ALC Communications Corporation30300 Telegraph Road, Suite 350 Birmingham, Michigan 48010
PROXY STATEMENT FOR STOCKHOLDER ACTION BY WRITTEN CONSENT INTRODUCTION
This Proxy Statement dated August 2, 1988 is being furnished by ALC Communications
Corporation ("ALC" or the "Company") to holders of record on June 13, 1988 of the Company's
outstanding Common Stock, par value $.01 (the "Common Stock") and Class A Preferred Stock,
par value $20 (the "Class A Stock") to solicit the written consent of stockholders of ALC to
adoption of a Restated Certificate of Incorporation (the "Restated Certificate") of the Company
which amends, restates and replaces the Company's Restated Certificate of Incorporation as of
December 13, 1985, as amended on June 1, 1987 (the -1985 Certificate"). The holder of each
share of Common Stock is entitled to one vote per share, and the holder of each share of Class A
Stock is entitled to one vote per share, each voting as a class. Only the holders of record of the
Common Stock and Class A Stock as of the close of business on June 13, 1988 are entitled to
vote on the adoption of the Restated Certificate. The Company intends to distribute this Proxy
Statement and any accompanying materials on August 2, 1988.
As of June 13, 1988, there were 13,612,502 shares of Common Stock, held by approximately
2,093 holders of record, and 2,500,000 shares of Class A Stock held by approximately 1,845
holders of record, issued and outstanding. As described in this Proxy Statement, the Board of
Directors of the Company is soliciting the written consents of holders of Common Stock and
Class A Stock for approval and adoption of a Restated Certificate which, among other things, (a)
establishes two new classes of Preferred Stock of the Company, I million shares of Class B
Senior Convertible Preferred Stock (the "Class B Stock"), par value $.01, and I million shares of
Class C Senior Convertible Preferred Stock (the "Class C Stock"), par value $.01, and the rights,
privileges and preferences attendant thereto, (b) modifies certain rights of the Class A Stock, and
(c) modifies provisions and rights relating to voting for Directors. A copy of the Restated
Certificate, marked to show additions and deletions from the 1985 Certificate, is attached to this
Proxy Statement, and all descriptions herein of the Restated Certificate are qualified in their
entirety by reference to the Restated Certificate.
The Restated Certificate is required to be adopted as a condition to the closing of a Securities
Purchase Agreement between the Company and Communications Transmission, Inc. ("CTI") de-
scribed under "BACKGROUND TO ADOPTION OF RESTATED CERTIFICATE." Under the
Securities Purchase Agreement, CTI will purchase all of the Class B Stock, and an assignable
option to acquire all of the Class C Stock. The Class B Stock and Class C Stock are convertible
into shares of Common Stock as described under "THE RESTATED CERTIFICATE." If CTI
exercises its option to acquire all of the Class C Stock, and if the shares of Class B Stock and
Class C Stock are converted into Common Stock (assuming a conversion price of $2.00 per
share), CTI will have control of the Company by owning approximately 52% of the outstanding
Common Stock. As of the closing of the Securities Purchase Agreement, the conversion price
will be based on the lower of $2.375 or the average market prices of the Company's Common
Stock for certain time periods before and/or after the closing date, and if such market price is
lower than $2.00, upon conversion, CTI's percentage ownership of Common Stock will increase.
Additional conditions to closing the Securities Purchase Agreement are the adoption of restated
Bylaws for the Company and the reconstitution of its Board of Directors to 5 members. The
reconstituted Board will consist of 2 current members of the Board, 2 members who currently are
directors of CTI, and a fifth member to be designated by Management who is acceptable to the
other 4 members. Under the Restated Certificate, the holders of Class A Stock, Class B Stock
and Class C Stock will have rights to elect 4 of the Directors voting as separate classes, and will
have the right to vote together with the holders of Common Stock for election of I Director (or if
there is no Class C Stock issued, election of 2 Directors).The Restated Certificate requires for adoption the approving vote of a majority of the shares of
Common Stock, and a majority of the shares of Class A Stock, each voting as a separate class.
Under the 1985 Certificate and under Delaware law, stockholder action can be taken without a
meeting, without prior notice and without a vote if stockholders representing the number of votes
which would be necessary to approve the action at a meeting deliver written consents to the
action. The Board of Directors of ALC has provided a form of written consent (the "Consent
Resolution") with this Proxy Statement which provides that the Restated Certificate shall be
approved and adopted, and that the stockholders' action shall be effective on the date on which
sufficient consents are received, contingent upon the closing of the Securities Purchase
Agreement defined and described herein (the "Effective Date"). The closing is expected to occur
on or about August 5, 1988. The consummation of the transactions described in the Securities
Purchase Agreement is conditioned on the receipt of the requisite consents from the holders of
Common and Class A Stock for adoption of the Restated Certificate.
The Board requests each holder of Common Stock and each holder of Class A Stock to execute,
date and mail or deliver the Consent Resolution delivered with this Proxy Statement (one form
for holders of Common Stock and one form for holders of Class A Stock) to the Registrar and
Agent of the Company as follows: ALC Communications Corporation, c/o CINB - Suite 600,
180 N. LaSalle, Chicago, IL 60601. Any stockholder who owns both Common Stock and Class
A Stock should execute and deliver two separate Consent Resolutions. Any Consent Resolution
executed and delivered by a stockholder may be revoked at any time prior to the Effective Date
by written notice from the stockholder to the Company at the following address: ALC
Communications Corporation, 30300 Telegraph Road, Suite 350, Birmingham, Michigan 48010,
Attn: Connie R. Gale, Esq. (313) 647-4060, received by ALC prior to the Effective Date.
Holders of approximately 85% of the Class A Stock and of more than 51% of the Common
Stock have indicated to the Company that they intend to execute the Consent Resolution. If they
do so, the stockholder action required for the closing of the Securities Purchase Agreement will
be approved and deemed taken even if no other stockholders execute the Consent Resolution.
BACKGROUND TO ADOPTION OF RESTATED CERTIFICATE
The Securities Purchase Agreement As the culmination of the financing endeavors initiated in late 1987 and described under
"Interests of Certain Parties", ALC entered into a letter of intent dated May 25, 1988 with CTI
which was incorporated into a Securities Purchase Agreement dated June 20, 1988 (the
"Securities Purchase Agreement"). Under the Securities Purchase Agreement, CTI has agreed to
purchase 1 million shares of Class B Stock of ALC and an option to purchase up to I million
shares of Class C Stock for an aggregate purchase price of $15 million payable in cash at closing.
Under the option, CTI or its assignee may acquire at any time, and from time to time, prior to
December 31, 1988 up to a maximum of I million shares of Class C Stock by payment of the
exercise price of $15.00 per share. If the option to acquire Class C Stock is not exercised, and if
all shares of Class B Stock are converted into Common Stock pursuant to the conversion rights
described below under "THE RESTATED CERTIFICATE" (assuming a conversion price of
$2.00 per share), then CTI will hold 7,500,000 shares of Common Stock, approximately 36% of
the total outstanding, and the present holders of Common Stock will hold 13,612,502 shares of
Common Stock, approximately 64% of the total outstanding. If the option to acquire Class C
Stock is exercised in full, and if all shares of Class B and Class C Stock are converted into
Common Stock pursuant to the conversion rights mentioned above (assuming a conversion price
of $2.00 per share), then CTI and the bolder of the Class C Stock will hold 15,000,000 shares of
Common Stock, approximately 52% of the total outstanding, and the present holders of Common
Stock will hold 13,612,502 shares of Common Stock, approximately 48% of the total
outstanding. As of the closing of the Securities Purchase Agreement, the conversion price will be
based on the lower of $2.375 or the average market prices of the Company's Common Stock for
certain time periods before and/or after the closing date, and if such market price is lower than
$2.00, upon conversion, CTI's percentage ownership of Common Stock will increase.The Securities Purchase Agreement requires that certain conditions be satisfied, including,
among other things, the receipt of a sufficient number of written consents of stockholders
approving adoption of the Restated Certificate, the adoption of amended and restated Bylaws of
ALC, and the reconstitution of the Board of Directors. On June 13, 1988, the Board of Directors
of ALC approved the execution, delivery and performance of the Securities Purchase Agreement
and its related agreements. At that meeting, the Board of Directors also adopted the Restated
Certificate establishing the Class B and Class C Stock and the rights, privileges and preferences
attendant thereto, and modifying the rights, privileges and preferences of the Class A Stock. See
"THE RESTATED CERTIFICATE - The Class B and Class C Stock." At the closing of the
Securities Purchase Agreement, the Class B Stock will be issued to CTI. At the June 13 meeting,
the Board of Directors of ALC also approved the adoption of amended and restated Bylaws (the
"Restated Bylaws") to replace the Amended and Restated Bylaws of ALC dated December 19,
1985. Among other things, the Restated Bylaws establish a 5 member Board and delete
references to the Private Investors' Agreement made among the Company and certain
stockholder groups. In December 1985, ALC entered into the Private Investors' Agreement in
connection with the affiliation of Allnet Communication Services, Inc. and Lexitel Corporation.
The Agreement was made among ALC and 27 stockholders, 21 of whom currently own or
otherwise control stock representing approximately 69% of the voting power of the Class A
Stock and Common Stock. Twenty-one of the 27 stockholders are identified under "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" as the Allnet
Participants and Lexitel Participants. Under the Agreement, the Allnet Participants and Lexitel
Participants have certain rights to nominate candidates for election to the Board, and ALC is
required to recommend that its stockholders vote for those candidates. The Private Investors'
Agreement will be terminated in connection with and at closing of the Securities Purchase
Agreement. The adoption of the Restated Certificate is subject to stockholder approval and is
conditioned on and not effective until the closing of the transactions contemplated under the
Securities Purchase Agreement. The adoption of the Restated Bylaws and termination of the
Private Investors' Agreement are also conditioned on, and not effective until, such closing. On
July 28, 1988, the Board of Directors met again and, after reviewing the Restated Certificate,
reaffirmed their prior approval.
As a condition to the closing of the Securities Purchase Agreement, immediately after the
effective adoption of the Restated Bylaws, all Directors of ALC other than George J. Vasilakos
and Neal J. Robinson will resign, and immediately thereafter, Mr. Vasilakos and Mr. Robinson
will appoint Richard D. Irwin and Ralph J. Swett to fill two of the Board vacancies. It is
Management's intention that the fifth directorship will be filled by a Director nominated by
Management and acceptable to the four prospective Directors. On June 14, 1988, the Company
mailed to its stockholders a Notice to Stockholders (the "Notice") which described the
resignations of present Directors and the appointment of the new Directors. Although the Notice
was delivered in accordance with the Company's interpretation of regulations of the Securities
and Exchange Commission and was not intended or believed to be a solicitation, the Notice may
be construed as part of this solicitation of consents under Rule 14a-1 (k). Because the Notice was
not filed in complianee with Rules 14a-3 and 14a-6, each stockholder making a decision
regarding executing the Consent Resolution should disregard the information contained in the
Notice in its entirety and look only to the information contained in this Proxy Statement and the
accompanying materials. The slate of four Directors (and the fifth Director appointed as
described above) will continue in office until the 1988 Annual Meeting of Stockholders at which
it is intended that they will stand for re-election. At this Meeting, the Restated Certificate wi ll be
in place and the provisions therein for class voting for Directors will apply so that holders of
Class A Stock will have the right to elect one Director, holders of Class B Stock will have the
right to elect two Directors, holders of Class C Stock will have the right to elect one Director and
holders of Common Stock will have the right to vote with all other classes for one Director (or
for two Directors if there are no shares of Class C Stock outstanding).
The Securities Purchase Agreement requires ALC to obtain the consent of holders representing
at least a majority in principal amount of the Company's 10%% Senior Subordinated Debentures
due December 31, 1995 (the "Debentures") to changes in certain financial and operating
covenants and dividend payment restrictions on ALC contained in the Indenture made between
ALC and Continential Illinois National Bank and Trust Company of Chicago, as Trustee (the
"Indenture"). In order to obtain the Debenture holders' consent (which was received on August 1,
1988), ALC has agreed to increase the coupon rate on the Debentures to 11 7/8% commencing
August 1, 1988 and accelerate the redemption schedule from $9 million, $9 million, $9 million,
$9 million and $9 million in 1990, 1991, 1992,1993 and 1994, respectively to $12 million, $15
million, $15 million, $9 million, $9 million and $0 in 1990, 1991, 1992, 1993, 1994 and 1995,
respectively. In addition, for each $1.00 of dividends paid on the Class A Stock from the gross
proceeds of the issuance of the Class C Stock, ALC will escrow $2.35 toward the December 31,
1988 interest payment, up to a maximum of $3,512,500.
Under the Securities Purchase Agreement and as provided in the Restated Certificate, the
Company is required to issue to the holders of Class B and Class C Stock three year warrants
(the "Warrants") for the purchase of the Company's Common Stock if shares of Class A Stock
are converted to Common Stock by exercise of certain redemption conversion rights of holders
of Class A Stock under the Restated Certificate. Each Warrant will entitle the holder to purchase
Common Stock at the Class A Conversion Price calculated for the conversion of the Class A
Stock to Common Stock. The aggregate number of shares of Common Stock issuable upon
exercise of the Warrants by the holders of Class B or Class C shares is equal to 50% of a
fraction, the numerator of which is the number of outstanding shares on the conversion date of
Class B Stock (or Class C Stock for the determination of Warrants issuable with respect to the
Class C Stock), and the denominator of which is 1 million, times the number of shares of
Common Stock issued on the conversion.The shares of Class B Stock and Class C Stock, and all shares of Common Stock issuable upon
exercise of the Warrants or conversion of the Class B Stock and Class C Stock, will be
"restricted" securities within the meaning of Rule 144, and will be subject to Rule 144
restrictions on transfer and resale by the holders thereof, and will be subject to the restrictions on
transfer contained in the Voting and Dividend Agreement described below.
The Company does not intend to apply for listing and registration of the Class B Stock or Class
C Stock. At the closing, the Company will grant the holders of Class B Stock and Class C Stock
and the holders of Warrants certain rights to demand registration or to participate in a registration
of other shares by the Company.
At the closing, the Company, CTI and Philip D. Goodman, Melvyn J. Goodman and Michael P.
Richer, holders of approximately 86% of the Class A Stock, will enter into a Voting and
Dividend Agreement ("Voting Agreement") which grants to CTI an irrevocable proxy to vote
those holders' issued and outstanding shares of Class A Stock; however, the holders have
retained their voting rights with respect to election of I member of the Board of Directors. If,
however, an “HSR Filing Event" has occurred, the number of shares of Class A Stock that CTI
shall be entitled to vote, when added to the number of votes that CTI has as a result of its
ownership of Class B Stock and/or Class C Stock, is limited to a maximum of 13,500,000 votes.
Such limitation terminates when -HSR Approval" has been obtained. An -HSR Filing Event"
occurs if the exercise of the Class B Stock or Class C Stock conversion rights will trigger the
notification filing requirements of the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976,
as amended (the -HSR Act"). -HSR Approval" is obtained as of the earlier of the date on which
(i) the waiting period as specified under the HSR Act has expired or (ii) the Federal Trade
Commission or the Department of justice, as applicable, has permitted the early termination of
such waiting period. The Voting Agreement provides for certain agreements on payment of
dividends and provides that, (i) prior to the closing date and conditioned on the closing of the
sale of Class B Stock to CTI, the Board will declare $1.5 million of accrued and unpaid
dividends on the Class A Stock to be paid in connection with the closing, and (ii) prior to the
closing date and conditioned on CTI's or its assignee's exercise of the option to acquire Class C
Stock, the Board will declare up to an additional $1.5 million of accrued and unpaid dividends,
or dividends in an amount equal to 10% of the gross proceeds to be paid for the Class C Stock,
whichever is less, to be paid as and when the option is exercised from time to time; provided in
both (i) and (ii) that the Company can declare and pay such dividends under Delaware law. In
connection with the closing of the Securities Purchase Agreement, the Company will pay
dividends to the Class A holders of $1.5 million. The Voting Agreement restricts the ability of
CTI and the stockholder signatories to dispose of their shares of stock, generally to amounts
which are calculated to not result in a restriction on the Company's ability to utilize existing net
operating loss carryforwards. Voting rights under the Voting Agreement terminate upon a default
by the Company in (i) payment of dividends on the Class A Stock unless such payment is
prohibited by Delaware law, (ii) payment of principal or interest on notes which the Company
may issue for partial payment of dividends as described under "THE RESTATED CERTIFI-
CATE - Amendments Affecting the Class A Stock", or (iii) payment of the redemption price for
the Class A Stock unless payment is prohibited by Delaware law. The Voting Agreement
terminates on the earlier of (a) 10 years from the date thereof, or (b) the later of (i) December 31,
1993, (ii) when there is no Class A Stock outstanding, or (iii) when there is less than 80% of the
originally issued Class B Stock outstanding.The Company has agreed to reimburse up to $500,000 of CTI's expenses regardless of whether
the Securities Purchase Agreement is closed unless the closing does not occur because of a CTI
breach. If the closing does not occur on or before August 31, 1988 and it the Company publicly
announces or reaches a preliminary or definitive agreement with respect to a major asset sale or a
stock sale of at least $5 million on or before November 17, 1988, the Company shall pay CTI a
fee of $1.25 million, unless the closing fails to occur as a result of a CM breach. The Company
has also agreed to pay certain legal expenses incurred by holders of Class A Stock in connection
with the transactions contemplated by the Securities Purchase Agreement, and if the closing
occurs, CTI will reimburse the Company for one half of such amount.
Subject to the expense reimbursement, the Securities Purchase Agreement may be terminated (a)
by mutual agreement, (b) by either party if the closing has not occurred on or before August 31,
1988 unless the terminating party is then in breach of the Securities Purchase Agreement, or (c)
by either party if the other party discovers any misrepresentations in the Securities Purchase
Agreement or is in material breach of its agreements under the Securities Purchase Agreement
unless the party seeking termination has waived the breach.
Use of Proceeds
The following chart lists the anticipated uses by the Company for the proceeds to be received at
closing from CTI of the sale of the Class B Stock, and upon the exercise of the option for the
Class C Stock:
Proceeds of Sale Proceeds of Exercise
Uses of Class B Stock of Option (6)
Payment of Dividends to Holders of Class A Stock (1) $ 1,500,000 $ 1,500,000
Closing Costs and Expenses $ 800,000(2) $ 50,000
Payment of Fee to Dillon, Read & Co. Inc. (3) $ 500,000 $
450,000Payment to CTI (4) $ 3,400,000 $ 0
Escrowed Interest Payment on the Debentures (5) $ 0 $ 3,512,500
General Operating Costs and Working Capital $ 8,800,000 $ 9,487,500
TOTAL $15,000,000 $15,000,000
__________
(1) Payable only if the Company can legally pay such dividends under Delaware law. If the Company cannot pay $1.5 million of dividends, it may pay such lesser amount as is
legally payable, as described under "BACKGROUND TO ADOPTION OF THE
RESTATED CERTIFICATE - The Securities Purchase Agreement."
(2) This sum includes attorneys' fees and miscellaneous closing costs, estimated to be approximately $400,000 payable by the Company with respect to CTI's expenses, and
$400,000 payable by the Company for certain legal expenses incurred by the holders of
Class A Stock under the Securities Purchase Agreement, miscellaneous printing and other
costs, and legal and accounting fees. This sum includes approximately $80,000 already
paid by the Company for attorneys' fees and expenses relating to the closing of the
Securities Purchase Agreement.
(3) Payable pursuant to an agreement between Dillon, Read & Co. Inc. ("Dillon Read") and the Company whereby Dillon Read agreed to arrange for financing for the Company's
operations. See "Interests of Certain Parties." The Company has agreed to pay Dillon
Read four percent of the gross proceeds of equity sales over $25.0 million which it
arranged; this fee will be payable by payment of $500,000 at the closing of the sale of
Class B Stock, payment of $450,000 at the time of exercise of the option and sale of the
Class C Stock and payment of approximately $250,000 payable monthly from August
1988 through October 1988 for consulting services. The Company has also agreed to
reimburse and otherwise indemnify Dillon Read for costs which it incurs in rendering
services under the agreement, and for any liabilities or damages suffered by Dillon Read
in connection with matters arising out of its agreement with the Company, except those
which arise out of the gross negligence of Dillon Read.
(4) Under the Securities Purchase Agreement, the Company has agreed to pay at closing approximately $3.4 million due and owing from the Company to CTI under certain
leasing arrangements made between the companies.
(5) Under the Indenture the Company has agreed that for each $1.00 of dividends paid on the Class A Stock from the gross proceeds of the issuance of the Class C Stock, the Company
will escrow $2.35 toward the December 31, 1988 interest payment. See
"BACKGROUND TO ADOPTION OF RESTATED CERTIFICATE."
(6) This table assumes that the option will be exercised in full. If the option is not exercised in full, the amounts to be paid with proceeds from the exercise of the option will be
reduced on a pro rata basis.
A pro forma balance sheet as of March 31, 1988, giving effect to the uses of proceeds outlined
above, is attached to this Proxy Statement.
Interests of Certain Parties
In addition to the interests of the parties described above under "Use of Proceeds", certain parties
have interests in this transaction. Melvyn J. Goodman and Michael P. Richer are currently
Directors and holders of Class A Stock and Common Stock, and have advised Management that
they will execute the Consent Resolutions adopting the Restated Certificate. Philip D. Goodman,
father of Mr. Melvyn Goodman, has also indicated that he will execute the Consent Resolution.
Messrs. M. Goodman, M. Richer and P. Goodman own an aggregate of approximately 86% of
the outstanding shares of Class A Stock and approximately 24% of the outstanding shares of
Common Stock of ALC and are parties to the Voting and Dividend Agreement described under
"The Securities Purchase Agreement." Under the terms for closing of the Securities Purchase
Agreement, as holders of approximately 86% of the outstanding Class A Stock, Messrs. M.
Goodman, M. Richer and P. Goodman will be entitled to receive approximately 86% of up to
$3.0 million of dividends which may be paid with respect to the Class A Stock. Messrs. M.
Goodman, M. Richer and P. Goodman will also be entitled to receive regular and additional
dividends as described under "THE RESTATED CERTIFICATE." Other Directors of the
Company and their affiliates who own shares of Common Stock and/or Class A Stock (as listed
under "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT") have also indicated to Management that they will execute the Consent
Resolution, and those Directors or their affiliates who own shares of Class A Stock will receive
any dividends paid in accordance with their interests.The persons to be appointed as Directors effective as of the closing of the Securities Purchase
Agreement are Ralph J. Swett and Richard D. Irwin. Mr. Swett serves as Chairman of the Board,
Chief Executive Officer and director of CTI, and Mr. Irwin is currently a director of CTI. These
individuals do not own any shares of capital stock of ALC.
Pursuant to the Company's Change of Control Severance Benefits Plan, the following officers
and directors have entered into Severance Benefits Agreements which are currently in effect:
George J. Vasilakos, Jerry W. Finefrock, Bradley J. Heap, John G. Henson, Jr., Janice E.
Loichle, William A. Maloney, Derrald W. Pick and Donald W. Sessamen. In connection with the
transactions under the Securities Purchase Agreement, there will be a change in the composition
of the Board which is a ..change in control" event which would trigger the executives' rights to
payment under the Agreements if their employment or compensation is changed. These
payments generally consist of continued salary and benefits for I to 3 year periods, varying with
the agreements, after termination.
To obtain cash for operation and development of its business, ALC entered into an agreement
with Dillon Read & Co. Inc. ("Dillon Read") dated August 13, 1987, as supplemented February
5, 1988, and as further amended July 28, 1988, to provide financial advisory services to ALC and
to attempt to arrange a sale of equity securities of ALC in a private placement. Mr. Edgar A.
Miller, one of the ALC Directors who will resign effective as of the closing of the Securities
Purchase Agreement, is a Senior Vice President of Dillon Read. ALC paid $100,000 to Dillon
Read in 1987 for financial advisory services under the August 13, 1987 agreement, and agreed to
pay $200,000 in 1988 under the February 5, 1988 agreement for its services in connection with
the private placement arrangements. Dillon Read is entitled to receive a total fee of $500,000 in
connection with the sale of the Class B Stock, a fee of $450,000 in connection with the sale of
the Class C Stock upon exercise of CTI's option and approximately $250,000 payable monthly
from August 1988 through October 1988, for consulting services, as more fully described under
"Use of Proceeds."
THE RESTATED CERTIFICATE
The following is a summary of certain provisions of the Restated Certificate. This discussion is
qualified in its entirety by reference to the Restated Certificate, a marked copy of which is
attached hereto. The Restated Certificate effects three principal changes to the 1985 Certific ate:
(a) it establishes the Class B Stock and Class C Stock, and sets forth the rights, privileges and
preferences attendant thereto, (b) it modifies dividend, conversion and redemption rights of the
present Class A Stock, and (c) it modifies provisions and rights relating to voting for directors.
Except as noted, the rights of holders of Common Stock are generally unchanged.
The Class B Stock and Class C Stock
The Restated Certificate authorizes the issuance of the Class B Stock and the Class C Stock.
Holders of Class B Stock or Class C Stock have generally the same rights and preferences,
except that holders of Class B Stock and Class C Stock have the right to vote separately as a
class for the election of 2 Directors and I Director, respectively. Holders of both classes have the
right to vote upon every matter upon which the holders of Common Stock are entitled or
afforded the opportunity to vote and have the right to elect directors as follows: one director will
be elected by the holders of Class A Stock, voting as a class, two directors will be elected by the
holders of Class B Stock, voting as a class, one director will be elected by the holders of Class C
Stock, voting as a class, and, the remaining director (or remaining two directors if there are no
shares of Class C Stock outstanding) will be elected by the holders of Class A Stock, Class B
Stock, Class C Stock and Common Stock, voting together. The holders of Class B Stock and
Class C Stock have the right to vote as a class on certain other matters described below. Each
outstanding share of Class B and Class C Stock shall be entitled to a number of votes based on
the sum of (i) the number of shares of Common Stock into which it is convertible at the time of
the record date for the meeting at which, or written consent upon which, such share is to be
voted, plus (ii) the number of shares of Common Stock then purchasable with the Warrants
issued with respect to each share of the class described above.
Holders of each class have the right to vote as a class to approve a merger, consolidation, sale,
pledge or other disposition of all or substantially all of the assets of the Company; provided that
except as required by Delaware law, the holders of Class B Stock and Class C Stock shall be
entitled to vote as a class only if at least 666,667 shares of the Class C Stock have been issued,
and in such event, the voting rights are effective only so long as 200,000 shares of Class B Stock
and Class C Stock, respectively, remain outstanding. Holders of both classes have the right to
vote as a class to amend, alter or repeal any of the rights, preferences and privileges of the shares
of their respective classes or to amend the Restated Certificate if either action adversely affec ts
the holders of that class. Holders may vote as a class to authorize any reclassification of their
respective classes, and the creation or issuance of any class or series of stock ranking on a parity
with or in priority to their classes either with respect to dividends, redemption or distribution of
assets upon liquidation, dissolution, winding up or otherwise, and to approve any changes in the
size of the Company's Board of Directors by an amendment to the Restated Certificate, Restated
Bylaws or otherwise.
In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, the holder of each share of Class B Stock and Class C Stock then outstanding shall
receive a liquidation preference for any distributions of the Company's assets prior to any such
distributions to holders of any other class of the Company's capital stock in amounts ranging
from $15 during the period from July 1, 1988 to June 30, 1989 to $22.50 after June 30, 1993. If
the assets of the Company are insufficient to pay in full all amounts to which holders of Class B
Stock and Class C Stock are entitled, the amount available for distribution shall be shared on a
pro-rata basis.
Each share of either Class B Stock or Class C Stock may be converted, at the option of the
holder, at any time, into shares of Common Stock at a conversion rate entitling each holder to a
certain number of shares of Common Stock for each share of his or its stock. The number of
shares of Common Stock is determined by dividing $15 by the lesser of (i) $2.375, (ii) the
average "Market Price" of Common Stock for the 60 day period commencing May 26, 1988
(which has been determined to be $1.883) or (iii) the average "Market Price" of Common Stock
for the 60 day period commencing 30 days prior to closing under the Securities Purchase
Agreement and continuing 30 days thereafter. The "Market Price" is the closing price of the
Company's Common Stock for such day as reported in The Wall Street journal; if no such price
is reported, the "Market Price" shall be based on the average of the bid and asked prices reported
therein, and if there are no published quotes, "Market Price" shall be fair market value as
determined by the Board. From the date of issuance of the Class B Stock until the date of
determination of the conversion rate as set forth in the foregoing sentence, the conversion rate for
Class B Stock and Class C Stock shall be $2.00. The conversion rate shall be adjusted to prevent
dilution in the event of stock splits, stock dividends, extraordinary dividend payments,
recapitalizations or similar transactions and in the event of certain sales or issuances of Common
Stock by ALC at a price less than the conversion price then in effect. The number of shares
issuable on conversion of the Class B Stock and Class C Stock is also subject to a maximum of
13,500,000 (adjusted for recapitalizations and other changes in the Company's outstanding
Common Stock) if an HSR Filing Event has occurred. Such limitation terminates when HSR
Approval has been obtained. The holders of Class B Stock and Class C Stock have no right to
receive payment of dividends and the Company has no right or obligation to redeem such shares.
Amendments Affecting the Class A StockThe Restated Certificate also contains certain modifications in the rights of the holders of Class
A Stock which must be adopted by the majority of holders of Class A Stock and a majority of the
holders of Common Stock. The following is a summary of the material changes, but this
discussion is qualified in its entirety by reference to the Restated Certificate attached a s an
exhibit hereto.
First, the rights of the holders to demand conversion of their shares to shares of Common Stock
for existing or future dividend arrearages will be eliminated. Because earned and unpaid
dividends on all outstanding Class A Stock for the 3 quarters through March 31, 1988 total $1.20
per share (a total of $3.0 million on all shares), record holders have a right to call a meeting of
the holders of the Class A Stock to vote on whether such dividends should be converted into
Common Stock. Although Mr. Michael P. Richer, as a holder of Class A Stock, has exercised
this right, as of the date of this Proxy Statement, the meeting date has not been established.
Contingent upon the closing of the Securities Purchase Agreement, Mr. Richer will withdraw his
demand for this meeting and the Company will no longer be required to hold the meeting under
the terms of the 1985 Certificate. If the closing of the Securities Purchase Agreement occurs, the
Indenture will be modified to permit the payment of $1.5 million in dividends on the Class A
Stock upon the issuance of the Class B Stock and to permit the payment of up to 10% of the
gross proceeds of the issuance of any shares of the Class C Stock (up to a maximum of an
additional $1.5 million). See "BACKGROUND TO ADOPTION OF RESTATED
CERTIFICATE - The Securities Purchase Agreement."
Consistent with the terms of the 1985 Certificate, the Restated Certificate provides that dividends
will accrue on the Class A Stock in an amount of $.40 per share per "Quarterly Dividend Period;-
that the Company will declare and pay dividends on Class A Stock as determined by the Board:
and that, to the extent any accrued dividends are unpaid, the unpaid amounts of such dividends
shall, unless earlier paid, be added without interest to the redemption price for Class A Stock and
to the full liquidation value. However, the Restated Certificate differs from the 1985 Certificate
in that it provides that the amount of the dividend which shall accrue per day on the Class A
Stock will be changed beginning in 1992 to the equivalent of interest, on $20 per share, at a
blended rate consisting of a weighted average of (i) 1% plus the prime rate on 300,000 shares of
Class A Stock (or, after December 31, 1992, on 600,000 shares), and (ii) $.40 per share on the
rest of the outstanding Class A Stock. (The "prime rate" for these purposes means the prime rate
published in The Wall Street journal on the first day of each quarter.) In addition, the Restated
Certificate also provides that if the Company does not pay accrued dividends of at least an
amount ("Minimum Dividend") equal to the lesser of (i) 87.5% of the quarterly accrued
dividend, (ii) the amount legally payable, (iii) the maximum amount permitted to be paid under
the Indenture, and (iv) an amount equal to 67% of "Available Cash Flow", certain additional
dividends will accrue as described below. (The Restated Certificate provides that Available Cash
Flow equals the Company's consolidated net income (loss) after taxes, after certain deductions
for non-cash charges, increases for reductions in accounts receivable and credits, deductions for
capital expenditures up to $13.5 million for each applicable twelve month test fiscal period,
deductions for scheduled principal payments for capital leases and Company borrowings,
dividends paid on the Class A Stock and certain other miscellaneous items.) If, and to the extent
that, the Minimum Dividend is not paid, an additional dividend will accrue in an amount equal to
the sum of (i) .75 times the amount of the difference between the Minimum Dividend and the
dividend actually paid. plus (ii) interest on the unpaid portion of the Minimum Dividend and on
the amount described in clause (i) of this sentence, at the Prime Rate, as defined below.The Company is given the option to pay up to 50% of any Minimum Dividend by delivering a
one year, unsecured, negotiable note of the Company in that principal amount. Each such note
shall bear interest (payable quarterly) at a variable rate equal to the "Prime Rate" published from
time to time in The Wall Street journal (or an average of such rates if a range of Prime Rates is
published). All unpaid principal and accrued interest on such notes shall be given a preference on
liquidation to any payments due on the Class B Stock and Class C Stock.
Holders of Class A Stock will be subordinated to a liquidation preference in favor of the holders
of Class B Stock and Class C Stock. but shall retain their preference on liquidation as to holders
of Common Stock. The par value of shares of Class A Stock will be reduced to $.01 under the
Restated Certificate.
Under the Restated Certificate, the provisions for mandatory redemption of the Class A Stock
have been modified to extend the length of time over which the Company must redeem the Class
A Stock; under the 1985 Certificate. 40% of the shares of Class A Stock were to be redeemed at
the end of 1991, 40% at the end of 1992, and 20% at the end of 1993; under the Restated
Certificate, 28% of the shares of Class A Stock are to be redeemed at the end of 1991, 28% at the
end of 1992, 20% at the end of 1993, and 24% at the end of 1994.
Election of Directors
The Restated Bylaws provide for a five member Board of Directors, and the Restated Certificate
provides that in an election of Directors. one Director is elected by the holders of the Class A
Stock voting as a class, two Directors are elected by the holders of the Class B Stock voting as a
class, and one Director is elected by the holders of the Class C Stock voting as a class. The
remaining Director is, or two Directors (if the Class C Stock is not issued) are, elected by all
stockholders voting together as a single class. In voting for the remaining Directors. each share
of Common Stock has one vote, each share of Class A Stock has .83 votes, and each share of
Class B and C Stock has the number of votes equal to the sum of (i) the number of shares of
Common Stock into which it is convertible at the time of the record date for the meeting at
which, or written consent upon which, such share is to be voted, plus (ii) the number of shares of
Common Stock then purchasable with the Warrants issued with respect to each share of the class.Class voting for Directors may be regarded as an anti-takeover provision. Holders of Class A,
Class B and Class C Stock will each have rights to representation on the Board of Directors. At
the present time, under the class voting provisions to be adopted if the Securities Purchase
Agreement is closed, and assuming that the option for the Class C Stock is exercised by CTI,
CTI will have effective control over voting for three of the five members of the Board of
Directors, as holder of the Class B and Class C Stock. Holders of Common Stock will not control
the Board of Directors because those holders will only have the right to vote, together with the
holders of the Class A, Class B and Class C Stock, for one Director (or two Directors, if the
option for the Class C Stock is not exercised). These class voting provisions may render more
difficult or discourage any future merger, tender offer or proxy contest intended to effect a
change in control of the Company.
SPECIAL CONSIDERATIONS FOR STOCKHOLDERS
In addition to the general considerations discussed in this Proxy Statement, the Company has
delivered with this Proxy Statement a copy of its 1987 Annual Report and a copy of its March
31, 1988 Quarterly Report on Form 10-Q (the "Form 10-Q-) for review by stockholders.
Discussed below are certain matters relating to the Company's business, results of operations and
prospects that have occurred subsequent to the date of the 1987 Annual Report and Form 10-Q,
and which are described in the Company's Current Report on Form 8-K dated June 20, 1988,
which is incorporated by reference herein. A cop), of the Current Report on Form 8-K will be
promptly mailed by the Company without charge upon written or oral request of any stockholder
receiving this Proxy Statement made to the Company at the address and phone number listed on
page 2 of this Proxy Statement. Stockholders should give due consideration to these matters prior
to submitting the Consent Resolutions requested hereunder.
Company Operations. Based on preliminary financial data, Management believes that the Com-
pany has continued to incur operating losses following the first quarter of 1988, and to
experience cash flow shortages which developed during the second quarter of 1988. The
Company is consolidating and restructuring its operations in an attempt to reduce expenditures
and to achieve future profitability, and has pursued various alternatives to raise additional capital
and increase its cash flow. In furtherance of this goal, on June 20, 1988, the Company entered
into the Securities Purchase Agreement with CTI discussed in detail above which the Company
anticipates will close on or about August 5, 1988. Due to certain restructurings and
consolidations of Company operations referred to above and which may continue, the Company
has sustained and may sustain non-recurring losses. As a result of cash flow shortages referred to
above, the Company deferred payment of significant amounts owed to its creditors in recent
months and has continued to delay payments of many of its accounts payable beyond contract
term. As of the date of this Proxy Statement, the Company has reached a consensual resolution
of a significant amount of the referenced deferred and delayed payments. The Company is
continuing to attempt to negotiate suitable payment arrangements with its other creditors. These
negotiations have included and will include efforts to renegotiate contract terms. The Company
anticipates using a portion of the proceeds of sale of the Class B Stock to pay certain agreed
amounts in respect of the deferred and delayed payments. The Company did not timely make its
$3.3 million interest payment on the Debentures which was due on June 30, 1988. However., the
Company did cure this failure by making the interest payment prior to the expiration of the
applicable thirty day "grace" period. Although the Company's failure to make the payments
referred to in this paragraph constitutes a default under many of the Company's agreements with
creditors and other parties, and although the Company has received default and/or termination
notices and deposit requests from certain lessors and service suppliers (some of which are
essential to the conduct of the Company's business), as of the date hereof, no legal action has
been commenced other than four lawsuits involving real estate leases. As of the date of this
Proxy Statement, two of these lawsuits have been settled and the remaining two involve real
estate that is presently unused and unnecessary for the Company's operations. Management
believes that the programs outlined above together with active cash management should
adequately address the foregoing cash flow concerns, regardless of whether the CTI transaction
is consummated. However, no assurance can be given that these actions will be effective to the
extent necessary to preclude material adverse effects on the Company's operations.Regulatory Action by the NASD. The Company's Common Stock is currently traded on the
NASDAQ National Market System ("NASDAQ/ NMS"). The Company was notified by the
National Association of Securities Dealers, Inc. (the "NASD") on April 8, 1988 that the
Company would be deleted from the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") because its December 31, 1987 financial statements indicated
that the Company failed to meet the minimum capital and surplus requirements of the NASD By-
Laws. Based on the Company's year end statements, and according to the NASD calculations
described below, the capital and surplus of the Company was approximately a deficit of $40.0
million, and the NASD By-Laws require a minimum of a positive $375,000. On June 20, 1988,
the NASD granted a temporary exception from that rule until October 20, 1988. In making the
calculation of the Company's capital and surplus for NASD purposes, the NASD has taken the
position that the capital represented by the Company's Class A Stock is not included in capital
and surplus because it has a mandatory redemption feature which gives it attributes of debt, not
equity. As a result, the Class A Stock is characterized by the NASD as a liability for purposes of
the capital and surplus calculations. The Company disagrees with the NASD's position on this,
and is appealing the June 20, 1988 determination. If this appeal is successful and if the CTI
transaction closes, the Company may have capital and surplus sufficient to meet the NASD
requirement. However, if the appeal is not successful, in order to meet the NASD requirements
for capital and surplus of at least $375,000, the Company must close the transaction with CTI
described above, and must also delete the mandatory redemption feature of the Class A Stock. If
the Company is unable to obtain appropriate modifications of the Class A Stock, it is likely that
its inclusion in NASDAQ will terminate on October 20, 1988 when the temporary exception
expires. Termination of the Company's inclusion on NASDAQ would limit the marketability of
the Common Stock. By letter dated July 20, 1988 the Company was further notified by the
NASD that it would be deleted from the NASDAQ/NMS because the Company did not meet the
minimum capital and surplus requirements applicable to NASDAQ/NMS companies. The
NASDAQ/NMS requirements are in addition to the general NASD requirements. Therefore, the
temporary exception from the NASD rule does not apply to the Company's obligation as a
NASDAQ/NMS company. The Company has until August 8,1988 to request an exception from
the NASDAQ/NMS rule. Based on the method of computation of capital and surplus contained
in the July 20, 1988 letter, the Company believes that consummation of the transaction with CTI
described above will result in compliance with the NASDAQ/NMS capital and surplus require-
ments. If the transaction with CTI has not been consummated by August 8, 1988, the Company
intends to request a temporary exception from the rule for sufficient time to consummate the CTI
transaction.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of July 18, 1988, the stockholdings of each person (as well as
any group) known to ALC who beneficially owns more than 5 percent of the Common Stock or
Class A Stock of ALC and each current Director of ALC and all executive officers and Directors
of ALC as a group. The figures presented are based upon information available to ALC. Approximate % of
Common Stock (2) Class A Preferred Stock (2) Voting Power
Name and Address of Number Approximate Number Approximate of Company
Beneficial Owner (1) of Shares % of Class of Shares % of Class (2)
Allnet Participants (3) 4,916,946 36.1% 2,259,471 90.4% 43.3%
Philip D. Goodman 1,200,386 8.8% 552,598 22.1% 10.6%
Lexitel Participants (4) 4,428,519 31.6% 10,165 * 27.5%
LDX Group, Inc. (5) 2,172,795 16.0% - - 13.9%
Directors (6)
Melvyn J. Goodman 994,886 7.3% 552,597 22.1% 9.3%
Sears Tower, Ste. 7818
233 South Wacker Drive
Chicago, IL 60606
John Hawkinson 3,000 * - - *
Kemper Financial Services
120 S. LaSalle Street
Chicago, IL 60603
William R. James 20,000 * - - *
James Communications
710 North Woodward
Bloomfield Hills, MI 48013
Edgar A. Miller 241,704(7) 1.8% - - 1.5%
Dillon, Read & Co. Inc.
535 Madison Avenue
10th Floor
New York, NY 10022
Michael P. Richer 2,296,857 16.9% 1,038,849 41.6% 20.1%
505 W. Lakeshore Dr.#4311
Chicago, IL 60611
Paul D. Rhines 214,217(8) 1.6% - - 1.4%
R.W. Allsop & Associates
2750 First Avenue, NE
Suite 210
Cedar Rapids, IA 52402
George J. Vasilakos 303,457(9) 2.1% - - 1.9%
ALC Communications
Corporation
30300 Telegraph Road
Birmingham, MI 48010
All current executive officers and
directors of ALC considered as
a group (9 persons) 6,575,603(10) 45.7% 1,591,446 63.7% 48.0% _________
*Less than one percent
(1) ALC shall provide the business address of the individual persons or entities listed under the two groups upon a written request addressed to Shareholder Relations, ALC
Communications Corporation.
(2) Based on 13,612,502 shares of Common Stock and 2,500,000 shares of Preferred Stock issued and outstanding as of July 18, 1988.
(3) Included under this caption are Melvyn J. Goodman, Philip D. Goodman, Michael P. Richer, and Saulene Richer. Each of them executed the Private Investors' Agreement
(described under "BACKGROUND TO ADOPTION OF THE RESTATED
CERTIFICATE-) in the capacity of an "Original Allnet Participant." Messrs. M.
Goodman and M. Richer are Directors of ALC who will resign effective as of the closing
of the Securities Purchase Agreement, and each own more than five percent of the
Company's Common Stock and Class A Stock, as described in the chart under
"Directors." The Private Investors' Agreement will be terminated at the closing of the
Securities Purchase Agreement.
(4) Each person or entity included in this caption executed the Private Investors' Agreement (described above) in the capacity of an "Original Lexitel Participant." Lexitel Participants
include: R.W. Allsop & Associates, L.P.; Capital Southwest Corp.; Capital Southwest
Venture Corporation; Citicorp Venture Capital, Ltd.; Concord Partners; Cord Capital,
N.V.; Hicks & Haas; Intercapco, Inc.; Intercapeo West, Inc.; Kansas City Southern
Industries, Inc.; LDX Group, Inc.; Lexington Capital Group, Inc.; Lexington Venture
Partners, 1983 Ltd.; Manufacturers Hanover Venture Capital Corp.; Mercury Financial
Partners; State Treasurer of the State of Michigan (Custodian of Public School
Employees' Retirement System, State Employees' Retirement System, Michigan State
Police Pension, Accident and Disability Fund, judges' Retirement System, and Probate
judges' Retirement System); and Republic Venture Group, Inc.
Includes Warrants to purchase 419,595 shares of Common Stock beneficially owned by
the Lexitel participants.
(5) These shares are included in the total Lexitel Participants above. Kansas City Southern
Industries, Inc. holds approximately 88 percent of the capital stock of LDX Group, Inc.
(6) The following Directors will resign effective as of the closing of the Securities Purchase
Agreement: Melvyn J. Goodman, John Hawkinson, William R. James, Edgar A. Miller,
Paul D. Rhines, Michael P. Richer and R. Michael Tyler. Douglas D. Wheat resigned
effective July 25, 1988.
(7) Includes 192,499 shares owned by Concord Partners, of which Mr. Miller is a general partner. Also includes 33,970 shares owned by Cord Capital, N.V., 20 percent of the
common stock of which is owned by a limited partnership of which Mr. Miller is a
general partner. Does not include 243,469 shares of Common Stock held by Dillon, Read
& Co. Inc., of which Mr. Miller is a Senior Vice President. Dillon Read serves as
investment manager of Concord Partners and Cord Capital, N.V. Includes warrants to
purchase 15,235 shares of Common Stock owned by Concord Partners and Cord Capital,
N.V. Mr. Miller disclaims beneficial interest as to shares and warrants held by Concord
Partners and Cord Capital, N.V.
(8) All such shares are held by R.W. Allsop & Associates, L.P. of which Mr. Rhines is a general partner. Includes warrants to purchase 19,800 shares of Common Stock owned by
R.W. Allsop & Associates, L.P.
(9) Includes 301,457 shares of Common Stock which Mr. Vasilakos may acquire pursuant to
the exercise of outstanding stock options.
(10) Includes 736,394 shares of Common Stock which current or former executive officers of ALC have the right to acquire pursuant to the exercise of outstanding stock options.
Includes warrants to purchase 35,035 shares of Common Stock.
MANAGEMENT
Directors
The following list identifies (a) the persons who are Directors of ALC as of the date of this Proxy
Statement and who will continue as Directors after consummation of the Securities Purchase
Agreement, and (b) the persons who will be appointed as Directors upon the closing of the
Securities Purchase Agreement:
Name Position Age
George J. Vasilakos Director 50
Neal J. Robinson Director 43
Richard D. Irwin Director(l) 53
Ralph J. Swett Director(l) 54
______
(1) To be appointed by Mr. Vasilakos and Mr. Robinson upon the effectiveness of the resignations of seven Directors of ALC who are Directors who will resign as of the
closing, as described above.
George J. Vasilakos, age 50, has been a Director since August 26, 1985. Mr. Vasilakos has been
President and Chief Executive Officer of ALC since ALC's inception in August 1985. Mr.
Vasilakos served as President and Chief Executive Officer of Lexitel Corporation ("Lexitel")
from February 1983 until it was merged into Allnet Communication Services, Inc., the wholly
owned subsidiary of ALC, on December 19, 1985 and became Chairman of the Board in
November 1983. He served Southern Pacific Communications Co. (presently known as U.S.
Sprint), a long distance telephone company, as Executive Vice President-Commercial
Engineering and Construction, from February 1982 to January 1983, where he was responsible
for marketing, engineering, business development and property departments, and for a telephone
equipment sales and services subsidiary, and as Executive Vice President-Operations and
Engineering from April 1979 to February 1982.
Neal J. Robinson, age 43, is Chairman and Chief Executive Officer of Voice Control Systems in
Dallas, Texas, a position he has held since November 1984. He is also President of his own
venture management and investment firm, Neal J. Robinson Investments, Inc. Mr. Robinson
served as President and Chief Executive Officer of U.S. Telephone, Inc. from December 1981
through October 1984 and was a director of said company commencing February 1984. He was
appointed a Director of ALC on July 30, 1987.
Richard D. Irwin, age 53, has been a director of CTI since June 1986, and is the President of
Grumman Hill Associates, Inc. ("Grumman"), a merchant banking firm, and has held that
position since its formation in 1985. Prior to the formation of Grumman, Mr. Irwin was a
Managing Director of Dillon, Read & Co. Inc. from 1983 through 1986. Prior to that, he served
as Chief Executive Officer of Fotomat Corporation for 12 years. Mr. Irwin is also a member of
the Board of Directors of Mountain Medical Equipment, Inc.
Ralph J. Swett, age 54, has served as Chairman of the Board, Chief Executive Officer and as a
director of CTI since June 1986. Prior to that, Mr. Swett served as Chairman of the Board of
Times Mirror Microwave Communications Company, a subsidiary of The Times Mirror
Company ("TMC") from the time of its acquisition by TMC in 1979. He also served as Vice
President, President and Chairman of the Board of Times Mirror Cable Television, a subsidiary
of TMC, from 1969 to June 1986, and as a Vice President of TMC from 1981 to June 1986.
All Directors (including a fifth Director to be nominated and appointed as described under
"BACKGROUND TO ADOPTION OF THE RESTATED CERTIFICATE - The Securities
Purchase Agreement") will hold office until the 1988 Annual Meeting of stockholders of ALC
and it is intended that they will stand for re-election at such meeting.
In the past, the nomination of candidates for election to the Board was determined in part by a
Private Investors' Agreement among ALC and certain stockholders of ALC dated December 19,
1985. The Private Investors' Agreement will terminate simultaneously with the closing of the
Securities Purchase Agreement.
Executive Officers of the Company
The following table sets forth the executive officers of ALC as of the date of this Proxy
Statement. Executives are elected annually and serve at the pleasure of the Board. Name Age Position
George J. Vasilakos 50 President, Chief Executive Officer, Director
Donald W. Sessamen 55 Executive Vice President-Operations
William A. Maloney 42 Senior Vice President-Sales and Marketing
Jerry W. Finefrock 43 Vice President-Network Planning
Bradley J. Heap 44 Vice President-Management Information Systems
John G. Henson, Jr 46 Vice President-Operations
Janice E. Loichle 40 Vice President-Financial Operations
Derrald W. Pick 41 Vice President-Engineering
George J. Vasilakos has held all of his positions since just shortly prior to the affiliation of Allnet
and Lexitel in December 1985. At Lexitel he served as the President and Chief Executive Officer
since February 1983 and became Chairman of the Board in November 1983. He was formerly
employed by Southern Pacific Communications Co. (presently known as U.S. Sprint) where he
was elected Executive Vice President-Commercial Engineering and Construction from February
1982 to January 1983. Mr. Vasilakos first joined Southern Pacific Communications Co. in 1973
and held the positions of Executive Vice President-Operations and Engineering (April 1979 to
February 1982), Vice President Operations (September 1975 to April 1979) and Vice President-
Marketing (December 1974 to September 1975).
Donald W. Sessamen was appointed Executive Vice President-Operations on June 13, 1988. He
had been Senior Vice President-Operations since the affiliation. He had served as Lexitel's
Senior Vice President-Operations from February 1983. From December 1982 he was the Senior
Vice President Corporate Planning and Business Development for Southern Pacific
Communications Co. (presently known as U.S. Sprint). Prior thereto, he served as Vice
President-Operations (May 1980 to December 1982), National Plant Manager (May 1979 to May
1980) and Eastern Regional Operations Manager (March 1976 to May 1979), joining Southern
Pacific Communications Co. in 1975.
William A. Maloney has held his positions since the affiliation. He was recognized as a Senior
Vice President in September of 1987. He had served as Lexitel's Vice President-Sales and
Marketing from June 1985. From December 1980 he was Executive Vice President and Chief
Operating Officer of a business management company, Woodside Management Systems, Inc., in
Boston, Massachusetts. Prior to December 1980 he held various positions with Hughes Air
Corporation, including Vice President Sales.
Jerry W. Finefrock has held his position since the affiliation. From July 1984 to December 1985
he served as Vice President-Network Planning for Lexitel Corporation. From March 1983 to July
1984 he served as Director- Network Planning. Prior to Lexitel from June 1974 to March 1983
he held a number of managerial positions with Southern Pacific Communications Co. (presently
known as U.S. Sprint): Manager-Product Development; Manager-Operations Network Planning;
Manager-Network Analysis. He commenced employment with Southern Pacific
Communications Co. as a Senior Communications Analyst.
Bradley J. Heap has held his position since the affiliation. From October 1985 to December 1985
he served as Vice President-Management Information Systems for Lexitel. He held similar
positions with MGM/UA Entertainment Company (January 1984 to October 1985) and Summa
Corporation (November 1980 to September 1983). From May 1971 through October 1980 he
held a number of positions with Hughes Airwest, serving as Vice President of Corporate
Services from October 1979 through October 1980.
John G. Henson, Jr. has held his position since March 1986 when he commenced employment
with ALC. From 1973 to March 1986 he held a variety of positions with Southern Pacific
Communications Co. (presently known as U.S. Sprint): Director-Central Operations (July 1983
to March 1986); Director-National Plant Operations (March 1983 to June 1983); Regional Plant
Operations Manager (June 1979 to March 1983); Division Plant Manager (August 1978 to June
1979) and Network Manager (December 1975 to August 1978).
Janice E. Loichle has been Vice President-Financial Operations since December 1987. She has
served as Vice President from December 1985 to April 1988, and was Controller from December
1985 to April 1988. She was given additional responsibilities commencing December 1987 and
promoted to her current position. From November 1985 she served as Vice President and
Controller at Lexitel. She served Lexitel as Controller from September 1981 to November 1985
and as Accountant and Assistant Controller from January 1981 to August 1981.
Derrald W. Pick has served in his position since April 1986. From January 1981 through March
1986 he held the position of Director, Western Operations for Southern Pacific Communications
Co. (presently known as U.S. Sprint).
FINANCIAL INFORMATION
The financial information required to be presented herein has been incorporated by reference in
this Proxy Statement by delivery of the 1987 Annual Report containing the audited consolidated
balance sheets and related consolidated statements of operations, preferred stock and
stockholders' equity and changes in financial position of the Company and consolidated
subsidiary as of December 31, 1986 and 1987,-and the Form 10-Q containing the unaudited
consolidated balance sheet and related statements of operations and cash fl
