have
offered to extend the date set forth in Section 7.1(e) until at least March
31, 1996;
(iii) Section 7.1(f) because the Agreement and the Merger shall fail
to receive the requisite vote for approval and adoption by the stockholders
of ALC at a meeting of stockholders of ALC called to vote thereon and at
the time of such meeting there shall exist a Competing Transaction with
respect to ALC;
(iv) Section 7.1(g)(i) and at the time of the withdrawal,
modification or change (or resolution to do so) of its recommendation by
the Board of Directors of ALC, there shall exist a Competing Transaction
with respect to ALC; or
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(v) Sections 7.1(g)(ii), (iii) or (iv), or Section 7.1(h);
then ALC shall pay to Frontier an amount equal to $45,000,000, plus all of
Frontier's Expenses, not to exceed $5,000,000.
(c) Frontier agrees that if this Agreement shall be terminated
pursuant to:
(i) Section 7.1(c) and (x) such termination is the result of wilful
breach of any material covenant, agreement, representation or warranty
contained herein and (y) at any time during the period commencing on the
date hereof and ending twelve months after the date of termination of this
Agreement, a Business Combination involving Frontier shall have occurred or
Frontier shall have entered into a definitive agreement providing for such
a Business Combination;
(ii) Section 7.1(e) and (x) there shall exist a Competing
Transaction with respect to Frontier, (y) at any time during the period
commencing on the date hereof and ending twelve months after the date of
termination of this Agreement, a Business Combination involving Frontier
that is at least as favorable to Frontier and its stockholders from a
financial point of view as such Competing Transaction shall have occurred
or Frontier shall have entered into a definitive agreement providing for
such a Business Combination and (z) if such termination is by ALC, ALC
shall have offered to extend the date set forth in Section 7.1(e) until at
least March 31, 1996;
(iii) Section 7.1(f) because the Frontier Vote Matter shall fail to
receive the requisite vote for approval by the stockholders of Frontier at
the meeting of the stockholders of Frontier called to vote thereon and at
the time of such meeting there shall exist a Competing Transaction with
respect to Frontier;
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(iv) Section 7.1(i)(i) and at the time of the withdrawal,
modification or change (or resolution to do so) of its recommendation by
the Board of Directors of Frontier, there shall exist a Competing
Transaction with respect to Frontier; or
(v) Sections 7.1(i)(ii), (iii) or (iv), or Section 7.1(j);
then Frontier shall pay to ALC an amount equal to $45,000,000, plus all of ALC's
Expenses, not to exceed $5,000,000.
(d) ALC agrees that if this Agreement shall be terminated pursuant to
Section 7.1(f) because the Agreement and the Merger shall fail to receive the
requisite vote for approval and adoption by the stockholders of ALC at a meeting
of stockholders of ALC called to vote thereon, or pursuant to Section 7.1(b) or
Section 7.1(g)(i), then, in any such event, ALC shall pay to Frontier an amount
equal to Frontier's Expenses, not to exceed $5,000,000, provided that ALC shall
not be obligated to make any payment pursuant to this Section 7.3(d) if ALC
shall be obligated to make a payment to Frontier pursuant to Section 7.3(b).
(e) Frontier agrees that if this Agreement shall be terminated
pursuant to Section 7.1(f) because the Frontier Vote Matter shall fail to
receive the requisite vote for approval by the stockholders of Frontier at a
meeting of stockholders of Frontier called to vote thereon, or pursuant to
Section 7.1(c) or Section 7.1(i)(i), then, in any such event, Frontier shall pay
to ALC an amount equal to ALC's Expenses, not to exceed $5,000,000, provided
that Frontier shall not be obligated to make any payment pursuant to this
Section 7.3(e) if Frontier shall be obligated to make a payment to ALC pursuant
to Section 7.3(c).
(f) Any payment required to be made pursuant to Section 7.3(b)
through Section 7.3(e), inclusive, shall be made contemporaneously with the
termination of this Agreement and shall be made by wire transfer of immediately
available funds to an account
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designated by the recipient of such payment, and termination by any party
required to make such payment contemporaneously therewith shall not be effective
until such payment shall have been made pursuant hereto, except that any payment
to be made as the result of an event described in Section 7.3(b)(i) or Section
7.1(c)(i) shall be made as promptly as practicable but not later than five
business days after the occurrence of the Business Combination or the execution
of the definitive agreement providing for a Business Combination. Any payment
made pursuant to Sections 7.3(b) through 7.3(e), inclusive, shall not preclude
the recipient of such payment from seeking monetary damages from the other party
as described in clause (ii) of Section 7.2.
(g) For purposes of this Section 7.3, the term "Business Combination"
shall mean any of the following involving a party hereto: (i) any merger,
consolidation, share exchange, business combination or similar transaction; (ii)
any sale, lease, exchange, transfer or other disposition of 20% or more of the
assets of such party and its subsidiaries, taken as a whole, in a single
transaction or series of transactions; or (iii) the acquisition by a person or
any group of beneficial ownership of 20% or more of the capital stock of such
party whether by tender offer or exchange offer or otherwise.
(h) If the Merger is consummated, ALC agrees to pay, or cause to be
paid, any and all property or transfer taxes imposed on ALC or its subsidiaries
and any real property transfer or gains taxes imposed on any holder of shares of
ALC Common Stock resulting from the Merger.
7.4 Amendment. This Agreement may be amended by the parties hereto,
by action taken or authorized by their respective Boards of Directors, at any
time before or after approval of the matters presented in connection with the
Merger by the stockholders of ALC or of Frontier, but, after any such approval,
no amendment shall be made which by law
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requires further approval by such stockholders without such further approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
7.5 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Nonsurvival of Representations, Warranties and Agreements. None
of the representations, warranties, covenants and agreements in this Agreement
or in any instrument delivered pursuant to this Agreement shall survive the
Effective Time, except for the agreements contained in Sections 2.1, 2.2,
4.1(l), 5.9 through 5.16, 7.3, the last sentence of Section 7.4 and Article
VIII, and the agreements of the "affiliates" of ALC delivered pursuant to
Section 5.7.
8.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
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72
(a) if to Frontier or Sub, to
Louis L. Massaro
Corporate Vice President-Treasurer
Frontier Corporation
180 South Clinton Avenue
Rochester, New York 14646
Telecopy No. (716) 546-7823
with copies to
Martin T. McCue, Esq.
Frontier Corporation
180 South Clinton Avenue
Rochester, New York 14646
Telecopy No. (716) 546-7823
Helen A. Zamboni, Esq.
Frontier Corporation
180 South Clinton Avenue
Rochester, New York 14646
Telecopy No. (716) 546-7823
Richard I. Beattie, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telecopy No. (212) 455-2502
and
(b) if to ALC, to
Marvin C. Moses
Executive Vice President and Chief Financial Officer
ALC Communications Corporation
30300 Telegraph Road
Bingham Farms, Michigan 48025
Telecopy No.
with copies to
Connie R. Gale, Esq.
ALC Communications Corporation
30300 Telegraph Road
Bingham Farms, Michigan 48025
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73
Telecopy No.
Christopher Smeall, Esq.
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopy No. (212) 909-6386
8.3 Certain Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person;
(b) "beneficially own" or "beneficial ownership" with respect to any
securities, means having "beneficial ownership" of such securities in accordance
with the provisions of Rule 13d-3 under the Exchange Act. Without duplicative
counting of the same securities by the same holder, securities beneficially
owned by a person include securities beneficially owned by all other persons
with whom such person would constitute a group.
(c) "group" means two or more persons acting together for the purpose
of acquiring, holding, voting or disposing of any securities, which persons
would be required to file a Schedule 13D or Schedule 13G with the SEC as a
"person" within the meaning of Section 13(d)(3) of the Exchange Act if such
persons beneficially owned a sufficient amount of such securities to require
such a filing under the Exchange Act.
(d) "person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity; and
(e) a "subsidiary" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are
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74
no such voting interests, 50% or more of the equity interests of which) is owned
directly or indirectly by such first person.
8.4 Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit to this Agreement or a Schedule delivered by a party in connection with
its delivery of this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. The phrases "the date of this
Agreement", "the date hereof" and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to April 9, 1995.
8.5 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.6 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement (including the documents and the instruments
referred to herein) (a) constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, provided that the Confidentiality
Agreement shall survive the execution and delivery of this Agreement and (b)
except as provided in Section 5.13, is not intended to confer upon any person
other than the
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75
parties hereto any rights or remedies hereunder. The parties hereby acknowledge
that, except as hereinafter agreed to in writing, no party shall have the right
to acquire or shall be deemed to have acquired shares of common stock of the
other party pursuant to the Merger until consummation thereof.
8.7 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, except to the extent Delaware
law shall govern the Merger, without regard to any applicable conflicts of law.
8.8 Severability; Limitations on Remedies. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction or a federal or state regulatory agency to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. Each party agrees that, should
any such court or agency make such a holding, or should any such court or agency
order any party to take any action inconsistent herewith or not to take any
action required herein, the other party shall not be entitled to specific
performance of such provision or part hereof or to any other remedy, including
but not limited to money damages, for breach hereof or of any other provision of
this Agreement or part hereof as a result of such holding or order. This
provision is not intended to render null or unenforceable any obligation
hereunder that would be valid and enforceable if this provision were not in this
Agreement.
8.9 Publicity. Except as otherwise required by law or the rules of
the NYSE or the AMEX, so long as this Agreement is in effect, neither ALC nor
Frontier shall, or shall permit any of its subsidiaries to, issue or cause the
publication of any press release or other public announcement with respect to
the transactions contemplated by this Agreement without the consent of the other
party, which consent shall not be unreasonably withheld.
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76
8.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
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77
IN WITNESS WHEREOF, Frontier, Sub and ALC have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of
April 9, 1995.
FRONTIER CORPORATION
by /s/ Ronald L. Bittner
____________________________
Name: Ronald L. Bittner
Title: Chairman, President &
Chief Executive Officer
Attest:
/s/ Josephine S. Trubek
_____________________________
Name: Josephine S. Trubek
Title: Corporate Secretary
FRONTIER SUBSIDIARY ONE, INC.
by /s/ Ronald L. Bittner
____________________________
Name: Ronald L. Bittner
Title: President
Attest:
/s/ Josephine S. Trubek
_____________________________
Name: Josephine S. Trubek
Title: Secretary
ALC COMMUNICATIONS CORPORATION
by /s/ John M. Zrno
____________________________
Name: John M. Zrno
Title: President and Chief
Executive Officer
Attest:
/s/ Connie R. Gale
_____________________________
Name: Connie R. Gale
Title: Vice President, General Counsel and Secretary
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78
Schedules to the Agreement and Plan of Merger
Schedules Delivered by ALC
--------------------------
3.1(c) Certain Agreements
3.1(h) Taxes
3.1(i) Employment Agreements
3.1(k) Significant Subsidiaries
3.1(s) Intellectual Property
Schedules Delivered by Frontier
-------------------------------
3.2(h) Taxes
3.2(i) Employment Agreements
3.2(k) Significant Subsidiaries
3.2(q) Properties
3.2(s) Intellectual Property
In accordance with Item 601(b)(2) of Regulation S-K, the exhibits described
in the Table of Contents of this Agreement and the schedules described in the
list of Schedules above have not been filed with the Current Report on Form 8-K
to which this Agreement is an Exhibit. The Registrant hereby agrees to furnish
supplementally copies of such exhibits and schedules to the Commission upon
request.
EXHIBIT 20
Frontier Corporation
frontier LOGO
180 South Clinton Avenue
Rochester, NY 14646
FOR IMMEDIATE RELEASE
Frontier Corporation and ALC Communications Corporation Announce
Definitive Agreement to Merge
$1.8 Billion Deal Creates Fifth Largest
Long Distance Company in U.S.
New York, NY, April 10, 1995 -- Frontier Corporation (NYSE:FRO) and ALC
Communications Corporation (AMEX: ALC) today announced the two companies have
signed a definitive agreement to merge, creating the fifth-largest long distance
company in the U.S. This transaction firmly establishes the combined company,
which will operate under the name Frontier Corporation, as a nationwide leader
in this rapidly consolidating high-growth industry. This synergistic merger of
equals will create a combined company with consolidated revenues approaching
$2 billion, and long distance revenues in the $1.4 billion range -- ranking the
new company behind only AT&T, MCI, Sprint and LDDS. The Boards of Directors of
both companies have approved the merger.
Under the terms of the merger agreement, shareowners of ALC will receive a
total of 79.3 million shares (equivalent to 49% of the combined company's
shares) of Frontier common stock, or 2.0 shares of Frontier for each share
of ALC stock. Based on the approximately 39.7 million
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2
shares of ALC stock outstanding and the closing stock price of Frontier on
Friday, April 7,1995, the transaction will have a total value of approximately
$1.8 billion. The merger is intended to qualify as a tax-free reorganization
and a "pooling of interests" for accounting and financial purposes.
"With this merger, Frontier is superbly positioned as an emerging force in the
high-growth long distance telephone industry," said Ronald L. Bittner, Chairman
and Chief Executive Officer of Frontier. "By combining the rapidly expanding
long distance businesses at Frontier and ALC, we have achieved critical size
and scope -- two strategic elements necessary for long-term success in this
industry. On its own, each company has a demonstrated track record of superior
revenue and customer growth in the long distance industry and now together, we
expect to be at the forefront of the changing telecommunications landscape."
"This combination is a perfect fit of operating philosophies, cultures,
products, and services," said John M. Zrno, President and Chief Executive
Officer of ALC. "ALC, like Frontier, has successfully focused its strategy on
bundling a portfolio of high-quality, integrated communications services to
its customers. By creating an even more powerful long distance franchise, we
expect additional opportunities to provide these bundled services."
The merger of Frontier and ALC brings together two success stories and
immediately creates one of the most innovative telecommunications companies
in the U.S. Frontier's $500 million long
<PAGE>
3
distance business, its strong financial condition, superior cash flow and
loyal customer base are a natural fit with ALC's established position as one of
the best managed and fastest growing companies in the long distance industry.
The combined company will serve nearly two million customers throughout the U.S.
Executives from both Frontier and ALC will assume critical management roles
at the new company, creating one of the strongest and most progressive
management teams in the industry. The structure of the new management team is:
Ronald L. Bittner, Chairman of the Board and Chief Executive Officer; John M.
Zrno, Vice Chairman of the Board; William H. Oberlin, President and Chief
Operating Officer; Marvin C. Moses, Chief Financial Officer; Louis L. Massaro,
Chief Administrative and Technology Officer; Dale M. Gregory, President, Long
Distance; Jeremiah T. Carr, President, Telephone; and James Whelehan, President,
Wireless. Messrs. Zrno and Oberlin, as well as two of ALC's current outside
Directors will join the enlarged Frontier Board. The company will appoint a
transition team consisting of senior officers which will oversee organizational
issues and assure the integration of the combined long distance customer base.
The ALC senior management team has signed long-term employment contracts with
Frontier, effective upon completion of the transaction.
<PAGE>
4
Both companies expect to report first quarter results within 10 days. ALC
expects to report results that are somewhat ahead of current analyst
expectations, while Frontier expects its results to be in line with current
Wall Street earnings expectations. Based On current Wall Street estimates and
targeted synergies of at least $40 million annually, the company would
experience greater than 10% earnings dilution in 1995 as a result of this
transaction, diminishing significantly in 1996 to less than 5% and becoming
accretive to earnings in 1997. "Our plan is to reduce costs through significant
network efficiencies, lowering corporate expenses and overhead, and combining
operations. At the same time we will be increasing revenues by reducing customer
attrition and cross-selling each others' products to a larger customer base,"
said Mr. Bittner.
The combined company will have total consolidated long distance, local and
cellular revenues approaching $2 billion and more than 6,500 employees
throughout the U.S. Long distance revenues are expected to account for
approximately 70% of the total.
This merger represents fulfillment of the two companies objectives and allows
the combined company to expand aggressively into the domestic and international
long distance business. In addition to this merger, Frontier recently completed
the acquisition of American Sharecom and is expected to close on the announced
WCT Communications acquisition in May 1995. ALC has also recently completed the
acquisition of ConferTech International, Inc.
<PAGE>
5
At the Frontier Board of Directors meeting which approved the merger agreement,
the Directors also adopted a Shareowner Rights Plan, which protects existing
shareowners from unsolicited and unreasonable takeover offers. ALC's Board of
Directors approved a similar rights plan several months ago.
The merger is subject to the approval of shareowners of Frontier and ALC at
separate meetings anticipated in August, 1995 and other customary conditions.
Frontier recently increased its dividend in December, 1994 and the company
anticipates no change in its dividend policy as a result of this merger.
Advisors on the transactions were Lazard Freres & Co. for Frontier Corporation
and Salomon Brothers for ALC Corporation.
Frontier is a provider of integrated telecommunications solutions to more than
1.5 million customers through its long distance, local telephone and wireless
communications operations. Incorporated in 1920 as Rochester Telephone
Corporation and named Frontier on January 1, 1995, the company's landmark Open
Market Plan makes it the first in the nation to open a local telephone market
to competition.
<PAGE>
6
ALC, through its wholly-owned subsidiary Allnet Communications Services,
Inc. provides long distance products and services to small to medium-sized
business customers nationwide. Recently, Allnet announced the offering of
cellular and paging services to customers nationwide and continues to focus on
expanding communications services both domestically and internationally.
<PAGE>
7
For more information, contact:
ALC Frontier
--- --------
Media/Investors Investors
Marvin C. Moses Louis L. Massaro
Chief Financial Officer Chief Financial Officer
(810) 433-4999 (716) 777-7940
David J. Thomas Philip H. Yawman
VP- Treasurer Manager, Investor Relations
(810)433-4935 (716) 777-6179
Media
John Purcell
Corporate Vice President
(716) 777-7944
Catherine A. Duda
VP Corporate
Communications
(716) 777-5897
Linda Crociata
Manager, Corp.
Communications
(716) 777-7693
