UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 1-6793
CENTRAL TELEPHONE COMPANY
(Exact name of registrant as specified in its charter)
Delaware 47-0533677
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 11315, Kansas City, Missouri 64112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (913) 624-3000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Convertible Junior Preferred Stock, with a stated value of $10
per share
Cumulative Preferred Stock
$2.50 Dividend Series with a stated value of $50 per share
$1.24 Dividend Series with a stated value of $25 per share
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates
at March 15, 1994 was $8,632,855 (preferred stock at stated
value). The number of shares of common stock, no par value,
outstanding at March 15, 1994 was 9,000,000.
Documents incorporated by reference.
Registrant's definitive proxy statement or information statement
to be filed under the Securities Exchange Act of 1934, which
definitive proxy statement or information statement is
anticipated to be filed within 120 days after the end of the
registrant's fiscal year ended December 31, 1993, is incorporated
by reference in Part III hereof.
CENTRAL TELEPHONE COMPANY
SECURITIES AND EXCHANGE COMMISSION
Annual Report on Form 10-K
Part I
Item 1. Business
Central Telephone Company (Central Telephone) was incorporated
December 14, 1970, under the laws of Delaware and is the
successor by merger on December 1, 1971, to a Delaware
corporation of the same name incorporated May 25, 1944. Central
Telephone and its subsidiaries (the Company) provide local
exchange telephone service in portions of Nevada, North Carolina,
Florida, Illinois and Virginia. In addition, intra-LATA toll
service and access by other carriers to the Company's local
exchange facilities are provided.
Central Telephone is a subsidiary of Centel Corporation (Centel)
which, in addition to its ownership of all the common stock of
Central Telephone, has a subsidiary which provides local exchange
telephone service in portions of Texas, subsidiaries which
provide cellular communications services in various markets, and
various other subsidiaries. On March 9, 1993, Centel became a
wholly-owned subsidiary of Sprint Corporation (Sprint), a holding
company with subsidiaries in a number of telecommunications
markets.
As of December 31, 1993, the Company served more than 1.5 million
access lines. All of the access lines are served through central
offices equipped with switching. Over 60 percent of the access
lines served are located in the following seven communities:
Access
Community Lines
Las Vegas, Nevada 528,590
Tallahassee, Florida 163,939
Des Plaines, Illinois 73,969
Charlottesville, Virginia 62,187
Park Ridge, Illinois 45,872
Fort Walton Beach, Florida 39,582
Hickory, North Carolina 38,874
953,013
The Company is providing and continuing to introduce new services
made possible by the enhancement of its facilities to a more
intelligent network. A new signaling system (SS7) routes calls
more efficiently and makes possible Custom Local Area Signaling
Services (CLASS) features such as automatic callback, automatic
recall, calling line identification/block (Caller ID), and
customer initiated trace.
Revenues from communications services constituted 88 percent of
operating revenues in 1993, with the remainder derived largely
from directory operations, equipment sales and billing and
collection services. The Company recovers its costs of providing
telephone services, as well as a return on investment, through a
combination of local rates and access charges. Access charge
tariffs are the principal means by which the Company is
reimbursed for services provided to interexchange carriers.
American Telephone and Telegraph (AT&T), as the dominant long
distance telephone company, is the Company's largest customer for
access services. In 1993, 16 percent of the Company's operating
revenues was derived from services provided to AT&T. While AT&T
is a significant customer, the Company does not believe its
revenues are dependent upon AT&T as customers' demand for inter-
LATA long distance telephone service is not tied to any one long
distance carrier. Historically, as the market share of AT&T's
long distance competitors increases, the percent of revenues
derived from network access services provided to AT&T decreases.
The Company is subject to the jurisdiction of the Federal
Communications Commission (FCC) and the utilities commissions of
each of the states in which it operates. In each state in which
the commission exercises authority to grant certificates of
public convenience and necessity, the Company has been granted
such certificates of indefinite duration to provide local
exchange telephone service in its current service areas. In most
instances, where required by law, the Company has valid local
franchises sufficient to enable it to provide local exchange
telephone service in the areas in which it is operating. The
absence of any such franchises should have no material adverse
effect upon the Company's operations.
In the communities where the Company provides local exchange
telephone service, no other local exchange carrier is currently
authorized to provide such facilities based service. The
potential for more direct competition is, however, increasing for
the Company. Illinois law allows alternative telecommunications
providers to obtain certificates of local exchange telephone
service authority in direct competition with existing local
exchange carriers if certain showings are made to the
satisfaction of the Illinois Commerce Commission. In November
1993, MFS Intelenet of Illinois, Inc. submitted an application to
the Illinois Commerce Commission to operate as an alternative
local exchange carrier for business customers located in portions
of the Chicago metropolitan area served by Illinois Bell
Telephone Company and Central Telephone's Illinois subsidiary;
the application is pending.
Many states, including most of the states in which the Company
offers local exchange telephone service, allow competitive entry
into the intra-LATA long distance service market. Illinois
permits the resale of local exchange telephone service, and North
Carolina allows customers to participate in the sharing and
resale of local exchange telephone service under shared tenant
arrangements.
At the interstate level, the FCC has revised its rules to permit
connection of customer-owned coin telephones to the local
network, exposing local exchange carriers (LECs) to direct coin
telephone competition. Additionally, the FCC has assisted
Competitive Access Providers (CAPs) in providing access to
interexchange carriers and end users by mandating that all Tier 1
(over $100 million annual operating revenues) LECs allow
collocation of CAP equipment in LEC central offices. The FCC's
decision regarding collocation is under appeal to the U.S. Court
of Appeals for the District of Columbia Circuit. Central
Telephone's Illinois subsidiary had provided physical collocation
prior to the FCC's mandate.
New technology, as well as changes in state law and regulatory
decisions, is permitting expansion of the types of services
available through the local exchange and increasing the number of
competitors. Other means of communication, such as private
network, satellite, cellular and cable systems permit bypass of
the local exchange. Although the extent to which bypass has
occurred cannot be precisely determined, management believes it
has not had a material adverse effect on the Company's operating
revenues.
The extent and ultimate impact of competition for the Company and
other LECs will continue to depend, to a considerable degree, on
FCC and state regulatory actions, court decisions and possible
federal or state legislation. Legislation designed to stimulate
local competition between local exchange service providers and
cable programming service providers, in both markets, is
presently pending in both houses of the U.S. Congress although it
is uncertain if any of the bills will be enacted.
Effective January 1, 1991, the FCC adopted a price caps
regulatory format for the Bell Operating Companies (the LECs
owned by AT&T prior to divestiture) and the LECs owned by GTE
Corporation. Other LECs could volunteer to become subject to
price caps regulation. Under price caps, prices for network
access service must be adjusted annually to reflect industry
average productivity gains (as specified by the FCC), inflation
and certain allowed cost changes. The Company did not originally
elect price caps, but as a result of Sprint's merger with Centel,
adopted price caps effective July 1, 1993. Under the form of the
plan adopted, the Company generally has an opportunity to earn up
to a 14.25 percent rate of return on investment. Certain of the
Company's operations have committed to produce higher than
industry average productivity gains, and as a result have an
opportunity to earn up to a 15.25 percent rate of return on
investment. Prior to price caps, under rate of return
regulation, the Company's authorized rate of return on investment
was 11.25 percent, with the ability to earn 0.25 percent above
the authorized return. The FCC is conducting a scheduled review
of all aspects of the price caps plan; changes to the plan may be
proposed by interested parties and the FCC may implement changes
in 1995. Without further action by the FCC, the current price
caps plan would expire in 1995 and would be replaced by rate of
return regulation.
In December 1992, the Florida Public Service Commission approved
a stipulation giving Central Telephone's Florida subsidiary an
annual revenue increase of approximately $3.5 million, effective
January 1, 1993. From January 1, 1993 to June 30, 1994, any
earnings in excess of an annual earned return on equity of 12.0
percent must be refunded. Also in December 1992, the Public
Service Commission of Nevada authorized an annual revenue
increase of approximately $6.1 million for Central Telephone's
Nevada division, effective January 1, 1993. Central Telephone's
Illinois subsidiary has applied for a rate increase of
approximately $10.2 million from the Illinois Commerce
Commission, and the final order is due in May 1994. In December
1993, the Virginia alternative regulatory plan was modified to
lower the maximum rate of return on equity from 14 percent to
12.55 percent, and to include 25 percent of yellow page income in
the determination of return on equity.
Compliance with federal, state and local provisions relating to
the protection of the environment has had no significant effect
on the capital expenditures or earnings of the Company and future
effects are not expected to be material.
As of December 31, 1993, the Company had approximately 5,900
employees. During 1993, the Company had no material work
stoppages caused by labor controversies.
Item 2. Properties
The properties of the Company consist principally of land,
structures, facilities and equipment and are in good operating
condition. All of the central office buildings are owned, except
eight which are leased. Substantially all of the telephone
property, plant and equipment is subject to the liens of the
indentures securing indebtedness. As of December 31, 1993, cable
and wire facilities represented 50 percent of total net property,
plant and equipment; central office equipment, 37 percent; land
and buildings, 6 percent; and other assets, 7 percent.
The following table sets forth the gross property additions and
retirements or sales during each of the five years in the period
ended December 31, 1993 (in millions):
Gross Property
Year Additions Retirements
or Sales
1993 $ 163.4 $ 60.1
1992 168.1 173.1
1991 162.2 254.8 [1]
1990 214.7 54.3
1989 175.3 72.8
[1] Includes $213 million related to the sale of the Company's
operations in Iowa and Minnesota.
Item 3. Legal Proceedings
There are no material pending legal proceedings, and the Company
is a party only to ordinary routine litigation incidental to its
business.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the
fourth quarter of 1993.
Item 10. Executive Officers of the Registrant
Officer Name Age
President and Chief Executive
Officer D. Wayne Peterson (1) 58
Vice President-Chief Financial
Officer John P. Meyer (2) 43
Vice President-Controller Ralph J. Hodge (3) 41
Vice President-Treasurer M. Jeannine
Strandjord (4) 48
Vice President Stephen M. Bailor (5) 50
Vice President Peter W. Chehayl (6) 46
Vice President-Assistant
Secretary Don A. Jensen (7) 58
Vice President A. Allan Kurtze (8) 49
Secretary Marion W. O'Neill (9) 53
President-North Carolina William E.
Division McDonald (10) 51
President-Nevada Division Dianne Ursick (11) 44
(1)Mr. Peterson has been President and Chief Executive Officer
since September 1993. He has also served as President-Local
Telecommunications Division of Sprint since August 1993.
From 1980 to 1993, he served as President of Carolina
Telephone and Telegraph Company, a subsidiary of Sprint.
(2)Mr. Meyer has been Vice President-Chief Financial Officer
since January 1993. Mr. Meyer has also served as Senior Vice
President and Controller of Sprint since April 1993. He
served as Vice President and Controller of Centel from 1989
to 1993 and as Controller of Centel from 1986 to 1989.
(3)Mr. Hodge has been Vice President-Controller since December
1993. He has also served as Assistant Vice President and
Assistant Controller of Sprint since April 1993. He was
Director of Earnings Analysis and External Reporting for
Sprint from 1992 to 1993. He served as Treasurer of the
companies comprising the Midwest Group of local exchange
companies of Sprint from 1991 to 1992 and Controller of the
companies comprising the Midwest Group from 1988 to 1991.
(4)Ms. Strandjord has been Vice President-Treasurer since
September 1993. She has also served as Senior Vice President
and Treasurer of Sprint since 1990. She served as Vice
President and Controller of Sprint from 1986 to 1990.
(5)Mr. Bailor has been Vice President since December 1993. Mr.
Bailor served as Vice President and Controller of Central
Telephone from 1989 to December 1993. He has also served as
Vice President-Financial and Local Billing Services of
Sprint's Finance Division since September 1993.
(6)Mr. Chehayl has been Vice President since December 1993. He
has also served as Vice President and Assistant Treasurer of
Sprint since 1991. He was Vice President and Treasurer of
Alert Holdings, Inc., a provider of security alarm monitoring
services, during part of 1990, and from 1988 to 1990 he was
Treasurer of Firestone Tire & Rubber Company (now known as
Bridgestone/Firestone, Inc.) , a manufacturer and retailer of
tires and a retailer of automotive services.
(7)Mr. Jensen has been Vice President-Assistant Secretary since
September 1993. He has also served as Vice President and
Secretary of Sprint since 1975.
(8)Mr. Kurtze has been Vice President since 1991. Mr. Kurtze
has also served as Senior Vice President of Sprint/United
Management Company, a subsidiary of Sprint, since July 1993.
He served as Executive Vice President of Centel from 1991 to
1993 and as Senior Vice President-Planning and Technology of
Centel from 1986 to 1991.
(9)Ms. O'Neill has been Secretary since July 1993. She has been
an attorney for Sprint for more than five years.
(10)Mr. McDonald has been President of the North Carolina
Division since September 1993. He has also served as
President of the other four companies comprising the Mid-
Atlantic Group of local exchange companies of Sprint since
August 1993. From 1988 to 1993, he served as President of
the two companies comprising the Eastern Group of local
exchange companies of Sprint.
(11)Ms. Ursick has been President of the Nevada Division
since March 1993. From 1989 to 1993, she was General
Regulatory Manager of the Nevada Division.
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
All shares of common stock of Central Telephone, representing
97.4 percent of the aggregate outstanding capital stock of
Central Telephone, are owned by Centel, a wholly-owned subsidiary
of Sprint. There is no established public trading market for the
common stock.
One series of voting convertible junior preferred stock and four
series of voting cumulative preferred stock of Central Telephone
are outstanding. Since issuance, quarterly dividends have been
paid on all series of the preferred stock at the respective
prescribed rates.
The junior preferred stock is publicly held and each share is
convertible to 6.47325 shares of Sprint common stock. There
were 35,528 shares outstanding as of December 31, 1993. During
1993, there were 7,290 shares converted. There is no established
public trading market for this particular issue.
There is no active market for shares of any of the series of
cumulative preferred stock.
Transfer Agent for all Conversion Agent for the Junior
Preferred Stocks Preferred Stock
First Chicago Trust Company of First Chicago Trust Company of
New York, New York New York, New York
Item 6. Selected Financial Data
Selected consolidated financial data as of and for the years
ended December 31 is as follows (in millions):
1993 1992 1991 1990 1989
Operating
revenues $ 868.6 $ 786.6 $ 808.9 $ 831.7 $ 771.7
Income before
extraordinary
item and
cumulative effect
of changes in
accounting
principles [1],
[2] 41.4 71.6 143.3 100.9 88.0
Total assets 1,704.8 1,724.1 1,665.9 1,743.8 1,637.2
Long-term debt and
redeemable
preferred stock
(including
current
maturities) 472.6 522.0 530.3 549.1 424.7
[1] During 1993, nonrecurring charges of $77 million were
recorded related to the Company's portion of the transaction
costs associated with Sprint's merger with Centel and the
expenses of integrating and restructuring the operations of the
companies. Such charges reduced consolidated 1993 income before
extraordinary item and cumulative effect of changes in
accounting principles by $48 million.
[2] During 1991, gains of $92 million were recognized
related to the sale of the Company's Iowa and Minnesota
operations, which increased consolidated 1991 income before
extraordinary item and cumulative effect of changes in
accounting principles by $64 million.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Recent Development - Sprint/Centel Merger
Effective March 9, 1993, Centel, the parent company of Central
Telephone Company, and Sprint consummated a merger of the
companies (see Note 2 of "Notes to Consolidated Financial
Statements" for additional information). Sprint is a diversified
telecommunications company with local exchange telephone
operations in seventeen states prior to the merger, including
Florida, North Carolina and Virginia. As a result of the merger,
the operations of the merged companies continue to be integrated
and restructured to achieve efficiencies which have begun to
yield operational synergies and cost savings, particularly in the
latter half of 1993. The transaction costs associated with the
merger (consisting primarily of investment banking and legal
fees) and the estimated expenses of integrating and restructuring
the operations of the companies (consisting primarily of employee
severance and relocation expenses and costs of eliminating
duplicative facilities) resulted in a nonrecurring charge to
Sprint during 1993. The portion of such charge attributable to
the Company was $77 million, which reduced 1993 net income by
approximately $48 million.
Results of Operations
As described in Note 8 of "Notes to Consolidated Financial
Statements," the Company's local exchange telephone operations in
Minnesota and Iowa were divested in 1991. The following
comparisons and discussion exclude the effects of such divested
operations.
Net operating revenues increased 10 percent in 1993, following a
2 percent increase in 1992. Local service revenues, derived from
providing local exchange telephone service, increased 11 percent
and 9 percent in 1993 and 1992, respectively. These increases
reflect continued growth in the number of access lines served,
add-on services, such as custom calling, and increased Centrex
revenues. Access lines grew 5.0 percent in 1993 versus 4.8
percent in 1992. Rate increases also contributed to increased
local service revenue. The Florida Public Service Commission
(FPSC) ordered an interim rate increase effective September 1992,
which increased 1992 local service revenue by $1 million. In
addition, permanent annual increases granted by the FPSC and the
Public Service Commission of Nevada, effective January 1993,
increased 1993 local service revenue by $10 million.
Toll and access service revenues are derived from interexchange
long distance carriers use of the local network to complete
calls, and the provision of long distance services within
specified geographical areas. These revenues increased $37
million in 1993 as a result of increased traffic volumes and the
recognition of a portion of the merger, integration and
restructuring costs for regulatory purposes in certain
jurisdictions, partially offset by periodic reductions in network
access rates charged. Toll and access service revenue decreased
$3 million in 1992 principally due to reductions in network
access rates charged.
Other revenues increased $4 million in 1993 following a decrease
of $10 million in 1992. The increase in 1993 is generally due to
higher equipment sales and increased directory revenue. The
decrease in other revenue in 1992 was caused by a decrease in
certain billing services provided to American Telephone and
Telegraph and by an inside wire maintenance settlement which
resulted in refunds to the customers of the Company's Florida
subsidiary.
Operating expenses increased $45 million and $19 million in 1993
and 1992, respectively, primarily reflecting increases in the
costs of providing services resulting from access line growth.
The increases in 1993 also resulted from increases in systems
development costs incurred to enhance the efficiency and
capabilities of the billing processes and increases in the cost
of equipment sales. The increase in operating expenses in 1992
also resulted from increases in pension costs due to a new union
agreement.
The increases in operating expenses in 1993 also reflect the
impact of changes in accounting principles. As a result of the
change in accounting for certain software costs, the Company
recognized additional expense in 1993 of $7 million. In
addition, increased postretirement benefits cost of approximately
$7 million were recognized as a result of the adoption of
Statement of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions" (see Notes 1 and 3 of "Notes to Consolidated Financial
Statements" for additional information).
Depreciation and amortization expense increased $7 million in
1993, following a $4 million decrease in 1992. The 1993 increase
was generally due to plant additions. The decrease in 1992
depreciation expense was due to nonrecurring charges recorded in
1991, partially offset by plant additions.
Interest expense was $44 million, $43 million and $45 million in
1993, 1992 and 1991, respectively. The increase in 1993 was
generally related to increased advances from affiliates, whereas
the decrease in 1992 was related to a decrease in average levels
of debt outstanding and lower interest rates.
The divestitures of the Company's Minnesota and Iowa operations
in 1991 resulted in a gain of $92 million, which increased income
from continuing operations by $64 million.
The Company's income tax provisions for 1993, 1992 and 1991
resulted in effective tax rates of 25 percent, 29 percent and 30
percent, respectively. See Note 4 of "Notes to Consolidated
Financial Statements" for information regarding the differences
that cause the effective income tax rates to vary from the
statutory federal income tax rates.
Effective January 1, 1993, the Company conformed its accounting
practices for certain software costs with the prevalent practice
in the industry and with the accounting method used by Sprint's
local communications services division. The Company now expenses
these costs as incurred. The cumulative effect of this change in
accounting principle reduced 1993 net income by $22 million, net
of related income tax benefits of $13 million.
Regulatory Activities
In June 1993, the Company's Illinois subsidiary filed with the
Illinois Commerce Commission a petition to adjust its rates and
charges such that annual intrastate revenues would increase by
approximately $10 million. This rate proceeding was required to
provide revenue recovery for the added costs related to the
adoption of SFAS No. 106 and to recognize the phases of the
Federal Communications Commission mandated jurisdictional cost
shifts from interstate to intrastate. A final order will be
issued in May 1994. In addition, in December 1993, the Company's
Virginia subsidiary's alternative regulatory plan was modified to
lower the maximum rate of return on equity from 14 percent to
12.55 percent, and to include 25 percent of yellow page income in
the determination of return on equity.
Liquidity and Capital Resources
Cash Flows-Operating Activities
Cash flows from operating activities, which are the Company's
primary source of liquidity, were $227 million, $211 million and
$175 million in 1993, 1992 and 1991, respectively. The
improvement in 1993 operating cash flows reflects better
operating results, partially offset by expenditures of $26
million related to the merger, integration and restructuring
actions.
Cash Flows-Investing Activities
Capital expenditures, which represent the Company's most
significant investing activity, were $163 million, $168 million
and $162 million in 1993, 1992 and 1991, respectively. Capital
expenditures were made to accommodate access line growth and to
expand the capabilities for providing enhanced telecommunications
services.
Investing activities in 1991 also include proceeds of $216
million from the sales of the Company's Iowa and Minnesota local
telephone operations to Rochester Telephone Corporation
(Rochester). In addition to cash of $116 million, the Company
received shares of Rochester's common stock and ownership rights
to investments in cellular franchises. The Company received $100
million in cash and $12 million in advances from Centel for the
Rochester stock and cellular franchises.
Cash Flows-Financing Activities
The Company's financing activities used cash of $65 million, $45
million and $200 million in 1993, 1992 and 1991, respectively.
Improved operating cash flows during each year, together with the
proceeds from the divestitures in 1991, allowed the Company to
fund capital expenditures internally and reduce total debt
outstanding. In addition, the Company paid a special dividend in
1991 of $112 million to Centel with a portion of the proceeds
received from the sales of the Iowa and Minnesota operations.
During 1993 and 1992, a significant level of debt refinancing
occurred in order to take advantage of lower interest rates.
Accordingly, a majority of the proceeds from long-term borrowings
in 1993 and 1992 were used to finance the redemption prior to
scheduled maturities of $144 million and $148 million of debt,
respectively.
Financial Position, Liquidity and Capital Requirements
As of December 31, 1993, the Company's total capitalization
aggregated $1.09 billion, consisting of long-term debt (including
current maturities), advances from affiliates, redeemable
preferred stock, and common stock and other stockholder's equity.
Long-term debt (including current maturities and advances from
affiliates) comprised 43 percent of total capitalization as of
December 31, 1993, adjusted on a proforma basis for the effects
of changes in accounting principles, compared to 45 percent at
year-end 1992.
During 1994, the Company anticipates funding estimated capital
expenditures of $190 million with cash flows from operating
activities. The Company expects its external cash requirements
for 1994 to be approximately $12 million which is generally
required to pay scheduled long-term debt maturities. The method
of financing the cash requirements will depend on prevailing
market conditions during the year. The Company may also
undertake additional debt refinancings during 1994 in order to
take advantage of favorable interest rates.
The Company, Sprint and Sprint Capital Corporation (a wholly-
owned subsidiary of Sprint) have a $1.1 billion revolving credit
agreement with a syndicate of domestic and international banks,
under which the Company can borrow up to an aggregate of $200
million. As of December 31, 1993, the Company had no borrowings
outstanding under this agreement. The revolving credit agreement
expires in July 1996 and, subject to the approval of the lenders,
may be extended for up to an additional two years.
Recent Accounting Developments
Effective January 1, 1994, the Company will adopt SFAS No. 112,
"Employers' Accounting for Postemployment Benefits" (see Note 1
of "Notes to Consolidated Financial Statements" for additional
information).
Consistent with most local exchange carriers, the Company
accounts for the economic effects of regulation pursuant to SFAS
No. 71, "Accounting for the Effects of Certain Types of
Regulation." The application of SFAS No. 71 requires the
accounting recognition of the rate actions of regulators where
appropriate, including the recognition of depreciation and
amortization based on estimated useful lives prescribed by
regulatory commissions rather than those which might be utilized
by non-regulated enterprises. Management believes the Company's
operations meet the criteria for the continued application of
SFAS No. 71. With increasing competition and the changing nature
of regulation in the telecommunications industry, the ongoing
applicability of SFAS No. 71 must, however, be constantly
monitored and evaluated. Should the Company no longer qualify
for the application of the provisions of SFAS No. 71 at some
future date, the accounting impact could result in the
recognition of a material, extraordinary, noncash charge.
Effects of Inflation
The effects of inflation on the Company's operations were not
significant during 1993, 1992 or 1991.
Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Report of Independent Auditors - Ernst & Young
Report of Independent Public Accountants - Arthur Andersen & Co.
Consolidated Statements of Income and Retained Earnings for each
of the three years ended December 31, 1993
Consolidated Balance Sheets as of December 31, 1993 and 1992
Consolidated Statements of Cash Flows for each of the three years
ended December 31, 1993
Notes to Consolidated Financial Statements
Financial Statement Schedules for each of the three years ended
December 31, 1993:
V - Consolidated Property, Plant and Equipment
VI - Consolidated Accumulated Depreciation
VIII-Consolidated Valuation and Qualifying Accounts
IX - Consolidated Short-Term Borrowings
X - Consolidated Supplementary Income Statement Information
Certain financial statement schedules are omitted because the
required information is not present, or because the information
required is included in the consolidated financial statements and
notes thereto.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Central Telephone Company
We have audited the consolidated balance sheet of Central
Telephone Company (a wholly-owned subsidiary of Sprint
Corporation) as of December 31, 1993, and the related
consolidated statements of income and retained earnings, and cash
flows for the year then ended. Our audit also included the 1993
financial statement schedules listed in the Index to Financial
Statements and Financial Statement Schedules. These financial
statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audit. The
financial statements and schedules of Central Telephone Company
for the years ended December 31, 1992 and 1991, were audited by
other auditors whose report dated February 3, 1993, expressed an
unqualified opinion on those statements prior to restatement.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the 1993 consolidated financial statements
referred to above present fairly, in all material respects, the
consolidated financial position of Central Telephone Company at
December 31, 1993, and the consolidated results of its operations
and its cash flows for the year then ended, in conformity with
generally accepted accounting principles. Also, in our opinion,
the related financial statement schedules, when considered in
relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth
therein.
As discussed in Note 1 to the consolidated financial statements,
in 1993 the Company changed its method of accounting for income
taxes, software costs and postretirement benefits.
We also audited the adjustments described in Note 1 that were
applied to restate the 1992 consolidated financial statements for
the change in the method of accounting for income taxes. In our
opinion, such adjustments are appropriate and have been properly
applied.
ERNST & YOUNG
Kansas City, Missouri
January 21, 1994
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareowners of
Central Telephone Company
We have audited the consolidated balance sheet of CENTRAL
TELEPHONE COMPANY (a Delaware corporation and wholly owned
subsidiary of Centel Corporation) AND SUBSIDIARIES as of December
31, 1992, and the related consolidated statements of income,
retained earnings and cash flows for each of the two years in the
period ended December 31, 1992, prior to the restatement (and,
therefore, are not presented herein) for the change in the
Company's method of accounting for income taxes as described in
Note 1 to the restated financial statements. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the
consolidated financial statements (prior to restatement) based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatements. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements (prior to restatement)
referred to above present fairly, in all material respects, the
financial position of Central Telephone Company and Subsidiaries
as of December 31, 1992, and the results of their operations and
their cash flows for each of the two years in the period ended
December 31, 1992, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements (prior to restatement) taken as a
whole. In connection with our audits, certain auditing
procedures were applied to the following schedules (prior to
restatement) (and, therefore, are not presented herein) which are
required for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic
financial statements:
Schedule V--Consolidated Property, Plant and Equipment
Schedule VI--Consolidated Accumulated Depreciation
Schedule VIII--Consolidated Valuation and Qualifying Accounts
Schedule IX--Consolidated Short-Term Borrowings
Schedule X--Consolidated Supplementary Income Statement
Information
In our opinion, the information contained in these schedules
(prior to restatement) fairly states, in all material respects,
the financial data required to be set forth therein in relation
to the basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Chicago, Illinois
February 3, 1993
CENTRAL TELEPHONE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
AND RETAINED EARNINGS
Years ended December 31, 1993, 1992 and 1991
(In Millions)
1993 1992 1991
OPERATING REVENUES
Local service $ 416.9 $ 375.4 $ 362.9
Toll and access service 345.8 309.1 328.4
Other 105.9 102.1 117.6
868.6 786.6 808.9
OPERATING EXPENSES
Other operating expenses 558.9 514.4 511.8
Merger, integration and
restructuring costs 77.2
Depreciation and amortization 134.3 127.8 138.5
770.4 642.2 650.3
OPERATING INCOME 98.2 144.4 158.6
Gain on divestiture of
telephone properties 91.6
Interest expense (43.6) (43.1) (45.3)
Other income (expense), net 0.5 (0.6) 0.7
Income before income taxes,
extraordinary item and
cumulative effect of changes
in accounting principles 55.1 100.7 205.6
Income tax provision (13.7) (29.1) (62.3)
Income before extraordinary
item and cumulative effect of
changes in accounting
principles 41.4 71.6 143.3
Extraordinary losses on early
extinguishments of debt, net (4.6)
Cumulative effect of changes in
accounting principles, net (21.6) (0.5)
NET INCOME 15.2 71.1 143.3
RETAINED EARNINGS AT BEGINNING
OF YEAR 257.3 216.7 259.4
Cash dividends
Common stock (27.1) (30.0) (185.4)
Preferred stock (0.5) (0.5) (0.6)
RETAINED EARNINGS AT END OF
YEAR $ 244.9 $ 257.3 $ 216.7
PRO FORMA AMOUNTS ASSUMING THE
CHANGE IN ACCOUNTING FOR
SOFTWARE COSTS WAS
RETROACTIVELY APPLIED
Income before extraordinary $ 41.4 $ 63.0 $ 138.1
item
Net income $ 36.8 $ 62.5 $ 138.1
See accompanying notes to consolidated financial statements.
CENTRAL TELEPHONE COMPANY
CONSOLIDATED BALANCE SHEETS
December 31, 1993 and 1992
(In Millions)
1993 1992
ASSETS
CURRENT ASSETS
Cash $ 9.5 $ 7.3
Receivables
Customers and other, net of allowance for
doubtful accounts of $0.6 million ($0.5
million in 1992) 84.0 82.9
Interexchange carriers 4.9 6.5
Affiliated companies 13.9 2.9
Advances to affiliates 3.3 7.0
Deferred income taxes 19.8 17.7
Prepaid expenses and other 13.2 13.5
Total current assets 148.6 137.8
PROPERTY, PLANT AND EQUIPMENT
Land and buildings 116.4 113.0
Telephone network equipment and outside
plant 2,150.1 2,037.0
Other 138.8 151.7
Construction in progress 13.9 28.3
2,419.2 2,330.0
Less accumulated depreciation (943.7) (871.2)
1,475.5 1,458.8
DEFERRED CHARGES AND OTHER ASSETS 80.7 127.5
$ 1,704.8 $ 1,724.1
CENTRAL TELEPHONE COMPANY
CONSOLIDATED BALANCE SHEETS (continued)
December 31, 1993 and 1992
(In Millions)
1993 1992
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Outstanding checks in excess of cash
balances $ 17.5 $ 19.6
Current maturities of long-term debt 22.7 31.2
Advances from affiliates 14.4
Accounts payable
Vendors and other 17.6 24.3
Interexchange carriers 13.4 30.1
Affiliated companies 32.2 5.8
Accrued merger, integration and
restructuring costs 24.3
Accrued interest 17.2 13.1
Advance billings 16.2 13.0
Accrued vacation pay 15.2 16.4
Other 42.7 52.8
Total current liabilities 233.4 206.3
LONG-TERM DEBT 440.9 481.3
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes and investment tax
credits 276.4 293.2
Postretirement benefits obligations 71.6 43.8
Regulatory liability 59.1 74.8
Other 15.1 3.5
422.2 415.3
REDEEMABLE PREFERRED STOCK 9.0 9.5
COMMON STOCK AND OTHER STOCKHOLDER'S
EQUITY
Common stock, no par value, authorized-
10.0 million shares, issued and
outstanding-9.0 million shares 354.4 354.4
Retained earnings 244.9 257.3
599.3 611.7
$ 1,704.8 $ 1,724.1
See accompanying notes to consolidated financial statements.
CENTRAL TELEPHONE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1993, 1992 and 1991
(In Millions)
1993 1992 1991
OPERATING ACTIVITIES
Net income $ 15.2 $ 71.1 $ 143.3
Adjustments to reconcile net income to
net cash provided by operating
activities
Depreciation and amortization 134.3 127.8 138.5
Gain on divestiture of telephone
properties (91.6)
Extraordinary losses on early
extinguishments of debt 7.6
Cumulative effect of changes in
accounting principles 21.6 0.5
Deferred income taxes and investment
tax credits (33.8) 2.1 (44.5)
Changes in operating assets and
liabilities
Receivables, net (10.5) (2.5) 0.4
Other current assets 0.3 (2.4) 4.3
Accounts payable 0.9 12.3 (4.0)
Accrued expenses and other current
liabilities 32.9 (14.1) 24.1
Noncurrent assets and liabilities,
net 55.6 16.2 4.5
Other, net 2.5 (0.4) (0.3)
NET CASH PROVIDED BY OPERATING
ACTIVITIES 226.6 210.6 174.7
INVESTING ACTIVITIES
Capital expenditures (163.4) (168.1) (162.2)
Proceeds from divestiture of telephone
properties 215.8
(Increase) decrease in advances to
affiliates 3.7 19.5 (23.7)
Other, net 0.6 (17.6) (11.5)
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES (159.1) (166.2) 18.4
FINANCING ACTIVITIES
Proceeds from long-term debt 118.6 157.1 88.3
Retirements of long-term debt (147.5) (190.0) (39.1)
Increase (decrease) in short-term
borrowings (20.0) 20.0 (70.1)
Increase (decrease) in advances from
affiliates 14.4 (1.5) (1.9)
Dividends paid (27.6) (30.5) (176.8)
Other, net (3.2) (0.1) (0.3)
NET CASH USED BY FINANCING ACTIVITIES (65.3) (45.0) (199.9)
INCREASE (DECREASE) IN CASH 2.2 (0.6) (6.8)
CASH AT BEGINNING OF YEAR 7.3 7.9 14.7
CASH AT END OF YEAR $ 9.5 $ 7.3 $ 7.9
See accompanying notes to consolidated financial statements.
CENTRAL TELEPHONE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
Central Telephone Company is engaged in the business of providing
communications services, principally local, network access and
toll services in portions of Florida, Illinois, Nevada, North
Carolina and Virginia. The principal industries in the Company's
service area include retail and wholesale trade, transportation,
agriculture, manufacturing, finance and service.
Basis of Presentation
The accompanying consolidated financial statements include the
accounts of Central Telephone Company and its wholly-owned
subsidiaries, Central Telephone Company of Florida, Central
Telephone Company of Virginia and Central Telephone Company of
Illinois (the Company). All significant intercompany
transactions have been eliminated. The Company is a wholly-owned
subsidiary of Centel Corporation (Centel); accordingly, earnings
per share information has been omitted. Centel became a wholly-
owned subsidiary of Sprint Corporation (Sprint) on March 9, 1993,
in connection with the Sprint/Centel merger (see Note 2 for
additional information).
The Company accounts for the economic effects of regulation
pursuant to Statement of Financial Accounting Standards (SFAS)
No. 71, "Accounting for the Effects of Certain Types of
Regulation," which requires the accounting recognition of the
rate actions of regulators where appropriate. Such actions can
provide reasonable assurance of the existence of an asset, reduce
or eliminate the value of an asset, or impose a liability on a
regulated enterprise.
Certain amounts in the accompanying consolidated financial
statements for 1992 and 1991 have been reclassified to conform to
the presentation of amounts in the 1993 consolidated financial
statements. These reclassifications had no effect on net income
in either year.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Retirements
of depreciable property are charged against accumulated
depreciation with no gain or loss recognized. Repairs and
maintenance costs are expensed as incurred.
Depreciation
Depreciation expense is generally computed on a straight-line
basis over the estimated useful lives as prescribed by regulatory
commissions. Depreciation rate changes granted by a state
commission resulted in additional depreciation expense in 1993 of
$1 million. In addition, as ordered by the state commissions,
the Company recorded nonrecurring charges to depreciation expense
in 1991 of $5 million, which reduced net income by $1 million.
Average annual composite depreciation rates, excluding the
nonrecurring charges, were 5.5 percent for 1993, 5.3 percent for
1992 and 5.9 percent for 1991.
Income Taxes
Subsequent to the Sprint/Centel merger, operations of the Company
are included in the consolidated federal income tax returns of
Sprint. Prior to the merger, operations of the Company were
included in the consolidated federal income tax returns of
Centel. Federal income tax is calculated by the Company on the
basis of its filing a separate return.
In 1993, the Company retroactively changed its method of
accounting for income taxes by adopting SFAS No. 109, "Accounting
for Income Taxes," which requires an asset and liability approach
to accounting for income taxes. The new standard was adopted
retroactive to January 1, 1992; accordingly, the 1992 financial
statements were restated to reflect the change in accounting for
income taxes. Under the provisions of SFAS No. 109, the Company
adjusted existing deferred income tax amounts, using current tax
rates, for the estimated future tax effects attributable to
temporary differences between the tax bases of the Company's
assets and liabilities and their reported amounts in the
financial statements. The Company's principal temporary
difference results from using different depreciable lives and
methods with respect to its property, plant and equipment for tax
and financial statement purposes.
The adoption of SFAS No. 109 resulted in a decrease in the
deferred income tax liabilities as previous income tax accounting
standards did not permit accumulated deferred income tax amounts
to be adjusted for subsequent tax rate changes. However, because
this decrease will accrue to the benefit of the Company's
customers it has been reflected as a regulatory liability.
Additionally, upon adoption of SFAS No. 109, the Company
recognized deferred income tax liabilities for those temporary
differences for which deferred income taxes had not previously
been provided. Corresponding regulatory assets were also
recorded by the Company to reflect the anticipated recovery of
such taxes in future telephone rates. The adoption of SFAS No.
109 is reflected as a change in accounting principle in the 1992
consolidated statement of income. Adoption of this standard did
not significantly impact the Company's 1993 results of
operations.
Investment tax credits (ITC) are deferred and amortized over the
useful life of the related property. The Tax Reform Act of 1986
effectively eliminated ITC after December 31, 1985.
Software Costs
Effective January 1, 1993, the Company changed its method of
accounting for certain software costs. The change was made to
conform the Company's accounting to the predominant practice
among local exchange carriers. Under the new method, such costs
are being expensed when incurred. The resulting nonrecurring,
noncash charge of $22 million, net of related income tax benefits
of $13 million, is reflected as a change in accounting principle
in the 1993 consolidated statement of income. As a result of the
change in accounting, the Company recognized incremental expense
of $7 million in 1993.
Postretirement Benefits
Effective January 1, 1993, the Company modified its accrual
method of accounting for postretirement benefits (principally
health care and life insurance benefits) provided to certain
retirees by adopting SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." As permitted by
SFAS No. 106, the Company elected to recognize its previously
unrecognized obligation for postretirement benefits as of January
1, 1993 by amortizing such obligation on a straight-line basis
generally over a period of 20 years, except in those
jurisdictions where shorter amortization periods have been
authorized for regulatory treatment.
Postemployment Benefits
Effective January 1, 1994, the Company will adopt SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." Under the
new standard, the Company is required to recognize certain
previously unrecorded obligations for benefits provided to former
or inactive employees and their dependents, after employment but
before retirement. Postemployment benefits offered by the
Company include severance, workers compensation and disability
benefits, including the continuation of other benefits such as
health care and life insurance coverage. As required by the
standard, the Company will recognize its obligations for
postemployment benefits through a cumulative adjustment in the
consolidated statement of income. The resulting nonrecurring,
noncash charge will not significantly impact the Company's 1994
net income. Adoption of this standard is not expected to
significantly impact future operating expenses.
Interest Charged to Construction
In accordance with the Uniform System of Accounts, as prescribed
by the Federal Communications Commission (FCC), interest is
capitalized on those telephone plant construction projects for
which the estimated construction period exceeds one year. In
addition, the Public Service Commission of Nevada has ordered
that the Company's Nevada operations capitalize interest during
construction on short-term projects.
2. MERGER, INTEGRATION AND RESTRUCTURING COSTS
Effective March 9, 1993, Sprint consummated its merger with
Centel. Pursuant to the Agreement and Plan of Merger dated May
27, 1992, Sprint issued 1.37 shares of its common stock in
exchange for each outstanding share of Centel common stock.
The operations of the merged companies are being integrated and
restructured to achieve efficiencies which have begun to yield
operational synergies and cost savings. The transaction costs
associated with the merger (consisting primarily of investment
banking and legal fees) and the estimated expenses of integrating
and restructuring the operations of the companies (consisting
primarily of employee severance and relocation expenses and costs
of eliminating duplicative facilities) resulted in nonrecurring
charges to Sprint during 1993. The portion of such charges
attributable to the Company was $77 million, which reduced 1993
net income by approximately $48 million.
3. EMPLOYEE BENEFIT PLANS
Defined Benefit Pension Plans
Substantially all employees of the Company are covered by
noncontributory defined benefit pension plans sponsored by
Centel. Effective December 31, 1993, such plans were merged with
the defined benefit pension plan sponsored by Sprint. For
participants of the plans represented by collective bargaining
agreements, benefits are based upon schedules of defined amounts
as negotiated by the respective parties. For participants not
covered by collective bargaining agreements, the plans provide
pension benefits based upon years of service and participants'
compensation.
The Company's policy is to make contributions to the plans each
year equal to an actuarially determined amount consistent with
applicable federal tax regulations. The funding objective is to
accumulate funds at a relatively stable rate over the
participants' working lives so that benefits are fully funded at
retirement. As of December 31, 1993, the plans' assets consisted
principally of investments in corporate equity securities and
U.S. government and corporate debt securities.
The components of the net pension costs (credits) and related
assumptions are as follows (in millions):
1993 1992 1991
Service cost -- benefits earned during $ 10.0 $ 8.8 $ 7.2
the period
Interest cost on projected benefit 20.8 18.7 14.2
obligation
Actual return on plan assets (29.7) (18.3) (43.7)
Net amortization and deferral 5.8 (5.2) 16.7
Net pension cost (credit) $ 6.9 $ 4.0 $ (5.6)
Discount rate 8.0% 8.8% 8.8%
Expected long-term rate of return on
plan assets 9.5% 10.0% 10.0%
Anticipated composite rate of future
increases in compensation 5.5% 7.0% 7.0%
In addition, the Company recognized pension curtailment losses of
$5 million during 1993 as a result of the integration and
restructuring actions (see Note 2 for additional information).
The funded status and amounts recognized in the consolidated
balance sheets for the plans, as of December 31, are as follows
(in millions):
1993 1992
Actuarial present value of pension benefit
obligations
Vested benefit obligation $ (262.8) $ (207.4)
Accumulated benefit obligation $ (304.4) $ (241.3)
Projected benefit obligation $ (317.4) $ (263.7)
Plan assets at fair value 279.7 262.4
Projected benefit obligation in excess of
plan assets (37.7) (1.3)
Unrecognized net losses 39.4 23.3
Unrecognized prior service cost 59.5 55.3
Unamortized portion of transition asset (31.9) (36.0)
Prepaid pension cost $ 29.3 $ 41.3
The projected benefit obligations as of December 31, 1993 and
1992 were determined using a discount rate of 7.5 percent for
1993 and 8.0 percent for 1992, and anticipated composite rates of
future increases in compensation of 4.5 percent for 1993 and 5.5
percent for 1992.
Defined Contribution Plans
Substantially all employees of the Company are covered by defined
contribution employee savings plans. Effective December 31,
1993, the plan covering participants not represented by
collective bargaining agreements was merged with a defined
contribution plan sponsored by Sprint. Eligible employees may
contribute a portion of their compensation to the plans, and the
Company makes matching contributions up to specified levels. The
Company's contributions to the plans aggregated $10 million in
1993 and 1992, and $9 million in 1991.
Postretirement Benefits
The Company provides other postretirement benefits (principally
health care and life insurance benefits) to certain retirees.
Employees who retired from the Company before specified dates
became eligible for these postretirement benefits at no cost to
the retirees. Employees retiring after specified dates are
eligible for these benefits on a shared cost basis. The Company
funds the accrued costs as benefits are paid.
For regulatory purposes, the FCC permits recognition of net
postretirement benefits costs, including amortization of the
transition obligation, in accordance with SFAS No. 106.
The components of the 1993 net postretirement benefits cost are
as follows (in millions):
Service cost -- benefits earned during the period $ 4.5
Interest on accumulated postretirement benefits obligation 12.4
Amortization of transition obligation 5.9
Net postretirement benefits cost $ 22.8
For measurement purposes, an annual health care cost trend rate
of 13 percent was assumed for 1993, gradually decreasing to 6
percent by 2000 and remaining constant thereafter. The effect of
a one percent annual increase in the assumed health care cost
trend rate would have increased the 1993 net postretirement
benefits cost by approximately $4 million. The weighted average
discount rate for 1993 was 8 percent.
In addition, the Company recognized postretirement benefits
curtailment losses of $10 million during 1993 as a result of the
integration and restructuring actions (see Note 2 for additional
information).
The cost of providing health care and life insurance benefits to
retirees was $11 million and $12 million in 1992 and 1991,
respectively. Such costs were being accrued over the service
periods of employees expected to receive the benefits, with past
service costs amortized over 30 years except in those
jurisdictions where shorter amortization periods had been
authorized for regulatory purposes.
The amount recognized in the consolidated balance sheet as of
December 31, 1993 is as follows (in millions):
Accumulated postretirement benefits obligation
Retirees $ 79.0
Active plan participants -- fully eligible 34.3
Active plan participants -- other 64.2
177.5
Unrecognized net losses (14.9)
Unrecognized transition obligation (91.0)
Accrued postretirement benefits cost $ 71.6
The accumulated benefits obligation as of December 31, 1993 was
determined using a discount rate of 7.5 percent. An annual
health care cost trend rate of 12 percent was assumed for 1994,
gradually decreasing to 6 percent by 2001 and remaining constant
thereafter. The effect of a one percent annual increase in the
assumed health care cost trend rate would have increased the
accumulated benefits obligation as of December 31, 1993 by
approximately $18 million.
4. INCOME TAXES
The components of the federal and state income tax provision are
as follows (in millions):
1993 1992 1991
Current income tax provision
Federal $ 42.7 $ 23.0 $ 91.8
State 4.8 4.0 15.0
Amortization of deferred ITC (4.5) (5.5) (8.2)
43.0 21.5 98.6
Deferred income tax provision
(benefit)
Federal (26.8) 6.4 (32.0)
State (2.5) 1.2 (4.3)
(29.3) 7.6 (36.3)
Total income tax provision $ 13.7 $ 29.1 $ 62.3
On August 10, 1993, the Revenue Reconciliation Act of 1993 was
enacted which, among other changes, raised the federal income tax
rate for corporations to 35 percent from 34 percent, retroactive
to the beginning of the year. Pursuant to SFAS No. 71, the
resulting adjustments to the Company's deferred income tax assets
and liabilities to reflect the revised rate have generally been
reflected as reductions to the related regulatory liabilities.
The differences which cause the effective income tax rate to vary
from the statutory federal income tax rate of 35 percent in 1993
and 34 percent in 1992 and 1991 are as follows (in millions):
1993 1992 1991
Federal income tax provision at
the statutory rate $ 19.3 $ 34.2 $ 69.9
Less amortization of deferred ITC (4.5) (5.5) (8.2)
Expected federal income tax
provision after amortization of
deferred ITC 14.8 28.7 61.7
Effect of
Reversal of rate differentials (3.2) (2.9) (5.2)
State income tax, net of federal
income tax effect 1.5 3.4 7.0
Divestiture of telephone
properties (4.7)
Other, net 0.6 (0.1) 3.5
Income tax provision, including $ 13.7 $ 29.1 $ 62.3
ITC
Effective income tax rate 25% 29% 30%
The 1993 income tax benefits allocated to other items are as
follows (in millions):
Extraordinary losses on early extinguishments of debt $ 3.0
Cumulative effect of changes in accounting principles 12.5
During 1993 and 1992, in accordance with SFAS No. 109, deferred
income taxes were provided for the temporary differences between
the carrying amounts of the Company's assets and liabilities for
financial statement purposes and their tax bases. The sources of
the differences that give rise to the deferred income tax assets
and liabilities as of December 31, along with the income tax
effect of each, are as follows (in millions):
1993 Deferred 1992 Deferred
Income Tax Income Tax
Assets Liabilities Assets Liabilities
Property, plant and
equipment $ 272.1 $ 255.1
Postretirement and
other benefits $ 23.7 $ 16.6
Expense accruals 10.8 17.7
Integration and
restructuring costs 11.0
Other, net 11.0 31.3
$ 45.5 $ 283.1 $ 34.3 $ 286.4
During 1991, in accordance with APB No. 11, deferred income tax
provisions resulted from the differences in the timing of
recognizing certain revenues and expenses for financial statement
and income tax purposes. The sources of the differences, along
with the income tax effect of each, were as follows (in
millions):
Postretirement and other benefits $ (1.5)
Expense accruals (5.0)
Divestiture of telephone properties (26.7)
Other, net (3.1)
$ (36.3)
5. DEBT
Long-term debt as of December 31 is as follows (in millions):
1993 1992
Weighted
Average
Interest
Amount Rate Amount
Central Telephone Company
First mortgage bonds, due 1994
through 2021 $ 245.2 7.6% $ 298.1
Capital leases, due 1994 to
1996 0.2 8.5% 0.8
Short-term borrowings
classified as long-term debt 20.0
Subsidiaries
First mortgage bonds, due 1994
through 2021 115.5 7.9% 156.1
Notes, due 2002 through 2020 102.7 7.2% 37.5
463.6 512.5
Less current maturities 22.7 31.2
Total long-term debt, excluding
current maturities $ 440.9 $ 481.3
Long-term debt maturities during each of the next five years are
as follows (in millions):
Amount
1994 $ 22.7
1995 3.9
1996 22.8
1997 23.8
1998 15.7
The first mortgage bonds are secured by substantially all of the
Company's property, plant and equipment.
Provisions in certain debt agreements and charters restrict the
payment of dividends. Under the most restrictive of these
provisions, at any time the ratio of equity to total
capitalization falls below 50 percent, dividends are limited to a
percentage, as defined, of net income for the prior twelve month
period. As a result of this requirement, $115 million of
retained earnings were restricted from payment of dividends as of
December 31, 1993. In connection with dividend restrictions,
$138 million of the related subsidiaries' $154 million of
retained earnings is restricted as of December 31, 1993.
Short-term borrowings of $20 million at December 31, 1992 with a
weighted average interest rate of 7.3 percent are classified as
long-term debt due to the Company's intent to refinance such
borrowings on a long-term basis and its demonstrated ability to
do so.
The Company, Sprint and Sprint Capital Corporation (a wholly-
owned subsidiary of Sprint) have a $1.1 billion revolving credit
agreement with a syndicate of domestic and international banks,
under which the Company can borrow up to an aggregate of $200
million. The revolving credit agreement expires in July 1996
and, subject to the approval of the lenders, may be extended for
up to an additional two years. As of December 31, 1993, the
Company did not have any borrowings outstanding under the
agreement.
During 1993, the Company redeemed, prior to scheduled maturities,
$144 million of first mortgage bonds with interest rates ranging
from 7.5 percent to 8.6 percent. During 1992, the Company
redeemed, prior to scheduled maturities, $148 million of first
mortgage bonds and debentures with interest rates ranging from
6.7 percent to 12.4 percent. Except for amounts deferred as
allowed by the state commissions, the prepayment penalties
incurred in connection with the early extinguishments of debt and
the write-off of related debt issuance costs aggregated $5
million in 1993, net of related income tax benefits, and are
reflected as extraordinary losses in the consolidated statement
of income. Consistent with regulatory treatment, prepayment
penalties incurred in 1992 are being amortized over the life of
the applicable new issues.
6. COMMITMENTS AND CONTINGENCIES
Minimum rental commitments as of December 31, 1993 for all non-
cancelable operating leases, consisting principally of leases for
data processing equipment and real estate, are as follows (in
millions):
Amount
1994 $ 5.3
1995 4.6
1996 3.7
1997 3.3
1998 0.9
Thereafter 1.0
Gross rental expense aggregated $22 million in 1993 and 1992, and
$21 million in 1991.
7. RELATED PARTY TRANSACTIONS
Under agreements with Sprint and Centel, the Company reimburses
such affiliates for data processing services, other data related
costs and certain management costs which are incurred for the
Company's benefit. Total charges to the Company aggregated $49
million, $45 million and $43 million in 1993, 1992 and 1991,
respectively. The Company enters into cash advance and borrowing
transactions with such affiliates; generally, interest on such
transactions is computed based on the rate at which the Company
is able to obtain funds externally. Interest expense on advances
from such affiliates was $1 million in 1993. Interest expense in
1992 and 1991 was not significant. Interest income on advances
to such affiliates was $1 million in 1993 and 1992 and $2 million
in 1991.
The Company purchases telecommunications equipment, construction
and maintenance equipment, materials and supplies from its
affiliate, North Supply. Total purchases for 1993 were $13
million.
The Company provides various services to Sprint's long distance
communications services division, such as network access, billing
and collection services, operator services and the lease of
network facilities. The Company received $20 million in 1993 for
these services The Company paid Sprint's long distance
communications services division $1 million in 1993 for
interexchange telecommunications services.
The CenDon partnership (CenDon), a general partnership between
Centel Directory Company, an affiliate, and The Reuben H.
Donnelley Corporation, pays the Company a fee for the right to
publish telephone directories in the Company's operating
territories, a listing fee and a fee for billing and collections
services performed for CenDon by the Company. CenDon paid the
Company $50 million in 1993 and 1992 and $46 million in 1991.
8. ADDITIONAL FINANCIAL INFORMATION
Divestiture of Telephone Properties
During 1991, the sale of the Company's local telephone operations
in Minnesota and Iowa were completed, pursuant to a definitive
agreement reached in November 1990. Proceeds from the sales
included $116 million in cash, 2,885,000 shares of Rochester
Telephone Corporation (Rochester) common stock and ownership
rights in various cellular partnerships. Gains of $64 million,
net of related income taxes, were realized on the sale. The
Company received $112 million in cash and advances from Centel
for the Rochester common stock and the cellular franchises and
paid a dividend in cash and advances for the same amount to
Centel.
Financial Instruments Information
The Company's financial instruments consist of long-term debt
including current maturities with carrying amounts as of December
31, 1993 and 1992, of $464 million and $513 million,
respectively, and an estimated fair values of $511 million and
$526 million, respectively. The fair values are estimated based
on the present value of estimated future cash flows using a
discount rate commensurate with the risks involved.
Supplemental Cash Flows Information
The supplemental disclosures required for the consolidated
statements of cash flows for the years ended December 31, are as
follows (in millions):
1993 1992 1991
Cash paid for
Interest, net of amounts
capitalized $ 39.4 $ 40.5 $ 41.5
Income taxes 38.5 39.1 89.6
Major Customer Information
Operating revenues from American Telephone & Telegraph resulting
primarily from network access, billing and collection services
and the lease of network facilities aggregated approximately $137
million, $150 million and $154 million for 1993, 1992 and 1991,
respectively.
9. SUPPLEMENTAL QUARTERLY INFORMATION - UNAUDITED
1993 Quarters Ended
March 31 June 30 September 30 December 31
(in millions)
Operating revenues $ 204.9 $ 215.4 $ 218.8 $ 229.5
Operating income
(loss)[1] (38.0) 48.0 47.3 40.9
Income (loss) before
extraordinary item
and cumulative
effect of
changes in
accounting
principles (28.9) 25.0 24.7 20.6
Net income (loss) (50.6) 25.0 20.9 19.9
1992 Quarters Ended
March 31 June 30 September 30 December 31
(in millions)
Operating revenues $ 194.2 $ 198.2 $ 198.5 $ 195.7
Operating income 36.0 39.5 33.7 35.2
Income before
extraordinary item
and cumulative
effect of
changes in
accounting
principles 17.8 20.0 16.3 17.5
Net income 17.3 20.0 16.3 17.5
[1] During the first, third and fourth quarters 1993, the
Company recognized nonrecurring charges of $68 million, $5
million and $4 million, respectively. Such charges reduced
income before extraordinary item and cumulative effect of
changes in accounting principles by $44 million, $2 million
and $2 million, respectively. (See Note 2 for additional
information.)
CENTRAL TELEPHONE COMPANY
SCHEDULE V -- CONSOLIDATED PROPERTY, PLANT AND EQUIPMENT
Year Ended December 31, 1993
(In Millions)
Balance Balance
beginning Additions, Other end of
of year at cost Retirements changes year
Land and buildings $113.0 $ 5.3 $2.1 $ 0.2 $116.4
Other general
support assets 151.7 14.8 26.9 (0.8) 138.8
Cable and wire
facility assets 1,067.7 73.9 9.8 (1.2) 1,130.6
Central office
assets 869.4 73.6 17.3 (12.3) 913.4
Information
origination/
termination assets 99.9 10.2 4.0 106.1
Telephone plant
under construction 28.3 (14.4) 13.9
$2,330.0 $ 163.4 $60.1 $ (14.1) [1] $2,419.2
[1] Primarily represents the write-off of certain software
costs to conform the Company's accounting with the predominant
practice in the industry and with the accounting method used
by Sprint's local communications services division.
CENTRAL TELEPHONE COMPANY
SCHEDULE V -- CONSOLIDATED PROPERTY, PLANT AND EQUIPMENT
Year Ended December 31, 1992
(In Millions)
Balance Balance
beginning Additions, Other end of
of year at cost Retirements changes year
Land and buildings $107.2 $ 6.7 $1.1 $ 0.2 $113.0
Other general
support assets 140.5 22.2 11.1 0.1 151.7
Cable and wire
facility assets 1,017.6 60.7 10.6 1,067.7
Central office
assets 825.8 60.9 17.0 (0.3) 869.4
Information
origination/
termination assets 225.5 7.8 133.3 (0.1) 99.9
Telephone plant
under construction 18.4 9.8 0.1 28.3
$2,335.0 $ 168.1 $173.1 $2,330.0
CENTRAL TELEPHONE COMPANY
SCHEDULE V -- CONSOLIDATED PROPERTY, PLANT AND EQUIPMENT
Year Ended December 31, 1991
(In Millions)
Balance Balance
beginning Additions, Other end of
of year at cost Retirements changes year
Land and buildings $114.3 $ 4.6 $11.1 $ (0.6) $107.2
Other general
support assets 143.0 16.2 22.9 4.2 140.5
Cable and wire
facility assets 1,049.7 67.0 99.0 (0.1) 1,017.6
Central office
assets 851.7 73.8 96.7 (3.0) 825.8
Information
origination/
termination assets 242.0 8.1 25.1 0.5 225.5
Telephone plant
under construction 26.9 (7.5) (1.0) 18.4
$2,427.6 $162.2 $254.8 [1] $2,335.0
[1] Retirements include approximately $213 million related
to the divestiture of the Company's operations in Minnesota
and Iowa.
CENTRAL TELEPHONE COMPANY
SCHEDULE VI -- CONSOLIDATED ACCUMULATED DEPRECIATION
Year Ended December 31, 1993
(In Millions)
Balance Additions Balance
beginning charged Other end of
of year to income Retirements changes year
Buildings $ 23.4 $3.2 $ 2.1 $(0.6) $ 23.9
Other general
support assets 80.9 16.1 26.9 3.3 73.4
Cable and wire
facility assets 356.7 47.4 9.8 (3.0) 391.3
Central office
assets 325.9 59.6 17.3 (1.0) 367.2
Information
origination/
termination assets 84.3 7.0 4.0 0.6 87.9
$ 871.2 $133.3 [1] $ 60.1 $(0.7) $ 943.7
[1] Reconciliation of additions charged to income to
amount disclosed in the consolidated statement of
income:
Amount charged to income $ 133.3
Amortization of intangibles 1.0
Depreciation and amortization included in
consolidated statement of income $ 134.3
CENTRAL TELEPHONE COMPANY
SCHEDULE VI -- CONSOLIDATED ACCUMULATED DEPRECIATION
Year Ended December 31, 1992
(In Millions)
Balance Additions Balance
beginning charged Other end of
of year to income Retirements changes year
Buildings $ 21.6 $3.3 $ 1.1 $(0.4) $ 23.4
Other general
support assets 80.5 10.5 11.1 1.0 80.9
Cable and wire 326.2 44.4 10.5 (3.4) 356.7
facility assets
Central office 282.8 60.0 17.1 0.2 325.9
assets
Information
origination/ 208.4 8.9 133.3 0.3 84.3
termination assets
$ 919.5 $127.1 [1] $ 173.1 $(2.3) $ 871.2
[1] Reconciliation of additions charged to income to
amount disclosed in the consolidated statement of
income:
Amount charged to income $ 127.1
Amortization of intangibles 0.7
Depreciation and amortization included in
consolidated statement of income $ 127.8
CENTRAL TELEPHONE COMPANY
SCHEDULE VI -- CONSOLIDATED ACCUMULATED DEPRECIATION
Year Ended December 31, 1991
(In Millions)
Balance Additions Balance
beginning charged Other end of
of year to income Retirements changes year
Buildings $ 23.6 $3.0 $ 4.6 $(0.4) $ 21.6
Other general 74.6 19.5 15.6 2.0 80.5
support assets
Cable and wire 324.2 43.0 38.2 (2.8) 326.2
facility assets
Central office 274.5 58.4 50.3 0.2 282.8
assets
Information
origination/ 217.0 13.9 23.4 0.9 208.4
termination assets
$ 913.9 $137.8 [1] $ 132.1 [2] $(0.1) $ 919.5
[1] Reconciliation of additions charged to income to
amount disclosed in the consolidated statement of
income:
Amount charged to income $ 137.8
Amortization of intangibles 0.7
Depreciation and amortization included in
consolidated statement of income $ 138.5
[2] Reconciliation of retirements included in
Schedule V -- Consolidated Property, Plant and
Equipment:
Amount charged to reserve $ 132.1
Net book value of property sold in divestiture
of local companies 122.7
Total Schedule V retirements $ 254.8
CENTRAL TELEPHONE COMPANY
SCHEDULE VIII -- CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1993, 1992 and 1991
(In Millions)
Additions
Balance Charged Charged Other Balance
beginning to to other additions end of
of year income accounts (deductions) year
1993
Allowance for
doubtful accounts $0.5 $ 4.5 $ (4.4) [1] $0.6
1992
Allowance for
doubtful accounts $0.6 $ 2.8 $ (2.9) [1] $0.5
1991
Allowance for
doubtful accounts $0.6 $ 2.4 $ (2.4) [1] $0.6
[1] Accounts charged off, net of collections.
CENTRAL TELEPHONE COMPANY
SCHEDULE IX -- CONSOLIDATED SHORT-TERM BORROWINGS
Years Ended December 31, 1993, 1992 and 1991
(In Millions)
1993 1992 [1] 1991
Balance at end of period $ 20.0
Weighted average interest rate 3.73%
Average amount outstanding
during the year $28.1 $ 28.2 $25.3
Maximum amount outstanding
during the year $67.0 $ 45.7 $58.1
Weighted average interest rate
during the year (computed by
dividing the annual interest
expense by the average debt
outstanding during the year) 3.17% 3.96% 6.81%
[1] As of December 31, 1992, short-term borrowings were
classified as long-term debt in the consolidated balance sheet
due to the Company's intent to refinance such borrowings on a
long-term basis.
CENTRAL TELEPHONE COMPANY
SCHEDULE X -- CONSOLIDATED SUPPLEMENTARY
INCOME STATEMENT INFORMATION
Years Ended December 31, 1993, 1992 and 1991
(In Millions)
1993 1992 1991
Maintenance and repairs [1] $ 288.4 $ 262.7 $ 259.3
Taxes, other than payroll and
income taxes:
Property taxes $ 14.9 $ 15.5 $ 15.5
Gross receipts and other 11.1 9.8 8.9
$ 26.0 $ 25.3 $ 24.4
[1] Amounts represent plant operations expense as
maintenance and repairs is the primary component of this
total.
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
As reported in Central Telephone's Current Report on Form 8-K
dated April 28, 1993, following consummation of the Sprint/Centel
merger, Arthur Andersen & Co. was replaced with Ernst & Young as
auditors of the Company, effective April 23, 1993.
Part III
Item 10. Directors and Executive Officers of the Registrant
Pursuant to Instruction G(3) to Form 10-K, the information
relating to Directors of Central Telephone required by Item 10 is
incorporated by reference from Central Telephone's definitive
proxy statement or information statement which is anticipated to
be filed within 120 days after the end of Central Telephone's
fiscal year ended December 31, 1993.
For information pertaining to Executive Officers of Central
Telephone, as required by Instruction 3 of Paragraph (b) of Item
401 of Regulation S-K, refer to the "Executive Officers of the
Registrant" section of Part I of this report.
Pursuant to Instruction G(3) to Form 10-K, the information
relating to compliance with Section 16(a) required by Item 10 is
incorporated by reference from Central Telephone's definitive
proxy statement or information statement which is anticipated to
be filed within 120 days after the end of Central Telephone's
fiscal year ended December 31, 1993.
Item 11. Executive Compensation
Pursuant to Instruction G(3) to Form 10-K, the information
required by Item 11 is incorporated by reference from Central
Telephone's definitive proxy statement or information statement
which is anticipated to be filed within 120 days after the end of
Central Telephone's fiscal year ended December 31, 1993.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Pursuant to Instruction G(3) to Form 10-K, the information
required by Item 12 is incorporated by reference from Central
Telephone's definitive proxy statement or information statement
which is anticipated to be filed within 120 days after the end of
Central Telephone's fiscal year ended December 31, 1993.
Item 13. Certain Relationships and Related Transactions
Pursuant to Instruction G(3) to Form 10-K, the information
required by Item 13 is incorporated by reference from Central
Telephone's definitive proxy statement or information statement
which is anticipated to be filed within 120 days after the end of
Central Telephone's fiscal year ended December 31, 1993.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a) 1. The consolidated financial statements of the Company
and supplementary financial information are listed in the
Index to Financial Statements and Financial Statement
Schedules included at Item 8 of this report.
2. The consolidated financial statement schedules of the
Company are listed in the Index to Financial Statements and
Financial Statement Schedules included at Item 8 of this
report.
3. The following exhibits are filed as part of this
report.
3(a) Certificate of Incorporation of Central Telephone,
as amended.
3(b) Bylaws of Central Telephone, as amended.
4(a) Indenture dated June 1, 1944, between Central
Telephone and The First National Bank of Chicago and
Robert L. Grinnell, as Trustees (under which J. G.
Finley is successor to Robert L. Grinnell), as amended
and supplemented by indentures supplemental thereto
through and including a Thirty-third Supplemental
Indenture dated as of August 15, 1982 (Incorporated by
reference to Exhibit No. 4A to Central Telephone's
Registration Statement No. 33-10475 filed December 1,
1986).
4(b) Thirty-fourth Supplemental Indenture, dated as of
December 15, 1986 (Incorporated by reference to Exhibit
No. 4B to Central Telephone's Registration Statement
No. 33-35411 filed June 14, 1990).
4(c) Thirty-fifth Supplemental Indenture, dated as of
October 15, 1990 (Incorporated by reference to Central
Telephone's Current Report on Form 8-K dated October
26, 1990).
4(d) Thirty-sixth Supplemental Indenture, dated as of
March 15, 1991 (Incorporated by reference to Central
Telephone's Current Report on Form 8-K dated June 14,
1991).
4(e) Thirty-seventh Supplemental Indenture dated as of
August 15, 1992.
12 Ratio of Earnings to Fixed Charges
21 Subsidiaries of the Registrant.
23(a) Consent of Ernst & Young.
23(b) Consent of Arthur Andersen & Co.
Central Telephone will furnish to the Securities and
Exchange Commission, upon request, a copy of the
instruments, other than the indentures listed as Exhibits
4(a), (b), (c), (d) and (e), defining the rights of holders
of its long-term debt and the long-term debt of its
subsidiaries. The total amount of securities authorized
under any of said other instruments does not exceed 10
percent of the total assets of Central Telephone and its
subsidiaries on a consolidated basis.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of
1993.
(c) Exhibits are listed in Item 14(a).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CENTRAL TELEPHONE COMPANY
(Registrant)
By /s/ D. Wayne Peterson
D. Wayne Peterson
President and Chief
Executive Officer
Date: March 31, 1994
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities indicated on
the 31st day of March, 1994.
/s/ D. Wayne Peterson
D. Wayne Peterson
President and Chief
Executive Officer
/s/ John P. Meyer
John P. Meyer
Vice President - Chief
Financial Officer
/s/ Ralph J. Hodge
Ralph J. Hodge
Vice President -
Controller
SIGNATURES
CENTRAL TELEPHONE COMPANY
(Registrant)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities indicated on
the 31st day of March, 1994.
/s/ Stephen M. Bailor
Stephen M. Bailor, Director
/s/ Don A. Jensen
Don A. Jensen, Director
/s/ William E. McDonald
William E. McDonald, Director
/s/ D. Wayne Peterson
D. Wayne Peterson, Director
/s/ Alan J. Sykes
Alan J. Sykes, Director
/s/ M. Jeannine Strandjord
M. Jeannine Strandjord, Director
/s/ Dianne Ursick
Dianne Ursick, Director
Exhibit 3(a)
CERTIFICATE OF INCORPORATION
of
CENTRAL TELEPHONE COMPANY
Original Certificate of Incorporation
Filed under the Name of
New Centel, Inc.
December 14, 1970
(Amended March 16, 1994)
First: The name of the corporation (which is hereinafter
referred to as the "Corporation") is
CENTRAL TELEPHONE COMPANY
Second: The principal office of the Corporation in the
State of Delaware is to be located at 1209 Orange Street, in
the City of Wilmington, County of New Castle. The name of its
resident agent therein is The Corporation Trust Company, and
the address of said resident agent is 1209 Orange Street, in
said City, County and State.
Third: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
Fourth: The total number of shares of all classes of
stock which the Corporation shall have authority to issue is
eleven million thirty-two thousand nine hundred ninety-three
(11,032,993) shares, of which nine hundred seventy-two
thousand three hundred ninety-nine (972,399) shares shall be
Cumulative Preferred Stock without par value, fifty-three
thousand three hundred four (53,304) shares shall be
Convertible Junior Preferred Stock without par value and ten
million (10,000,000) shares shall be Common Stock without par
value.
A description of said different classes of stock and a
statement of the relative rights of the holders of stock of
such classes and the designations, preferences and
participating, voting, optional or other special rights and
the qualifications, limitations or restrictions thereof, of
the stock of such classes are as follows:
(1) The authorized shares of Cumulative Preferred Stock
without par value shall be issued in series, as follows:
35,000 shares of the stated value of $50 per share
as Cumulative Preferred Stock, $2.50 Dividend
Series,
144,975 shares of the stated value of $25 per share
as Cumulative Preferred Stock, $1.24 Dividend
Series,
4,852 shares of the stated value of $100 per share
as Cumulative Preferred Stock, $5 Dividend Series,
26,400 shares of the stated value of $100 per share
as Cumulative Preferred Stock, $4.70 Dividend
Series,
and the authorized shares of Cumulative Preferred Stock
without par value not so issued shall be issued in one or more
other series and with such designation for each such series
sufficient to distinguish the shares thereof from the shares
of all other series and classes as shall be stated and
expressed in the resolution or resolutions providing for the
issue of each such series adopted by the Board of Directors.
Authority is hereby expressly vested in the Board of Directors
to divide, and to provide for the issue from time to time of,
authorized and unissued Cumulative Preferred Stock in series
and to fix, prior to the issue of any shares of such series,
to the extent permitted by the law of the State of Delaware,
the voting powers, designations, preferences and relative,
participating, optional or other rights not fixed herein or in
an amendment hereto of shares of such series. All shares of
Cumulative Preferred Stock of any one series shall be
identical with each other share of the same series in all
respects, except that if issued at different times such shares
of the same series may, as hereinafter in Section (2) in this
Article Fourth provided, differ as to the dates from which
dividends thereon shall be cumulative.
The shares of Cumulative Preferred Stock of all series
are for convenience of reference sometimes collectively
designated in this Certificate of Incorporation as "Cumulative
Preferred Stock."
All authorized shares of Convertible Junior Preferred
Stock shall be issued as one class of the stated value of $10
per share.
(2) The holders of the Cumulative Preferred Stock of
each series shall be entitled to receive out of the net
profits or the net assets in excess of capital or any surplus
of the Corporation at the time legally available for the
payment of dividends under the law of the State of Delaware,
hereinafter in this Certificate of Incorporation referred to
as "net profits or surplus", but only as and when declared by
the Board of Directors, dividends on each share at the rate
fixed for such series herein or in the resolution or
resolutions providing for the issue of such series adopted by
the Board of Directors, and no more, payable in cash. Such
dividends shall be payable quarterly on the last days of
March, June, September and December in each year. Such
dividends may be declared and/or paid before, during or after
the period with respect to which they are payable, but shall
not be in arrears until after the date as of which such
dividends for any such period are payable.
Such dividends on the Cumulative Preferred Stock shall be
deemed to accrue from day to day, whether or not earned or
declared, and shall commence to accrue on each share thereof:
(a) from such date, if any, as may be fixed by the
Board of Directors prior to the issue thereof; or
(b) if no such date is fixed, then from the date of
issue thereof;
and shall be cumulative from the date on which such dividends
commence to accrue.
If cumulative dividends shall not have been fully paid or
declared and set apart for payment on each share of the
Cumulative Preferred Stock, the amount of the deficiency
(without interest) shall be fully paid, or dividends in such
amount declared and set apart for payment, before any
dividends are paid or declared or set apart for payment on the
Convertible Junior Preferred Stock or the Common Stock and
before any sum or sums shall be paid or set apart for the
purchase, retirement or redemption of any shares of any class
of stock of the Corporation. No dividend shall be declared or
paid on any share of Cumulative Preferred Stock at any time
when less than the full amount of cumulative dividends which
have accrued and become payable on all shares of the
Cumulative Preferred Stock have been paid or declared and set
apart for payment on such shares, unless the same proportion
of the amount of the dividends then accrued and which have
become payable on each share of the Cumulative Preferred Stock
is paid or declared and set apart for payment on each such
share.
Dividends on the Convertible Junior Preferred Stock
shall, in like manner as in respect of the Cumulative
Preferred Stock, be cumulative quarterly at the rate fixed
therefor herein, so that in case quarterly dividends at said
rate on each share of the Convertible Junior Preferred Stock
shall not have been fully paid or declared and set apart for
payment from the date dividends commence to accrue thereon, as
hereinafter provided, the amount of the deficiency (without
interest), together with the current quarterly dividend, shall
be fully paid, or dividends in such amount declared and set
apart for payment, before any dividends are paid or declared
or set apart for payment on the Common Stock and before any
sum or sums are paid or set apart for the purchase, retirement
or redemption of any shares of Convertible Junior Preferred
Stock or Common Stock. At any time less than full cumulative
dividends then accrued on each share of Convertible Junior
Preferred Stock are declared and paid, no dividends shall be
declared or paid on any share of Convertible Junior Preferred
Stock unless the same proportionate amount of the dividends
then accrued is declared and paid on each share of the
Convertible Junior Preferred Stock.
Such dividends on the Convertible Junior Preferred Stock
shall be deemed to accrue from day to day, whether or not
earned or declared, and shall commence to accrue on each share
thereof
(a) from such date, if any, as may be fixed by the
Board of Directors prior to the issue thereof; or
(b) if no such date is fixed, then from the date of
issue thereof;
and shall be cumulative from the date on which such dividends
commence to accrue. Such dividends shall be payable quarterly
on the last days of March, June, September and December in
each year, if declared by the Board of Directors. They may be
declared and/or paid before, during or after the period with
respect to which they are payable, but shall not be in arrears
until after the date as of which such dividends for any such
period are payable.
(3) Out of any net profits or surplus of the
Corporation remaining after cumulative dividends upon the
Cumulative Preferred Stock for all past dividend periods,
together with the current quarterly dividends, shall have been
fully paid or declared and set apart for payment and provided
that the Corporation shall not be in default in respect of any
sinking or purchase fund requirement applicable in respect of
any of the Cumulative Preferred Stock, then and not otherwise
and subject to such limitations as may be provided herein for
the benefit of any series of Cumulative Preferred Stock or in
the resolution or resolutions of the Board of Directors
providing for the issue of any series of Cumulative Preferred
Stock, (i) the Board of Directors may declare and pay
dividends upon the Convertible Junior Preferred Stock of the
Corporation, and no holder of Cumulative Preferred Stock as
such shall be entitled to share in such dividends, and (ii) if
cumulative dividends as aforesaid upon the Convertible Junior
Preferred Stock for all past dividend periods, together with
the current quarterly dividend, shall have been fully paid or
declared and set apart for payment, and all other conditions
thereto hereinabove referred to have been met, then the Board
of Directors may declare and pay dividends or declare and make
distributions upon the Common Stock of the Corporation, and no
holder of Cumulative Preferred Stock or of Convertible Junior
Preferred Stock shall, as such, be entitled to share in such
dividends or distributions.
(4) The Cumulative Preferred Stock shall be preferred
over the Convertible Junior Preferred Stock and the
Convertible Junior Preferred Stock shall be preferred over the
Common Stock as to both earnings and assets, and in the event
of any liquidation, dissolution or winding up of the
Corporation or any reduction of its capital resulting in the
distribution of any of its assets to its stockholders, the
holders of the Cumulative Preferred Stock shall be entitled to
receive for each share thereof an amount equal to the stated
value thereof, if such liquidation, dissolution, winding up or
reduction of capital be involuntary, and the current
redemption price thereof payable upon redemption at the option
of the Corporation (unless any such shares shall not be
redeemable at the option of the Corporation, in which case the
stated value thereof shall be distributable in respect of such
shares) if such liquidation, dissolution, winding up or
reduction of capital be voluntary, together in all cases with
an amount equal to cumulative dividends accrued and unpaid
thereon to the date of distribution, before any distribution
of any assets shall be made to the holders of the Convertible
Junior Preferred Stock or the Common Stock; and after payment
to the holders of the Cumulative Preferred Stock, as
aforesaid, the holders of the Convertible Junior Preferred
Stock shall be entitled to receive for each share thereof an
amount equal to the current redemption price thereof payable
upon redemption at the option of the Corporation whether such
liquidation, dissolution, winding up or reduction of capital
be voluntary or involuntary, together with an amount equal to
cumulative dividends accrued and unpaid thereon to the date of
distribution, before any distribution of any assets shall be
made to the holders of the Common Stock. After receipt in the
order and of the amounts to which they are respectively
entitled, as aforesaid, the holders of the Cumulative
Preferred Stock and the Convertible Junior Preferred Stock
shall be entitled to no further participation in such
distribution and the holders of the Common Stock shall be
entitled, to the exclusion of the holders of the Cumulative
Preferred Stock and the holders of the Convertible Junior
Preferred Stock, to share, ratably, in all assets of the
Corporation remaining. If, upon any such liquidation,
dissolution, winding up or reduction of its capital resulting
in the distribution of any of its assets to its stockholders,
the assets distributable among the holders of the Cumulative
Preferred Stock shall be insufficient to permit the payment in
full to such holders of the full preferential amounts
aforesaid, then the entire assets of the Corporation to be
distributed shall be distributed among the holders of the
Cumulative Preferred Stock then outstanding, ratably, in
proportion to the full preferential amounts to which they are
respectively entitled; and, similarly, if after payment to the
holders of the Cumulative Preferred Stock, of the full
preferential amounts to which they are entitled, the remaining
assets shall be insufficient to permit the payment in full to
the holders of the Convertible Junior Preferred Stock of the
amounts to which they are entitled in priority to the holders
of the Common Stock, then said remaining assets shall be
distributed among the holders of the Convertible Junior
Preferred Stock then outstanding, ratably, in proportion to
the amounts to which they are entitled in priority to the
holders of the Common Stock.
Neither the consolidation nor merger of the Corporation
with or into any other corporation or corporations, nor the
sale of all or substantially all of the assets of the
Corporation, shall be deemed to be a liquidation, dissolution
or distribution of assets within the meaning of any of the
provisions of this Certificate of Incorporation; provided,
however, that this paragraph shall not be construed to be a
limitation of or a restriction upon the preferential rights of
the holders of the Cumulative Preferred Stock or the holders
of the Convertible Junior Preferred Stock.
(5) Subject to the limitations imposed by Section (2) of
this Article Fourth and to any other limitations as to any
series provided herein or in the resolution or resolutions
providing for the issue of such series adopted by the Board of
Directors, at the election of the Corporation, to be exercised
by resolution of its Board of Directors, the whole or any part
of any one or more series of the Cumulative Preferred Stock or
the whole or any part of the Convertible Junior Preferred
Stock (but not sooner, in the case of the Convertible Junior
Preferred Stock, than five years and thirty days after the
initial issue of shares of such class) may be redeemed at any
time and from time to time upon not less than thirty nor more
than sixty days' previous notice given in such manner as may
be prescribed by the by-laws or by resolution of the Board of
Directors at the price for the shares to be redeemed fixed
herein or in the resolution or resolutions providing for the
issue of such shares adopted by the Board of Directors and, in
all cases, plus an amount equal to all cumulative dividends
accrued and unpaid on such shares to the date of redemption,
but without interest on the amount so payable. In the event
that a part and not the whole of any series of the Cumulative
Preferred Stock or a part and not the whole of the Convertible
Junior Preferred Stock shall be redeemed, the shares to be
redeemed shall be determined in such manner, either by lot or
pro rata among the holders of shares of such series or of the
Convertible Junior Preferred Stock, as the case may be or
otherwise, as shall be prescribed herein or, in the absence of
such prescription, by the by-laws or by resolution of the
Board of Directors. The Board of Directors shall have the
authority to increase or decrease the amount to be redeemed
from any holder so as to avoid fractional shares. From and
after the date fixed in any such notice as the date of
redemption, unless default shall be made by the Corporation in
the payment of the redemption price not later than the
redemption date so fixed, all dividends on the shares so
called for redemption shall cease to accumulate or accrue, and
all rights of the holders thereof as stockholders of the
Corporation, except the right to receive the redemption price,
including all cumulative dividends accrued and unpaid to the
date of redemption (without interest thereon as aforesaid),
shall cease and determine. At any time before the redemption
date the Corporation may deposit in trust the funds necessary
for such redemption with a bank or trust company, to be
designated in the notice of such redemption, doing business in
the City of Chicago and State of Illinois or in the City and
State of New York, and having capital, surplus and undivided
profits aggregating at least $5,000,000. In the event such
deposit is made so that the deposited funds shall be forthwith
available to the holders of the shares to be redeemed upon
surrender of the certificates evidencing such shares, then,
upon the giving of the notice of such redemption, as herein
above provided, or upon the earlier delivery to such bank or
trust company of irrevocable authorization and direction so to
give such notice, all shares with respect to the redemption of
which such deposit shall have been made and the giving of such
notice effected or authorization therefor given shall, whether
or not the certificates for such shares shall be surrendered
for cancellation, be deemed to be no longer outstanding for
any purpose and all rights with respect to such shares shall
thereupon cease and terminate, except only the right of the
holders of the certificates for such shares (i) to receive,
out of the funds so deposited in trust, from and after the
time of such deposit, the amount payable upon the redemption
thereof, without interest, or (ii) to exercise any privilege
of conversion which shall not theretofore have terminated.
Any funds so deposited, which shall not be required for the
payment of the redemption price of such shares by reason of
the exercise of any right of conversion subsequent to the date
of such deposit shall be paid over to the Corporation
forthwith. At the expiration of six years after the
redemption date, any such funds then remaining on deposit with
such bank or trust company shall be paid over to the
Corporation, free of trust, and thereafter the holders of the
certificates for such shares shall have no claims against such
bank or trust company, but only claims as unsecured creditors
against the Corporation for amounts equal to their pro rata
portion of the funds so paid over, without interest. Any
interest or other accretions to funds deposited with such bank
or trust company shall belong to the Corporation.
The provisions of this Section (5) with respect to the
method and effect of redemption shall be applicable to the
redemption of shares pursuant to any sinking fund created for
any series of the Cumulative Preferred Stock as well as to the
optional redemption of shares of Cumulative Preferred Stock or
Convertible Junior Preferred Stock, except to the extent, if
any, that the terms of such sinking fund, as fixed herein or
in the resolution or resolutions providing for the issue of
such series adopted by the Board of Directors, shall expressly
otherwise provide. Subject to the provisions hereof, the
Board of Directors shall have power to prescribe from time to
time the manner in which Cumulative Preferred Stock or
Convertible Junior Preferred Stock shall be redeemed.
(6) Subject to the limitations imposed by Section (2) of
this Article Fourth, nothing herein contained shall limit the
right of the Corporation to purchase any shares of the
Cumulative Preferred Stock or any shares of the Convertible
Junior Preferred Stock for any legal purpose.
(7) So long as any shares of the Cumulative Preferred
Stock shall be outstanding:
(a) the Corporation shall not, without the
affirmative vote or the written consent of the holders of
two-thirds of all shares of the Cumulative Preferred
Stock, as one class, outstanding at the time or as of a
record date fixed by the Board of Directors or by the by-
laws, create or authorize any stock of any class which
shall be prior in rank to such shares of the Cumulative
Preferred Stock with respect to the payment of dividends
or the distribution of assets, or amend this Certificate
of Incorporation so as adversely to affect any of the
preferences or other rights of the holders of the
Cumulative Preferred Stock; provided, that if any such
amendment would adversely affect any of the preferences
or other rights of the holders of one or more, but less
than all, of the respective series of the Cumulative
Preferred Stock, the holders of two-thirds or more of the
shares of the Cumulative Preferred Stock outstanding and
voting affirmatively for or consenting to such amendment,
as required, shall include the holders of at least two-
thirds of the shares of each such series so adversely
affected; and
(b) the Corporation shall not, without the
affirmative vote or the written consent of the holders of
a majority of the shares of the Cumulative Preferred
Stock, as one class, outstanding at the time or as of a
record date fixed by the Board of Directors or by the by-
laws, (i) create or authorize any stock of any class
ranking on a parity with the Cumulative Preferred Stock
with respect to the payment of dividends or the
distribution of assets or increase the number of
authorized shares of the Cumulative Preferred Stock, or
(ii) dissolve, liquidate or wind up the Corporation or
its affairs or consolidate with or merge into any other
corporation under applicable statutory procedure or make
any sale, transfer, lease or exchange of the property and
business of the Corporation as or substantially as an
entirety, but this provision shall not be applicable to a
mortgage or pledge.
(8) If no dividends or less than full cumulative
dividends shall have been paid for four quarterly dividend
periods, whether or not such periods are consecutive, on any
of the Cumulative Preferred Stock or if the Corporation shall
fail in any year to fulfill the requirements of the sinking
fund or purchase fund with respect to any series of the
Cumulative Preferred Stock entitled to the benefit of a
sinking fund or purchase fund and the terms of such sinking
fund or purchase fund shall so provide, the holders of the
Cumulative Preferred Stock, as a class, shall, at all meetings
held for the election of directors until full cumulative
dividends for all past quarterly dividend periods and the
current quarterly dividend period on all of the Cumulative
Preferred Stock shall have been paid or declared and set apart
for payment and until all such sinking fund or purchase fund
requirements which have matured shall have been fulfilled,
possess voting power to the exclusion of the holders of the
Convertible Junior Preferred Stock and the Common Stock to
elect the smallest number constituting a majority of the
directors to be elected and the holders of the Convertible
Junior Preferred Stock and the Common Stock, as if they were
one class, shall possess voting power to the exclusion of the
holders of the Cumulative Preferred Stock to elect the largest
number constituting a minority of the directors then to be
elected. Whenever the holders of shares of the Cumulative
Preferred Stock shall acquire the right to elect a majority of
the directors, a special meeting of the stockholders shall be
called by or on the order of a majority of the directors or by
or on the written request of any holder of shares of the
Cumulative Preferred Stock then outstanding who has held his
stock for a period of not less than six months, for the
purpose of electing a new Board of Directors, such meeting to
be held on not less than fifteen nor more than thirty days'
notice, provided, however, that no such special meeting shall
be called if an annual meeting of the stockholders is to be
held within sixty days after the holders of shares of the
Cumulative Preferred Stock shall have become entitled to
exercise such right of election. The terms of office of all
persons who may be directors of the Corporation at the time
shall terminate upon any election of directors by the holders
of shares of the Cumulative Preferred Stock in accordance with
the foregoing provisions, regardless of whether or not the
holders of shares of the Convertible Junior Preferred Stock
and the Common Stock shall have elected the remaining
directors of the Corporation; and unless and until such
remaining directors of the Corporation shall be elected by the
holders of shares of the Convertible Junior Preferred Stock
and the Common Stock, the number of directors, for the purpose
of determining the existence of a quorum or the validity of
any action taken, shall, notwithstanding any other provision
hereof, be deemed to be the number of directors elected by the
holders of shares of the Cumulative Preferred Stock. Whenever
the right of the holders of shares of the Cumulative Preferred
Stock to elect a majority of the directors shall terminate, a
special meeting of the stockholders shall be called by or on
the order of a majority of the directors or by or on the
written request of any holder of shares of the Convertible
Junior Preferred Stock or the Common Stock then outstanding
who has held his stock for a period of not less than six
months, for the purpose of electing a new Board of Directors,
such meeting to be held on not less than fifteen nor more than
thirty days' notice, provided, however, that no such special
meeting shall be called if an annual meeting of the
stockholders is to be held within sixty days after the right
of the holders of shares of the Cumulative Preferred Stock to
elect a majority of the directors shall terminate. The terms
of office of all persons who may be directors of the
Corporation at the time shall terminate upon the election of
directors by the holders of shares of the Cumulative Preferred
Stock, the Convertible Junior Preferred Stock and the Common
Stock with equal voting rights per share in respect of all the
directors then to be elected. If, during any interval between
meetings of stockholders for the election of directors while
the holders of shares of the Cumulative Preferred Stock shall
be entitled to elect a majority of the directors, the number
of directors in office who have been elected by the holders of
shares of the Cumulative Preferred Stock or the Convertible
Junior Preferred Stock and the Common Stock, as the case may
be, shall become less than the total number of directors which
the holders of shares of such class are entitled to elect,
whether by reason of the resignation, death or removal of any
director or directors, or an increase in the total number of
directors, the vacancy or vacancies shall be filled by a
majority vote of the directors then in office who were elected
by the holders of the shares of such class or whose
predecessors were so elected. Any director may be removed
from office by vote of the holders of a majority of the shares
of the class of stock voted for his election or for his
predecessor in cases where such director was elected by other
directors. A special meeting of the holders of shares of
either class may be called by a majority of the directors then
in office who were elected by the holders of the shares of
such class or whose predecessors were so elected, for the
purpose of removing a director in accordance with the
foregoing provisions and shall be called by or on the written
request of the holders of not less than 15% of the outstanding
shares of the class entitled to vote with respect to the
removal of any such director, such meeting to be held on not
less than fifteen nor more than thirty days' notice. At any
meeting of stockholders when the holders of shares of the
Cumulative Preferred Stock shall be entitled to vote for the
election of a majority of the directors, the absence of a
quorum of the holders of shares of the Cumulative Preferred
Stock or of the holders of shares of the Convertible Junior
Preferred Stock and the Common Stock shall not prevent an
election at any such meeting or adjournment thereof of
directors by the other such class if the necessary quorum of
the holders of shares of such other class is present in person
or by proxy at such meeting. For the purposes of such
election, a quorum shall consist of holders of not less than a
majority of the issued and outstanding shares of the class.
In the absence of a quorum of the holders of shares of either
such class, a majority of those holders of shares of such
class who are present in person or by proxy shall have power
to adjourn the election of the directors to be elected by such
class from time to time without notice other than announcement
at the meeting until the holders of the requisite number of
shares of such class shall be present in person or by proxy.
(9) Except as otherwise specifically provided in this
Article Fourth or as may be provided by the Board of Directors
in respect of any series of Cumulative Preferred Stock prior
to the issue of any shares of such series pursuant to the
authority vested in the Board of Directors by Section (1) of
this Article Fourth or as required by law, each share of each
class of stock of the Corporation shall represent one vote
which may be voted upon all measures, including the election
of directors. The election of directors need not be by ballot
unless so provided in the by-laws. Except as otherwise
expressly provided in this Article Fourth or by law, at all
meetings of stockholders a quorum for the transaction of any
business shall consist of the holders of such number of
shares, represented in person or by proxy, as shall be
entitled to cast a majority of the votes which might be cast
by the holders of all of the shares of the Corporation issued,
outstanding and entitled to be voted upon such business and,
except as otherwise expressly provided in this Article Fourth
or by law, the affirmative vote of a majority of such quorum
shall suffice to adopt any measure.
(10) Additional terms of the respective series of
Cumulative Preferred Stock and of the Convertible Junior
Preferred Stock are:
A.
THE CUMULATIVE PREFERRED STOCK, $2.50 DIVIDEND SERIES
1. The dividend rate on the Cumulative Preferred Stock,
$2.50 Dividend Series, shall be $2.50 per annum.
2. The price payable upon redemption at the option of
the Corporation of Cumulative Preferred Stock, $2.50 Dividend
Series, shall be Fifty Two Dollars and Fifty Cents ($52.50)
per share.
B.
THE CUMULATIVE PREFERRED STOCK, $1.24 DIVIDEND SERIES
1. The dividend rate on the Cumulative Preferred Stock,
$1.24 Dividend Series, shall be $1.24 per annum.
2. The price payable upon redemption at the option of
the Corporation of Cumulative Preferred Stock, $1.24 Dividend
Series, shall be Twenty-six Dollars ($26) per share to and
including September 30, 1972, and Twenty-five Dollars and
Fifty Cents ($25.50) per share thereafter.
3. At least twenty (20) and not more than sixty (60)
days prior to October 31 of each year the Corporation shall
mail to each holder of shares of Cumulative Preferred Stock,
$1.24 Dividend Series, of record as of a date not more than
fifty (50) days preceding such mailing, at the address of such
holder then appearing on the books of the Corporation, a
notice in writing of its intention to accept tenders of not
more than thirty-seven hundred fifty (3,750) shares of
Cumulative Preferred Stock, $1.24 Dividend Series, tendered to
the Corporation on or before such October 31 for purchase at a
price per share not exceeding Twenty Five Dollars ($25.00)
plus accrued dividends (the "maximum purchase price"). Not
later than October 31 of each year the Corporation shall, out
of any funds from which dividends might lawfully be paid,
deposit with a bank or trust company doing business in the
City of Chicago, State of Illinois, selected by the
Corporation and designated in the aforesaid notice as the
place to which tenders shall be delivered, a sum equal to the
maximum purchase price of thirty-seven hundred fifty (3,750)
shares of Cumulative Preferred Stock, $1.24 Dividend Series.
Tenders shall be accepted on October 31 in the order of
the prices at which they are made; those shares tendered at
the lowest price to be the first purchased. Among tenders at
the same price the Corporation may make selection of the
shares which it will purchase so that as nearly as may be
tenders may be accepted in their entirety rather than
partially. The Corporation may make partial acceptance of one
or more tenders so that the total number of shares purchased
will not exceed thirty-seven hundred fifty (3,750). If the
Corporation shall purchase less than all of the shares
represented by any certificate, a new certificate for the
shares not purchased will be issued to the holder of such
shares.
If after notice has been given and deposit of funds made
as aforesaid, less than thirty-seven hundred fifty (3,750)
shares of Cumulative Preferred Stock, $1.24 Dividend Series,
shall be tendered for purchase at not more than the maximum
purchase price, the purchase of such number of shares as shall
have been so tendered at not more than the maximum purchase
price shall constitute compliance by the Corporation for such
year with the provisions hereof. Any funds deposited for the
purpose of compliance with the provisions hereof and not
required for such purpose shall be returned to the Corporation
upon such compliance.
Shares will not be deemed tendered unless and until the
certificate or certificates therefor have been received by the
bank or trust company designated for the purpose nor unless,
if payment upon acceptance of tender thereof is to be made
other than to the record holder, such certificate or
certificates have been duly endorsed or are otherwise in
proper form for transfer, with all transfer taxes in respect
thereof paid or provided for.
Default by the Corporation in complying with the
provisions of this paragraph 3 shall preclude the declaration
or the payment of dividends or the making of any other
distribution whatsoever upon the Convertible Junior Preferred
Stock and the Common Stock of the Corporation until the
Corporation shall have cured such default by soliciting
tenders and depositing the funds necessary to the purchase in
the manner and upon the terms herein provided of such number
of shares of Cumulative Preferred Stock, $1.24 Dividend
Series, as shall equal the difference between (a) the product
of thirty-seven hundred fifty (3,750) multiplied by the number
of full twelve month periods elapsed since October 31, 1970;
and (b) the product of thirty-seven hundred fifty (3,750)
multiplied by the number of full twelve month periods since
October 31, 1970 for which the Corporation has complied with
the provisions of this paragraph 3; but neither the holder of
any shares of Cumulative Preferred Stock, $1.24 Dividend
Series, as such, nor the holders of all shares of Cumulative
Preferred Stock, $1.24 Dividend Series, as a class, shall be
entitled to apply to any court of law or equity for a money
judgment or a decree of specific performance or similar relief
or remedy on account of any such default other than to
restrain the Corporation from the declaration or payment of
dividends or the making of any distribution upon the
Convertible Junior Preferred Stock and the Common Stock of the
Corporation until such default shall have been cured.
4. Shares of Cumulative Preferred Stock, $1.24 Dividend
Series, redeemed, purchased upon tender, or otherwise
reacquired by the Corporation shall be canceled and upon such
cancellation shall be deemed to be authorized and unissued
shares of Cumulative Preferred Stock, but shall not be
reissued as shares of the same or any theretofore outstanding
series.
5. So long as any shares of Cumulative Preferred Stock,
$1.24 Dividend Series, shall be outstanding (and unless the
vote or assent of a greater number of shares of such series
shall then be required by law), without the assent, given by
vote at a meeting thereof called for the purpose, of the
holders of a majority in interest of the outstanding shares of
Cumulative Preferred Stock, $1.24 Dividend Series, the
Corporation shall not issue any shares of "preferred stock" or
issue any "funded debt" unless the "net earnings" of the
Corporation for 12 consecutive calendar months during the 15
months immediately preceding the month in which such issue is
to be made are at least one and one-half (1 1/2) times the
aggregate of the annual interest charges on all indebtedness
for borrowed money and the annual dividend requirements on all
preferred stock of the Corporation to be outstanding
immediately after the proposed issue.
As used in this paragraph 5, "preferred stock" means the
Cumulative Preferred Stock, $1.24 Dividend Series, and all
shares of any class of stock ranking in respect of dividends
or assets equally with or prior to the Cumulative Preferred
Stock, $1.24 Dividend Series; "funded debt" means all
indebtedness for borrowed money of the Corporation maturing
one year or more after the date of issuance thereof (excluding
renewals in such computations of time); and "net earnings"
means net income after depreciation, Federal income taxes and
other appropriate charges, but before interest charges and
dividends on preferred computed in accordance with generally
accepted accounting principles and without recognition of any
charges or credits to earned surplus and after excluding from
the computation of such net income all profits realized and
losses sustained from the sale or other disposition of capital
assets and resulting increases in and reductions of taxes
based on income. If notice of redemption of securities has
been given or irrevocably authorized to be given by or on
behalf of the Corporation and the funds necessary to effect
the redemption of such securities have been irrevocably
deposited in trust for such purpose, such securities shall not
be deemed to be outstanding for purposes of this paragraph 5.
C.
THE CUMULATIVE PREFERRED STOCK, $5 DIVIDEND SERIES
1. The dividend rate on the Cumulative Preferred Stock,
$5 Dividend Series, shall be $5 per annum.
2. The price payable upon redemption at the option of
the Corporation of Cumulative Preferred Stock, $5 Dividend
Series, shall be One Hundred Two Dollars ($102) per share.
D.
THE CUMULATIVE PREFERRED STOCK, $4.70 DIVIDEND SERIES
1. The dividend rate on the Cumulative Preferred Stock,
$4.70 Dividend Series, shall be $4.70 per annum.
2. The price payable upon redemption at the option of
the Corporation of Cumulative Preferred Stock, $4.70 Dividend
Series, shall be One Hundred Three Dollars and Fifty Cents
($103.50) to and including June 30, 1972; One Hundred Three
Dollars ($103) and One Hundred Two Dollars and Fifty Cents
($102.50) in each of the two (2) succeeding twelve month
periods, respectively; and One Hundred Two Dollars ($102)
after June 30, 1974.
3. At least twenty (20) and not more than sixty (60)
days prior to July 31 of each year, the Corporation shall mail
to each holder of shares of Cumulative Preferred Stock, $4.70
Dividend Series, of record as of a date not more than fifty
(50) days preceding such mailing, at the address of such
holder then appearing on the books of the Corporation, a
notice in writing of its intention to accept tenders of not
more than twelve hundred (1,200) shares of Cumulative
Preferred Stock, $4.70 Dividend Series, tendered to the
Corporation on or before such July 31 for purchase at a price
per share not exceeding $100 plus accrued dividends (the
"maximum purchase price"). Not later than July 31 of each
year the Corporation shall, out of any funds from which
dividends might lawfully be paid, deposit with a bank or trust
company doing business in the City of Chicago, selected by the
Corporation and designated in the aforesaid notice as the
place to which tenders shall be delivered, a sum equal to the
maximum purchase price of twelve hundred (1,200) shares of
Cumulative Preferred Stock, $4.70 Dividend Series.
Tenders shall be accepted on July 31 in the order of the
prices at which they are made; those shares tendered at the
lowest price to be the first purchased. Among tenders at the
same price the Corporation may prorate the available funds
according to the number of shares held or the number of shares
tendered by each holder making a tender at such price or may
make selection of the shares which it will purchase so that as
nearly as may be tenders may be accepted in their entirety
rather than partially. The Corporation may make partial
acceptance of one or more tenders so that the total number of
shares purchased will not exceed twelve hundred (1,200). If
the Corporation shall purchase less than all of the shares
represented by any certificate, a new certificate for the
shares not purchased will be issued to the holder of such
shares.
If after notice has been given and deposit of funds made
as aforesaid, less than twelve hundred (1,200) shares of
Cumulative Preferred Stock, $4.70 Dividend Series, shall be
tendered for purchase at not more than the maximum purchase
price, the purchase of such number of shares as shall have
been so tendered at not more than the maximum purchase price
shall constitute compliance by the Corporation for such year
with the provisions hereof. Any funds deposited for the
purpose of compliance with the provisions hereof and not
required for such purpose shall be returned to the Corporation
upon such compliance.
Shares will not be deemed tendered unless and until the
certificate or certificates therefor have been received by the
bank or trust company designated for the purpose nor unless,
if payment upon acceptance of tender thereof is to be made
other than to the record holder, such certificate or
certificates have been duly endorsed or are otherwise in
proper form for transfer, with all transfer taxes due in
respect thereof paid or provided for.
Default by the Corporation in complying with the
provisions of this paragraph 3 shall preclude the declaration
or the payment of dividends or the making of any other
distribution whatsoever upon the Convertible Junior Preferred
Stock and the Common Stock of the Corporation until the
Corporation shall have cured such default by soliciting
tenders and depositing the funds necessary to the purchase in
the manner and upon the terms herein provided of such number
of shares of Cumulative Preferred Stock, $4.70 Dividend
Series, as shall equal the difference between (a) the product
of twelve hundred (1,200) multiplied by the number of full
twelve month periods elapsed from and after July 31, 1970, and
(b) the product of twelve hundred (1,200) multiplied by the
number of full twelve month periods from and after July 31,
1970 for which the Corporation has complied with the
provisions of this paragraph 3; but neither the holder of any
shares of Cumulative Preferred Stock, $4.70 Dividend Series,
as such, nor the holders of all shares of Cumulative Preferred
Stock, $4.70 Dividend Series, as a class, shall be entitled to
apply to court of law or equity for a money judgment or a
decree of specific performance or similar relief or remedy on
account of any such default other than to restrain the
Corporation from the declaration or payment of dividends or
the making of any distribution upon the Convertible Junior
Preferred Stock and the Common Stock of the Corporation until
such default shall have been cured.
4. Shares of Cumulative Preferred Stock, $4.70 Dividend
Series, purchased upon tender as herein provided shall be
canceled and shall not be reissued.
5. So long as any shares of Cumulative Preferred Stock,
$4.70 Dividend Series, shall be outstanding (and unless the
vote or assent of a greater number of shares of such series
shall then be required by law), without the assent, given by
vote at a meeting thereof called for the purpose, of the
holders of a majority in interest of the outstanding shares of
Cumulative Preferred Stock, $4.70 Dividend Series, the
Corporation shall not issue any shares of "preferred stock" or
issue any "funded debt" unless the "net earnings" of the
Corporation for 12 consecutive calendar months during the 15
months immediately preceding the month in which such issue is
to be made are at least one and one-half (1 1/2) times the
aggregate of the annual interest charges on all indebtedness
for borrowed money and the annual dividend requirements on all
preferred stock of the Corporation to be outstanding
immediately after the proposed issue. As used in this
paragraph 5, "preferred stock" means the Cumulative Preferred
Stock, $4.70 Dividend Series, and all shares of any class of
stock ranking in respect of dividends or assets equally with
or prior to the Cumulative Preferred Stock, $4.70 Dividend
Series; "funded debt" means all indebtedness for borrowed
money of the Corporation maturing one year or more after the
date of issuance thereof (excluding renewals in such
computations of time); and "net earnings" means net income
after depreciation, Federal income taxes and other appropriate
charges, but before interest charges and dividends on
preferred stock, computed in accordance with generally
accepted accounting principles and without recognition of any
charges or credits to earned surplus and after excluding from
the computation of such net income all profits realized and
losses sustained from the sale or other disposition of capital
assets and resulting increases in and reductions of taxes
based on income. If notice of redemption of securities has
been given or irrevocably authorized to be given by or on
behalf of the Corporation and the funds necessary to effect
the redemption of such securities have been irrevocably
deposited in trust for such purpose, such securities shall not
be deemed to be outstanding for purposes of this paragraph 5.
E.
THE CONVERTIBLE JUNIOR PREFERRED STOCK
1. The dividend rate on the Convertible Junior
Preferred Stock shall be $2 per annum.
2. The price payable upon redemption at the option of
the Corporation of Convertible Junior Preferred Stock shall be
$25 per share.
3. (a) The shares of Convertible Junior Preferred Stock
(hereinafter in this subdivision E sometimes called the
"Convertible Preferred") shall be convertible at the option of
the respective holders thereof into fully paid and
nonassessable shares of Common Stock (hereinafter sometimes
called "Sprint Common Stock") of the par value of $2.50 per
share of Sprint Corporation, a Kansas corporation (hereinafter
in this paragraph 3 sometimes called 'Sprint"), at the initial
conversion price as of March 9, 1993 (taking the shares of the
Convertible Preferred at $25 per share) of $3.86 per share of
Sprint Common Stock (a basis of 6.47325 shares of Sprint
Common Stock for each share of the Convertible Preferred). In
order to exercise the conversion privilege, the holder of any
share or shares of Convertible Preferred that is or are to be
converted shall surrender the certificate or certificates
therefor to the Corporation at the designated office of the
Conversion Agent in the city of Chicago, Illinois, accompanied
by written notice to the Corporation that such holder elects
to convert such share or shares of Convertible Preferred.
Such notice shall state the name (with address) of the holder
of such share or shares of Convertible Preferred and the name
(with address) in which the certificate or certificates for
shares of Sprint Common Stock that shall be issuable on such
conversion shall be issued. Each certificate for a share or
shares of Convertible Preferred surrendered for conversion
into shares of Sprint Common Stock to be issued in a different
name shall also be accompanied by a proper instrument of
transfer thereof endorsed in blank. As promptly as practicable
after the receipt of such notice and the surrender of such
certificate or certificates, as aforesaid, the Corporation
shall deliver at the designated office of the Conversion Agent
to such holder or upon his written order a certificate or
certificates for the number of full shares of Sprint Common
Stock issuable upon the conversion of such share or shares of
Convertible Preferred in accordance with the provisions of
this paragraph 3 and cash, as hereinafter provided, in respect
of any fraction of a share of Sprint Common Stock otherwise
issuable upon such conversion. Subject to the exceptions
hereinafter made, such conversion shall be deemed to have been
effected on the date on which such notice shall have been
received by the Corporation and the certificate or
certificates for the share or shares of Convertible Preferred
to be converted shall have been surrendered, as aforesaid, and
the person or persons in whose name or names any certificate
or certificates for shares of Sprint Common Stock shall be
issuable upon such conversion shall be deemed to have become
on said date the holder or holders of record of the shares
represented thereby. No adjustment shall be made for
dividends on any shares of Convertible Preferred that shall be
converted or for dividends on any Sprint Common Stock that
shall be issued upon the conversion of such share or shares of
Convertible Preferred. In case less than all of the shares of
Convertible Preferred represented by one certificate are to be
converted, there shall be issued and delivered to or upon the
order of the holder of such certificate a new certificate for
the number of shares of Convertible Preferred not converted.
The Corporation shall not be required to deliver
certificates for shares of Sprint Common Stock upon conversion
while Sprint's stock transfer books are closed for any meeting
of stockholders or for the payment of dividends, or for any
other purpose, and the person or persons in whose name or
names any certificate for shares of Sprint Common Stock are
issuable upon such conversion shall not be deemed to have
become the holder or holders of record of such shares of
Sprint Common Stock until the date on which such transfer
books shall be reopened; provided, however, that such
certificate or certificates for shares of Sprint Common Stock
shall be issued and delivered as soon as the stock transfer
books shall again be opened.
No fractions of shares of Sprint Common Stock will be
issued upon conversions. The number of full shares of Sprint
Common Stock that shall be issuable upon conversion of shares
of Convertible Preferred shall be computed on the basis of the
aggregate number of shares represented by the certificate or
certificates surrendered for conversion or such lesser number
of shares as the holder shall specify in the notice of
conversion. If any fractional interest in a share of Sprint
Common Stock would otherwise be issuable upon the conversion
of any share or shares of Convertible Preferred, the
Corporation shall pay cash equal to the product of (i) the
closing sale price per share of Sprint Common Stock on the New
York Stock Exchange on the trading day next preceding the date
of conversion and (ii) the fraction of a share of Sprint
Common Stock to which the holder would otherwise have been
entitled.
For the purposes of this paragraph 3:
(i) The "conversion prices" or the
"applicable conversion price" means the initial
conversion price as of March 9, 1993, or such conversion
price as adjusted and at the time in effect. The
conversion price shall never be stated in terms of a
fraction of a cent but shall always be rounded to the
nearest full cent, or, if there is no nearest full cent,
to the next full cent upward;
(ii) A "change" in the conversion price means
any difference between the applicable conversion price
and the amount resulting from a recomputation pursuant to
such formula provided in subparagraph (c) of this
paragraph 3 as shall be applicable under the
circumstances; and
(iii) An "adjustment" in the conversion
price means a required reduction or increase in the
applicable conversion price. A reduction or increase in
the conversion price (i.e., an adjustment in the
conversion price) will be required in the event of a
change which, together with all cumulated changes, if
any, is an amount not less than $.50. In the cumulation
of changes, upward and downward changes will be offset
and only the net amount of changes will be given effect
in determining whether an adjustment in the conversion
price should be made.
(b) At any time and from time to time a change in
the conversion price shall be made:
(i) If Sprint shall issue
(A) any additional shares of Sprint Common
Stock without receiving therefor a consideration, if any,
per share at least equal to the then applicable
conversion price;
(B) any shares convertible into shares of
Sprint Common Stock, or any obligations so convertible,
for a consideration, if any, which together with the
consideration, if any, to be received by Sprint upon
conversion thereof into shares of Sprint Common Stock,
shall be less per share of Sprint Common Stock issuable
upon conversion thereof than the conversion price
applicable immediately prior to the issuance of such
convertible shares or obligations; or
(C) any options or warrants, subject to the
specific exceptions hereinafter provided, to purchase or
subscribe for any shares of Sprint Common Stock for a
consideration, if any, which, together with the
consideration, if any, received by Sprint for such
options or warrants shall be less per share of Sprint
Common Stock issuable upon exercise of such options or
warrants than the conversion price applicable immediately
prior to the issuance of such options or warrants;
(ii) Upon the termination of the right to convert
into shares of Sprint Common Stock any convertible shares or
obligations issued by Sprint or upon the expiration of any
options or warrants issued by Sprint to purchase or subscribe
for shares of Sprint Common Stock, if at any time a change in
the conversion price was made on account thereof and if upon
such termination or expiration the number of shares
theretofore issued upon conversions of such convertible shares
or obligations or upon exercise of such options or warrants is
less than the maximum number (or such number as adjusted by
antidilution provisions) of shares of Sprint Common Stock
deemed issued at the time such change in the conversion price
was made;
(iii) If, except as the result of antidilution
provisions, there shall be an increase or decrease in the
amount of Sprint Common Stock issuable upon conversion of one
convertible share issued by Sprint or a specified principal
amount of convertible obligations issued by Sprint or an
increase or decrease in the purchase or subscription price of
shares of Sprint Common Stock to be paid upon exercise of
options or warrants; provided that a change in the conversion
price was made upon the issuance of such convertible shares or
obligations or such options or warrants or that a change in
the conversion price would be required to be made if such
convertible shares or obligations or such options or warrants
were then being issued;
(iv) In case of any combination, subdivision,
reclassification or other reorganization of the Sprint Common
Stock (excluding such events in respect of which other
specific provisions are made herein).
The consideration, if any, received for the issuance of any
additional shares of Sprint Common Stock or any shares
convertible into shares of Sprint Common Stock or any
obligations so convertible or any options or warrants to
purchase or subscribe for shares of Sprint Common Stock shall
at all times be deemed to be the proceeds thereof to Sprint,
without deducting from the total amount received any expenses
incurred or any underwriting commissions or concessions paid
or allowed by Sprint in connection therewith. If the
consideration received by Sprint shall be in a form other than
cash, the amount of such consideration shall be deemed to be
the fair value thereof, as determined by the Board of
Directors of Sprint at or before the time of issuance of the
shares, obligations, options or warrants issued for such
consideration.
For the purposes of this paragraph 3, there shall at all
times be deemed to have been issued and to be outstanding as
of March 9, 1993, all shares of Sprint Common Stock reserved
for issuance:
(x) upon the conversion of any
convertible debt outstanding as of March 9, 1993;
(y) pursuant to any Sprint stock
purchase program in effect as of March 9, 1993; and
(z) pursuant to options granted or which
may be granted under any Sprint stock option plan in
effect as of March 9, 1993.
There are excepted from the operation of these
antidilution provisions and no change in the conversion price
shall be required as a result of the issuance after March 9,
1993 of:
Subscription rights for shares of Sprint Common
Stock or the issuance of shares of Common Stock pursuant
to further employees' stock purchase programs
substantially similar to such programs heretofore
established by Sprint, not involving an offering of
shares in any one fiscal year of Sprint in a number
exceeding 1% of the number of shares of Sprint Common
Stock outstanding at the beginning of such fiscal year;
Options to purchase shares of Sprint Common Stock or
the issuance of shares of Common Stock upon exercise of
such options, pursuant to any Stock Option Plan hereafter
approved pursuant to the provisions of the Internal
Revenue Code as then in force by the Sprint stockholders
under which the option price shall be at least 100% of
market value at the date of grant of such options; or
Shares of Sprint Common Stock payable as a dividend
upon the Common Stock of Sprint; provided that the
maximum number of shares of Sprint Common Stock issuable
in payment of such dividend, together with the number of
shares of Sprint Common Stock theretofore issued as a
dividend or dividends upon the Common Stock of Sprint
within the same fiscal year of Sprint, shall not exceed
2% of the shares of Sprint Common Stock outstanding at
the record date or other date for the determination of
the holders of shares of Sprint Common Stock entitled to
participate in such dividend.
(c) Upon the occurrence of any of the events
specified above as requiring a change in the conversion price
because additional shares of Sprint Common Stock are issued or
deemed to be issued or because a revision of the number of
such shares of Common Stock so deemed to be issued is
required, such change shall be computed by
(i) multiplying the total number of shares of
Sprint Common Stock outstanding (or deemed to be
outstanding for the purposes of this paragraph 3)
immediately prior to such event by the then applicable
conversion price;
(ii) adding to the product the total amount of the
consideration, if any, received (or deemed to have been
received) by Sprint upon the issuance of the additional
number of shares of Sprint Common Stock issued (or deemed
to have been issued for the purposes of this paragraph 3)
upon such event; and
(iii) dividing the resulting sum by the total
number of shares of Sprint Common Stock outstanding (or
deemed to be outstanding for the purpose of this
paragraph 3) immediately after such event.
For the purposes of the foregoing formula there shall (except
as otherwise provided in subparagraph (b) of this paragraph 3)
be deemed to have been issued at the time of issuance of any
shares convertible into shares of Sprint Common Stock or any
obligations so convertible or any options or warrants to
purchase or subscribe for any shares of Sprint Common Stock
the aggregate maximum number of shares of Sprint Common Stock
issuable upon conversion of such shares or obligations or upon
the exercise of such options or warrants. The consideration
received for the shares of Sprint Common Stock deemed to have
been issued upon the issuance of such convertible shares or
obligations or such options or warrants shall be deemed to be
the consideration, if any, received by Sprint for such
convertible shares or obligations or options or warrants plus
the minimum consideration, if any, to be received by Sprint
upon conversion into shares of Sprint Common Stock of such
convertible shares or obligations or upon the exercise of such
options or warrants.
Upon the termination of the right to convert into shares
of Sprint Common Stock any convertible shares or obligations
issued by Sprint, or the expiration of any options or warrants
issued by Sprint, to purchase or subscribe for shares of
Sprint Common Stock (if at any time a change in the conversion
price was made on account thereof), a change in the conversion
price shall forthwith be made to such conversion price as
would then be applicable had the change in the conversion
price been made upon the basis of the delivery of only the
number of shares of Sprint Common Stock actually delivered
upon conversions of such shares or obligations or upon
exercise of such options or warrants.
If, except as the result of antidilution provisions
applicable thereto, there shall be an increase or decrease in
the amount of Sprint Common Stock issuable upon conversion of
one convertible share issued by Sprint or a specified
principal amount of convertible obligations issued by Sprint
or an increase or decrease in the purchase or subscription
price of shares of Sprint Common Stock to be paid upon
exercise of options or warrants issued by Sprint and if a
change in the conversion price was made upon the issuance of
such convertible shares, obligations, options or warrants or
would be required to be made if such convertible shares or
obligations or such options or warrants were at the time being
issued, then any such increase or decrease in the amount of
Sprint Common Stock issuable upon conversion of one
convertible share or a specified principal amount of
convertible obligations shall be deemed to effect the
termination of the right to convert at the former rate any
such convertible shares or obligations remaining unconverted
and to effect the issuance of such remaining convertible
shares or obligations as a new issue of shares or obligations
convertible at the new rate, and any such increase or decrease
in the purchase or subscription price to be paid upon exercise
of such options or warrants shall be deemed to effect the
expiration of any unexercised options or warrants to purchase
or subscribe at the former price and to effect the issuance of
such unexercised options or warrants as a new issue of options
or warrants to purchase at the new price.
In case of a distribution of securities or assets to the
holders of Sprint Common Stock (excluding cash dividends
payable out of earned surplus and distributions in respect of
which other specific provisions are made herein), a change in
the conversion price shall be made reducing it by an amount
equal to the fair value of the portion of such distribution
applicable to one share of such Sprint Common Stock as
determined by the Board of Directors of Sprint (or, if they
shall not have made such determination, by the Board of
Directors of the Corporation), whose determination, in the
absence of fraud, shall be final and conclusive.
Upon a combination, reclassification or reorganization of
the shares of Common Stock of Sprint into a smaller number of
shares, an upward change shall be made in the conversion price
which shall bear the same relationship to the conversion price
prior to such change as the reduction in the number of shares
of Common Stock of Sprint outstanding (and deemed to be
outstanding for the purposes of this paragraph 3) immediately
prior to such event bears to the number of shares of Sprint
Common Stock outstanding (and deemed to be outstanding for the
purposes of this paragraph 3) immediately after such
combination, reclassification or reorganization.
(d) As promptly as practicable after it has
knowledge of any occurrence which will or may result in a
change in the conversion price, the Corporation shall make an
estimate of such change in the conversion price and of the
date as of which such change will or may become effective and
shall notify the Conversion Agent in writing accordingly. If
it appears from such notice that such change will or may
result in an adjustment in the conversion price, the
Conversion Agent shall, upon surrender to it of Convertible
Preferred for conversion, give written advice to the holder of
such Convertible Preferred of the notice received from the
Corporation. Such holder may, at any time within five days
after the mailing by the Conversion Agent of such written
advice, withdraw such holder's notice of election to convert
such Convertible Preferred, but if no such withdrawal shall
have been made within such five days, such Convertible
Preferred shall, subject to compliance with all conditions
precedent to conversion herein provided, be deemed to have
been converted on the date such notice of election to convert
was filed with the Conversion Agent.
(e) Whenever the conversion price is required to
be changed or adjusted as herein provided:
(i) the Corporation shall forthwith file with the
Conversion Agent a report setting forth such change and
showing in detail the events upon which such change is
based, including a statement of the consideration, if
any, received or to be received by Sprint for, and the
number of, any additional shares of Sprint Common Stock
issued (or deemed to have been issued) since the last
preceding change; and
(ii) if such change shall result in an adjustment in
the conversion price, the Corporation shall forthwith
cause a notice stating that such adjustment has been
effected and of the adjusted conversion price to be
mailed first-class, postage prepaid, to each holder of
Convertible Preferred of record at a date not more than
30 days prior to such mailing at his address appearing on
the stock records.
(f) Sprint has agreed with the Corporation for the
benefit of the holders of the Convertible Preferred that if
Sprint shall be consolidated with or merged into or shall sell
or dispose of all or substantially all of its property and
assets to any other corporation, Sprint will cause proper
provision to be made as part of the terms of such
consolidation, merger or sale or otherwise whereby the holders
of the Convertible Preferred shall thereafter be entitled to
such conversion rights with respect to securities of the
corporation resulting from such consolidation or merger or to
which such sale shall be made as shall be substantially
equivalent to the conversion rights herein granted. Notice
thereof shall be given to the holders of the Convertible
Preferred as in the case of an adjustment in the conversion
price.
(g) The issuance of any certificates for Sprint
Common Stock on conversion of any share or shares of
Convertible Preferred shall be made without charge to the
holder of the Convertible Preferred so converted for any tax
in respect of the issuance of such certificates. The
Corporation shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in
the issuance or delivery of Sprint Common Stock in any name
other than that of the holder of the Convertible Preferred
converted, and the Corporation shall not be required to
deliver any such certificate for the Sprint Common Stock
unless and until the person or persons requesting the issuance
thereof shall have paid to the Corporation the amount of such
tax or shall have established to the satisfaction of the
Corporation that such tax has been paid.
(h) Sprint has agreed with the Corporation for the
benefit of the holders of the Convertible Preferred that it
will at all times reserve and keep available out of its
authorized but unissued stock, for the purpose of making the
same available for effecting the conversions of the
Convertible Preferred, such number of its duly authorized
shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding
Convertible Preferred; and if at any time the number of
authorized but unissued shares of Common Stock of Sprint shall
not be sufficient to effect the conversion of all outstanding
Convertible Preferred at the conversion price then applicable,
Sprint has agreed that it will take such corporate action as
may, in the opinion of its counsel, be necessary to increase
its authorized shares of Common Stock to such number of shares
as shall be sufficient for such purpose.
(i) If any shares of Sprint Common Stock, reserved
or to be reserved, for the purpose of conversion of the
Convertible Preferred hereunder, require registration with or
approval of any governmental authority under any federal or
state law before such shares may be validly issued upon
conversion, then Sprint has agreed with the Corporation for
the benefit of the holders of the Convertible Preferred that
it will in good faith and as expeditiously as possible
endeavor to secure such registration or approval, as the case
may be.
(j) The Corporation covenants that all shares of
Sprint Common Stock which may be issued upon conversion of
Convertible Preferred will upon issuance be fully paid and
nonassessable and free from all taxes, liens and charges with
respect to the issuance thereof.
(k) In case at any time
(i) Sprint shall declare any dividend payable in
stock upon its Common Stock or make any distribution
(other than cash dividends) to the holders of its Common
Stock; or
(ii) Sprint shall offer for subscription to the
holders of its Common Stock, as a class, any additional
shares of stock of any class or grant to such holders, as
a class, any other rights or options; or
(iii) of any reclassification of Sprint Common
Stock or change, merger, consolidation, sale or
conveyance entitling the holders of the Convertible
Preferred to a security different from Sprint Common
Stock; or
(iv) of the liquidation, dissolution or winding-up
of Sprint;
then the Corporation shall give notice of any such action at
least 10 days prior to the date on which the Sprint stock
transfer books shall close or a record is to be taken for such
stock dividend, distribution, offering or granting of rights
or options, or such reclassification, change, merger,
consolidation, sale, conveyance, liquidation, dissolution or
winding-up is to be effective, as the case may be, by mail,
first-class postage prepaid, to the Conversion Agent and to
all holders of Convertible Preferred of record at a date not
more than 30 days prior to such mailing, at their addresses as
the same appear on the stock records.
(l) The Corporation hereby appoints First Chicago
Trust Company of New York, Chicago, Illinois, as the
Conversion Agent. The Conversion Agent may resign at any time
upon 60 days' written notice to the Corporation and may be
removed by the Corporation at any time upon 60 days' written
notice to the Conversion Agent. The Corporation shall, within
20 days after notice of resignation or removal of the
Conversion Agent, appoint a successor Conversion Agent, which
shall be a bank or trust company organized under the laws of
the United States or any state thereof having a combined
capital and surplus of at least $5,000,000, and having an
office in the City of Chicago and State of Illinois. Notice
of such appointment and of the effective date thereof shall be
given by the Corporation, at least 30 days prior to such
effective date, by mail, first-class postage prepaid, to the
Conversion Agent, the successor Conversion Agent and all
holders of Convertible Preferred of record at a date not more
than 30 days prior to such mailing, at their addresses as the
same appear on the stock records.
4. Shares of the Convertible Preferred redeemed,
purchased, converted or otherwise reacquired by the
Corporation shall be cancelled and retired and shall not be
reissued.
Fifth: The Board of Directors is expressly authorized to
make, amend, alter, change, add to or repeal the by-laws of
the Corporation without any action on the part of the
stockholders. By-laws made by the directors may, however, be
amended, altered, changed, added to or repealed at any annual
meeting of the stockholders or at any special meeting of the
stockholders called for that purpose, at which a quorum shall
be present, by the holders of a majority of each class of
stock entitled to vote thereat.
Sixth: Whenever a compromise or arrangement is proposed
between this Corporation and its creditors or any class of
them and/or between this Corporation and its stockholders or
any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way
of this Corporation or of any creditor or stockholder thereof,
or on the application of any receiver or receivers appointed
for this Corporation under the provisions of Section 291 of
Title 8 of the Delaware Code, or on the application of
trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section
279 of Title 8 of the Delaware Code, order a meeting of the
creditors or class of creditors, and/or of the stockholders or
class of stockholders of this Corporation, as the case may be,
to be summoned in such manner as the said Court directs. If a
majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or
class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any
reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement
and the said reorganization shall, if sanctioned by the Court
to which the said application has been made, be binding on all
the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as
the case may be, and also on this Corporation.
Seventh: In order to induce the directors, officers,
employees and agents of the Corporation and each person
(including a director, officer, employee or agent of the C
orporation) who, at the request of the Corporation, acts as a
director or officer of any other corporation in which the
Corporation has an interest to protect, to continue to serve
as such and in order to induce such other persons as may
hereafter be elected or appointed directors, officers,
employees or agents of the Corporation or such other
corporation to serve as such, and in consideration of such
service and as additional compensation therefor:
(1) No director of the Corporation shall be
personally liable to the Corporation or its stockholders
for breach of fiduciary duty as a director; provided,
however, that this Article Seventh shall not eliminate or
limit the liability of a director (a) for any breach of
the director's duty of loyalty to the Corporation or its
stockholders, (b) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing
violation of law, (c) under the provisions of Section 174
of the Delaware General Corporation Law and amendments
thereto, or (d) for any transaction from which the
director derived an improper personal benefit. If the
Delaware General Corporation Law is amended to authorize
corporate action further eliminating or limiting the
personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or
limited to the maximum extent permitted by the Delaware
General Corporation Law, as so amended.
(2) The Corporation shall have the power to
indemnify any person, advance expenses and purchase and
maintain insurance on behalf of any person to the fullest
extent permitted, from time to time, by the Delaware
General Corporation Law.
(3) Any repeal or modification of this Article
Seventh shall not adversely affect any right or
protection of a director of the Corporation existing at
the time of such repeal or modification.
Exhibit 3(b)
CENTRAL TELEPHONE COMPANY
BYLAWS
AS AMENDED APRIL 1, 1993
ARTICLE I
MEETINGS OF SHAREOWNERS
Section 1. Annual Meeting. An annual meeting of
shareowners shall be held each year, on such date as may be
determined by the Board of Directors, for the election of
directors and for the transaction of such other business as may
properly be brought before the meeting. If the Board of Directors
fails to fix a date for the annual meeting, it shall be held on
the last Thursday in April. The meeting shall be held at such
time and place as shall be stated in the notice of the meeting or
in a duly executed waiver of notice. If the time and place for
any meeting are not stated in the notice, then the meeting shall
be held at 2:00 p.m. at the Company's office in Chicago, Illinois.
Section 2. Special Meetings. Special meetings of
the shareowners may be called exclusively by the Board of
Directors or the Chief Executive Officer of the Company, and such
other persons as may be authorized by law, to be held at such time
and place as it or such officer shall determine or as shall be
stated in the notice of the meeting or a duly executed waiver of
notice.
Section 3. Notice of Meetings. Unless otherwise
required by law, written notice stating the place, day and hour of
the meeting and the purpose or purposes for which the meeting is
called, shall be delivered not less than 10 nor more than 60 days
before the date of any meeting of shareowners, either personally
or by mail, to each shareowner entitled to notice of or to vote at
the meeting. If mailed, notice is given when deposited in the
United States mail, postage prepaid, in a sealed envelope
addressed to the shareowner at such shareowner's address as it
appears on the records of the Company. Subject to Section 4 of
this Article I, at any meeting of shareowners, action may be taken
upon any subject which is either stated in the notice of the
meeting or is not stated in the notice of the meeting and is not
required by law, the Certificate of Incorporation or these Bylaws
to be stated in the notice of the meeting.
Whenever any notice is required to be given to any
shareowner, a written waiver of notice signed by the person or
persons entitled to such notice, whether before or after the time
stated in the waiver, shall be deemed equivalent to the giving of
such notice; and attendance of a shareowner at any meeting shall
constitute a waiver of notice of the meeting unless such
attendance is for the sole purpose of objecting to the transaction
of any business on the ground that the meeting was not lawfully
called or convened. No notice of an adjourned meeting of
shareowners need be given if the time and place of the adjourned
meeting are announced at the meeting at which the adjournment is
taken, unless the adjournment is for a period greater than 30 days
or unless after the adjournment a new record date is fixed for the
adjourned meeting.
Section 4. Business at Meetings. To be properly
brought before a meeting of shareowners, business must be (a)
specified in the notice of meeting (or any supplement thereto)
given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise properly
brought before the meeting by a shareowner. In addition to any
other applicable requirements, for business to be properly brought
before a meeting by a shareowner, the shareowner must give written
notice to the Secretary of the Company delivered to or mailed and
received at the principal executive offices of the Company, not
less than 50 days or more than 75 days prior to the meeting;
provided however, that in the event that less than 65 days' notice
or prior public disclosure of the date of the meeting is given or
made to shareowners, notice by the shareowner may be so received
not later than the close of business on the 15th day following the
day on which such notice of the date of the meeting was mailed or
such public disclosure was made, whichever first occurs. A
shareowner's notice to the Secretary shall set forth as to each
matter the shareowner proposes to bring before the meeting, (i) a
brief description of the business desired to be brought before the
meeting and the reasons for conducting such business at the
meeting, (ii) the name and record address of the shareowner
proposing such business, (iii) the class and number of shares of
the Company which are owned by the shareowner, and (iv) any
material interest of the shareowner in such business.
The chairman of a shareowners' meeting shall, if
the facts warrant, determine and declare to the meeting that
business was not properly brought before the meeting in accordance
with the procedure set forth in this Section and, if the chairman
should so determine, the chairman shall so declare to the meeting
and such business shall not be considered at the meeting.
Section 5. List of Shareowners. The Secretary
shall prepare, before every meeting of shareowners, a complete
list of the shareowners entitled to vote at the meeting, arranged
in alphabetical order, showing the address of each shareowner and
the number of shares registered in the name of each shareowner.
Such list shall be open to the examination of any shareowner, for
any purpose germane to the meeting, during ordinary business
hours, for a period of at least 10 days prior to the meeting, at a
place within the city where the meeting is to be held, which
place, if other than the place of the meeting, shall be specified
in the notice of the meeting. The list shall also be produced and
kept at the place of the meeting during the whole time thereof,
and may be inspected by any shareowner who is present in person
thereat.
Section 6. Quorum. At all meetings of shareowners,
a quorum for the transaction of any business shall consist of the
holders of such number of shares, represented in person or by
proxy, as shall be entitled to cast a majority of the votes which
might be cast by the holders of all of the shares of the Company
issued, outstanding and entitled to be voted upon such business.
In the absence of a quorum, the shareowners entitled to vote
thereat and represented at the meeting or at any adjournment
thereof may adjourn the meeting from time to time without notice
other than by announcement of the time and place of the adjourned
meeting at the meeting at which the adjournment is taken (subject
to the provisions of the last sentence of Section 3 of this
Article I) until a quorum shall attend. At any such adjourned
meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as
originally noticed.
Section 7. Voting. At any meeting of shareowners
when a quorum is present, the vote of the holders of a majority of
the shares having voting power, present in person or represented
by proxy, shall decide any question brought before such meeting,
except as otherwise provided by law, the Certificate of
Incorporation, or these Bylaws. Voting upon any matter, including
election of directors, need not be by ballot.
Section 8. Proxies. Any shareowner entitled to
vote at any meeting of shareowners may vote either in person or by
proxy, but no proxy which is dated more than 3 years before the
meeting at which it is offered shall be accepted unless the proxy
shall provide for a longer period. Every proxy shall be in
writing, signed by the shareowner or the shareowner's duly
authorized attorney and dated, but need not be sealed, witnessed
or acknowledged. A proxy received in the form of a datagram,
telegram or other written communication which identifies the
shareowner and evidences the shareowner's intent to submit a proxy
may be accepted, although not manually signed.
Section 9. Nominations. Only persons who are
nominated in accordance with the following procedures shall be
eligible for election to the Board of Directors. The Board of
Directors shall nominate candidates for election to the Board of
Directors. The Company shall solicit proxies from the shareowners
to vote for the Board of Directors' nominees. Nominations of
persons for election to the Board of Directors at a meeting of
shareowners may also be made by any shareowner of the Company
entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this Section.
Such nominations, other than those made by the Board of Directors,
shall be made pursuant to timely notice in writing to the
Secretary of the Company. To be timely, a shareowner's notice
shall be delivered to or mailed and received at the principal
executive offices of the Company not less than 50 days nor more
than 75 days prior to the meeting; provided, however, that in the
event less than 65 days' notice or prior public disclosure of the
date of the meeting is given or made to shareowners, notice by the
shareowner to be timely must be so received not later than the
close of business on the 15th day following the day on which such
notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs. Such shareowner's
notice to the Secretary shall set forth (a) as to each person whom
the shareowner proposes to nominate for election or re-election as
a director, (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment
of the person, (iii) the class and number of shares of capital
stock of the Company which are beneficially owned by the person
and (iv) such other information relating to the person required to
be disclosed in solicitations for proxies for election of
directors pursuant to law and the rules of the Securities and
Exchange Commission; and (b) as to the shareowner giving the
notice (i) the name and record address of such shareowner and (ii)
the class and number of shares of capital stock of the Company
which are owned by such shareowner. The Company may require any
proposed nominee to furnish such other information as may
reasonably be required by the Company to determine the eligibility
of such proposed nominee to serve on the Board of Directors.
The chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination
was not made in accordance with the procedure set forth in this
Section, and, if the chairman should so determine, the chairman
shall so declare to the meeting and the defective nomination shall
be disregarded.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Number and Powers. The number of directors
shall not be less than three (3) nor more than fifteen (15) and at
any time shall be such number as the Board of Directors shall most
recently have fixed. Each director shall hold office during the
term for which such director was elected and until such director's
successor is elected and qualified or until such director shall:
(a) attain age 70;
(b) if an employee of the Company, terminate employment with
the Company;
(c) have died;
(d) resign by writing filed with the Secretary of the
Company; or
(e) be removed as provided in Section 10 of this Article II
of these Bylaws.
The business and affairs of the Company shall be managed by or
under the direction of the Board of Directors which may exercise
all of the powers of the Company except such as are by law, the
Certificate of Incorporation or these Bylaws conferred upon or
reserved to other persons.
Section 2. Organization Meeting. Immediately
after each meeting of shareowners at which directors shall have
been elected, the Board of Directors may hold a regular meeting
for the purpose of organization or otherwise at the place of the
shareowners' meeting and no notice of such meeting of the Board of
Directors shall be necessary.
Section 3. Regular and Special Meetings. Meetings
of the Board of Directors may be called by the Chief Executive
Officer or the Secretary, and shall be called by the Secretary
upon the written request of 3 directors. The Board of Directors
may hold its meetings at such place or places as it may determine
or as may be designated by the person calling the meeting.
Section 4. Notice of Meetings. Except as provided
in Section 2 of this Article II, notice of the place, day and hour
of every meeting shall be given to each director at least 2 days
before the meeting by delivering such notice to each director
personally, either orally or in writing, or by sending notice to
each director by telegraph or by leaving a notice at each
director's residence or usual place of business or, in the
alternative, upon 5 days' notice by mail. If mailed, notice is
given when deposited in the United States mail, postage prepaid,
in a sealed envelope addressed to the director at the address
furnished to the Company for such purpose and, if telegraphed,
notice is given when it is delivered to the telegraph company for
transmission to the director at the address furnished to the
Company for such purpose. A written waiver of notice signed by
the director entitled to notice and filed with the records of the
meeting either before or after the holding thereof, waives such
notice; and attendance of a director at any meeting shall
constitute a waiver of notice of the meeting unless such
attendance is for the sole purpose of objecting to the transaction
of any business on the ground that the meeting was not lawfully
called or convened. No notice of adjourned meetings of the Board
of Directors need be given if the time and place of the adjourned
meeting are announced at the meeting at which the adjournment is
taken, unless the adjournment is for a period greater than 30
days. The notice need not specify the business proposed to be
transacted at the meeting, except as provided in Section 10 of
this Article II.
Section 5. Quorum. A majority of the
directors shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors. The act of a
majority of the directors present at a meeting at which a quorum
is present shall be the act of the Board of Directors, except as
may be otherwise specifically provided by law, the Certificate of
Incorporation or these Bylaws. In the absence of a quorum, the
directors present, by majority vote, may adjourn the meeting
without notice other than by announcement at the meeting, until a
quorum shall attend. At any adjourned meeting at which a quorum
is present, any business may be transacted which might have been
transacted at the meeting as originally noticed.
Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of
Directors which authorizes a contract or transaction between the
Company and one or more of the directors or officers of the
Company or a company or organization in which one or more of the
directors or officers of the Company are directors or officers or
have a financial interest.
Section 6. Action by Consent. Any action required
or permitted to be taken at any meeting of the Board of Directors
may be taken without a meeting if a written consent to such action
is signed by all members of the Board of Directors and such
written consent is filed with the minutes of its proceedings.
Section 7. Conference Call Meetings. The Board
of Directors may participate in a meeting by means of a conference
telephone or similar communications equipment by means of which
all directors participating in the meeting can hear each other and
participation in such a meeting shall constitute presence in
person at the meeting of the directors so participating.
Section 8. Vacancies. Except as provided by law
with respect to directors elected by any class or classes of stock
or series thereof, if any vacancy occurs in the Board of Directors
or any new directorship is created by an increase in the number of
directors, a majority of the directors then in office, though less
than a quorum, or a sole remaining director, have the exclusive
power to elect a successor or fill the newly created directorship,
and any director so elected shall hold office as provided in
Section 1 of this Article II until the next election of and until
a successor shall be duly elected and qualified.
Section 9. Compensation and Indemnification.
Directors shall be entitled to receive such compensation for their
services as directors and as members of committees of the Board of
Directors as may be fixed by the Board of Directors, and shall be
reimbursed for expenses of attendance at meetings of the Board of
Directors and committees thereof. Directors may act as officers
of or serve the Company in any other capacity and receive
compensation therefore.
Directors shall be entitled to indemnification to
the fullest extent permitted by law, the Certificate of
Incorporation and any written agreement with the Company.
Section 10. Removal. In addition to the power of
the shareowners to remove directors, unless otherwise prohibited
by law, any director may be removed, only for cause, by vote of a
majority of the entire Board of Directors at a meeting called for
that purpose and specified in the notice of the meeting.
ARTICLE III
COMMITTEES
Section 1. Committees. The Board of Directors, by
resolution adopted by a majority of the entire Board of Directors,
may designate one or more committees as it shall deem advisable
and with such rights, powers and authorities as it shall
prescribe.
Section 2. Additional Applicable Provisions. The
provisions of Sections 4, 5, 6 and 7 of Article II of these Bylaws
are applicable to meetings of committees.
ARTICLE IV
OFFICERS
Section 1. Principal Officers. The principal
officers of the Company shall be a Chief Executive Officer, a
Chairman, a Vice Chairman, a President, one or more Vice
Presidents (one or more of whom may be designated as an Executive
Vice President, a Senior Vice President or such other designation
as may be determined by the Board of Directors), a Secretary, a
Treasurer and a Controller. The Chief Executive Officer, the
Chairman, the Vice Chairman and the President shall be elected by
the Board of Directors. All other principal officers of the
Company may be elected by the Board of Directors or appointed by
the Chief Executive Officer. The Company may also have such other
officers as may be elected or appointed as provided in these
Bylaws. Subject to Section 14 of this Article IV, the elected
officers of the Company shall serve at the pleasure of the Board
of Directors, or in the case of appointed officers, at the
pleasure of the Chief Executive Officer, or until they shall have
resigned by writing filed with the Secretary of the Company.
Section 2. Chief Executive Officer. The Chief
Executive Officer shall have general charge and supervision of the
business of the Company and may appoint officers as provided in
these Bylaws. The Chief Executive Officer shall, when present,
preside at all meetings of the shareowners and of the Board of
Directors and perform such other duties as may be assigned to the
Chief Executive Officer by the Board of Directors.
Section 3. Chairman. The Chairman shall perform
such duties as may be assigned to him by the Board of Directors or
the Chief Executive Officer. The Chairman may sign, with the
Secretary or Treasurer or Assistant Secretary or Assistant
Treasurer, certificates of stock of the Company; and sign and
execute, in the name of the Company, all authorized deeds,
mortgages, bonds, contracts or other instruments, except in cases
in which the signing and execution thereof shall have been
expressly delegated to some other officer or agent of the Company.
Section 4. Vice Chairman. The Vice Chairman shall
assist the Chief Executive Officer and the Chairman and perform
such other duties as may be assigned to the Vice Chairman by the
Board of Directors or the Chief Executive Officer. The Vice
Chairman shall, in the absence of the Chief Executive Officer and
the Vice Chairman of the Executive Committee, preside at all
meetings of the shareowners and of the Board of Directors.
Section 5. President. The President shall perform
all duties incident to the office of a president of a company and
such other duties as may be assigned to such officer by the Board
of Directors, the Chief Executive Officer or the Chairman. The
President may sign, with the Secretary or Treasurer or Assistant
Secretary or Assistant Treasurer, certificates of stock of the
Company; and sign and execute, in the name of the Company, all
authorized deeds, mortgages, bonds, contracts or other
instruments, except in cases in which the signing and execution
thereof shall have been expressly delegated to some other officer
or agent of the Company.
Section 6. Vice President. Each Vice President
shall perform such duties as may be assigned to such officer by
the Board of Directors, the Chief Executive Officer, the Chairman
or the President. At the request of the President, or in the
President's absence or disability, at the request of the Chief
Executive Officer or the Chairman, any Vice President may perform
all of the duties of the President and when so acting shall have
the powers of the President. Any Vice President may sign, with the
Secretary or Treasurer, or Assistant Secretary or Assistant
Treasurer, certificates of stock of the Company; sign and execute,
in the name of the Company, all authorized deeds, mortgages,
bonds, contracts or other instruments, except in cases in which
the signing and execution thereof shall have been expressly
delegated to some other officer or agent of the Company; and, in
general, assist the Chief Executive Officer, the Chairman and the
President and perform all duties incident to the office of a vice
president of a company.
Section 7. Secretary. The Secretary shall keep the
minutes of all meetings of the shareowners, of the Board of
Directors and of any committee of the Board of Directors in books
provided for the purpose; cause notices to be given in accordance
with the provisions of these Bylaws or as required by law; be
custodian of the stock ledger and records and of the corporate
seal of the Company; see that the corporate seal is affixed to all
documents, the execution of which, on behalf of the Company, under
its seal, is duly authorized, and when it is so affixed attest the
same; sign, with the Chairman, the President or any Vice
President, certificates of stock of the Company; and, in general,
perform all duties incident to the office of a secretary of a
company, and such other duties as may be assigned to such officer
by the Board of Directors or the Chief Executive Officer.
Section 8. Treasurer. The Treasurer shall have
charge of and be responsible for all funds, securities, receipts
and disbursements of the Company, and shall deposit or cause to be
deposited, in the name of the Company, all moneys or other
valuable effects in such banks, trust companies or other
depositories as shall be authorized by the Board of Directors.
The Treasurer shall render to the Chief Executive Officer, the
Chairman, the President and to the Board of Directors, whenever
requested, an account of the financial condition of the Company.
The Treasurer may sign, with the Chairman, the President or a Vice
President, certificates of stock of the Company; and, in general,
the Treasurer shall perform all duties incident to the office of a
treasurer of a company, and such other duties as may be assigned
to such officer by the Board of Directors or the Chief Executive
Officer.
Section 9. Controller. The Controller shall have
control and general supervision over all accounts and records
pertaining to moneys, properties, materials and supplies, and
shall have such other powers and duties as are commonly incident
to the office of a controller of a company, and such other duties
as may be assigned to such officer by the Board of Directors or
the Chief Executive Officer.
Section 10. Assistant and Subordinate Officers.
The Board of Directors may elect, and the Chief Executive Officer
may appoint, such assistant or subordinate officers as the Board
of Directors or the Chief Executive Officer may deem desirable and
prescribe their powers and duties. In the absence or disability
of a principal officer, or at the direction of a principal
officer, any assistant or subordinate officer shall have the
powers and duties of such principal officer to which the assistant
officer or subordinate officer reports.
Section 11. Additional Authorities and Duties and
Restrictions Thereon. The Board of Directors, or in the case of
appointed officers, the Chief Executive Officer, may, at any time,
for a limited or unlimited period, grant to or impose upon any
officer (including any assistant or subordinate officer)
authorities or duties additional to those hereinabove specified.
The Board of Directors, or in the case of appointed officers, the
Chief Executive Officer, may also, at any time for a limited or
unlimited period, restrict the authorities and duties otherwise
appurtenant to any office.
Section 12. Officers Holding Two or More Offices.
Any number of the above offices may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument
in more than one capacity if such instrument is required by law or
these Bylaws to be executed, acknowledged or verified by two or
more officers.
Section 13. Compensation and Indemnification.
Officers shall be entitled to receive such compensation for their
services as officers, as may be fixed by or pursuant to authority
delegated by the Board of Directors.
Officers shall be entitled to indemnification to
the fullest extent permitted by law, the Certificate of
Incorporation and any written agreement with the Company.
Section 14. Removal. Any elected officer may be
removed, with or without cause, by vote of a majority of the
entire Board of Directors. Any appointed officer may be removed,
with or without cause, by the Board of Directors or the Chief
Executive Officer.
ARTICLE V
SHARES
Section 1. Certificates. Each shareowner shall
be entitled to a certificate or certificates certifying the
number and kind of shares owned by such shareowner, signed by the
Chairman, the President or a Vice President, and by the Secretary
or an Assistant Secretary or by the Treasurer or an Assistant
Treasurer, and sealed with the seal of the Company. The
signatures of the officers upon a certificate may be a facsimile
when the certificate is countersigned by a Transfer Agent or
registered by a Registrar other than the Company itself or an
employee of the Company. The seal of the Company may be a
facsimile thereof. Share certificates shall be in such form, not
inconsistent with law or the Certificate of Incorporation, as
shall be approved by the Board of Directors.
Section 2. Transfer of Shares and Additional
Authority. Except as otherwise provided by law or these Bylaws,
the transfer of shares and certificates representing shares of
stock shall be governed by the Uniform Commercial Code -
Investment Securities, 5A Delaware Code, Article 8. Shares of
stock shall be transferable only on the books of the Company by
the holder thereof, in person or by a duly authorized attorney,
upon the surrender of the certificate representing the shares to
be transferred, properly endorsed. A person in whose name shares
of stock stand on the books of the Company shall be deemed the
owner thereof as regards the Company. The Board of Directors may
make such additional rules and regulations and take such action as
it may deem expedient concerning the issue, reissue, transfer,
registration and cancellation of certificates representing shares
of stock of the Company.
Section 3. Transfer Agents and Registrars. The
Company shall, if and whenever the Board of Directors shall so
determine, maintain one or more transfer offices or agencies, each
in charge of a Transfer Agent designated by the Board of
Directors, where the shares of any of the stock of the Company
shall be directly transferable, and may also have one or more
registered offices, each in charge of a Registrar designated by
the Board of Directors, where such shares of stock shall be
registered, and no certificate for shares of stock of the Company
in respect of which a Transfer Agent shall have been designated
shall be valid unless countersigned by such Transfer Agent and, if
a Registrar shall have been designated, unless registered by such
Registrar.
Section 4. Record Dates. In order that:
(a) The Company may determine the shareowners
entitled to notice of or to vote at any meeting of
shareowners or any adjournment thereof, the Board of
Directors may fix a record date, which shall not precede the
date upon which the resolution fixing the record date is
adopted and which shall not be more than 60 nor less than 10
days before the date of such meeting. If no such record
date is fixed, the record date shall be at the close of
business on the day next preceding the day on which notice
is given, or if notice is waived, at the close of business
on the day next preceding the day on which the meeting is
held. A determination of shareowners of record entitled to
notice of or to vote at a meeting shall apply to any
adjournment of the meeting except that the Board of
Directors may fix a new record date for the adjourned
meeting;
(b) The Company may determine the shareowners
entitled to consent to corporate action in writing without a
meeting as provided by law; and
(c) The Company may determine the shareowners
entitled to receive payment of any dividend or other
distribution or allotment of any rights or the shareowners
entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any
other lawful action, the Board of Directors may fix a record
date which shall not precede the date upon which the
resolution fixing the record date is adopted and shall be
not more than 60 days prior to such action. If no record
date is fixed, the record date for determining shareowners
for any such purpose shall be at the close of business on
the day on which the Board of Directors adopts the
resolution relating thereto.
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 1. Offices. The Company shall maintain
such registered offices and registered agents as may be required
by law. The Company may have such other offices at such other
places as the Board of Directors may from time to time appoint or
as the business of the Company may require and, subject to the
provisions of the laws of the State of Delaware, may keep the
books of the Company outside of said state and at such place or
places as may be designated by the Board of Directors or pursuant
to these Bylaws.
Section 2. Seal. The corporate seal of the Company
shall bear the name of the Company and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced. If deemed
advisable by the Board of Directors, a duplicate seal or duplicate
seals may be provided and kept for the purposes of the Company.
Section 3. Books and Records. Except as otherwise
provided by law, the Certificate of Incorporation or these Bylaws,
the Board of Directors may determine whether and, if allowed, when
and under what conditions and regulations the books and records of
the Company, or any of them, shall be opened to the inspection of
shareowners, and the rights of shareowners in this respect are and
shall be limited accordingly. Under no circumstances shall any
shareowner have the right to inspect any book or record or receive
any statement for an improper or illegal purpose.
Section 4. Fiscal Year. The fiscal year of the
Company shall begin on the first day of January in each year and
end of the last day of December in each year.
Section 5. Voting of Stock in Other Companies.
Any shares in other companies which may be held by the Company may
be represented and voted at any meeting of shareowners of such
other company by the Chief Executive Officer, the Chairman, the
Vice Chairman, the President or any Vice President of the Company
or by proxy executed in the name of the Company by any one of such
officers.
Section 6. Amendments. Except to the extent
otherwise provided by law or the Certificate of Incorporation, the
Board of Directors is expressly authorized to adopt, amend or
repeal these Bylaws without any action on the part of the
shareowners. Notwithstanding the power conferred on the Board of
Directors, the shareowners may adopt Bylaws and may amend or
repeal Bylaws adopted by the Board of Directors, as provided by
law and in Article Seventh of the Certificate of Incorporation.
Exhibit 4(e)
________________________________________________________________
THIRTY-SEVENTH
SUPPLEMENTAL INDENTURE
CENTRAL TELEPHONE COMPANY
TO
THE FIRST NATIONAL BANK OF CHICAGO AND
J. G. FINLEY
AS TRUSTEES
__________
DATED AS OF AUGUST 15, 1992
__________
CREATING AN ISSUE OF
FIRST MORTGAGE BONDS,
MEDIUM-TERM NOTES, SERIES TWO
__________
SUPPLEMENTAL TO AND AMENDATORY OF THE
INDENTURE OF MORTGAGE AND DEED OF TRUST
DATED JUNE 1, 1944, AS SUPPLEMENTED AND AMENDED
_________________________________________________________________
THIS THIRTY-SEVENTH SUPPLEMENTAL INDENTURE, dated as of the
15th day of August, A.D. 1992, between CENTRAL TELEPHONE COMPANY,
a corporation duly organized and existing under the laws of the
State of Delaware (hereinafter called the "Company"), and THE
FIRST NATIONAL BANK OF CHICAGO, a national banking association
organized and existing under the laws of the United States of
America, and J. G. Finley, of Chicago, Illinois, as Trustee and
Co-Trustee, respectively, under the Indenture hereinafter
mentioned,
WITNESSETH:
WHEREAS, under date of June 1, 1944, a predecessor Central
Telephone Company (hereinafter called the "Predecessor") executed
and delivered to The First National Bank of Chicago and Robert L.
Grinnell (to whom J. G. Finley is now successor), as Trustees,
its Indenture of Mortgage and Deed of Trust (hereinafter called
the "Original Indenture"), providing for the issuance from time
to time thereunder, in series, of bonds of the Predecessor, for
the purposes and subject to the limitations specified therein;
and
WHEREAS, the Predecessor thereafter executed and delivered
to the said Trustees successive indentures supplemental to and
amendatory of the Original Indenture, to and including the Twenty-
third Supplemental Indenture dated as of September 1, 1971; and
WHEREAS, the Company succeeded by merger to the Predecessor
and, pursuant to Section 14.01 of the Original Indenture, as
theretofore amended, executed and delivered to the Trustees the
Twenty-fourth Supplemental Indenture dated as of December 1, 1971
and thereupon succeeded to and was substituted for the
Predecessor under the Original Indenture, as theretofore and
thereby amended, as if the Company had originally been named in
the Original Indenture as the mortgagor corporation with the
right to issue bonds under the Original Indenture, as theretofore
and thereby amended, to the extent and for the purposes therein
provided with respect to the issuance of bonds by the Predecessor
and also to issue any bonds which the Predecessor was entitled to
issue but which had not been issued; and
WHEREAS, the Company thereafter executed and delivered to
the said Trustees supplemental indentures, the latest being the
Thirty-sixth Supplemental Indenture dated as of March 15, 1991,
supplemental to and amendatory of the Original Indenture, as
theretofore amended (the Original Indenture, as theretofore and
thereby amended, being hereinafter called the "Amended Original
Indenture"); and
WHEREAS, the Company has determined, by appropriate
corporate action, to create an additional series of bonds to be
designated as "First Mortgage Bonds, Medium-Term Notes, Series
Two" (hereinafter referred to as the "Bonds of MTN Series Two"),
to be limited in principal amount to $175,000,000 and to be
secured by the Amended Original Indenture, as supplemented by
this Thirty-seventh Supplemental Indenture (the Amended Original
Indenture, as supplemented by this Thirty-Seventh Supplemental
Indenture, being hereinafter called the "Indenture"); and
WHEREAS, all acts and things necessary to constitute this
Thirty-seventh Supplemental Indenture a valid indenture
supplemental to said Amended Original Indenture have been done
and performed, and the creation, execution and issue of the Bonds
of MTN Series Two, subject to the terms of the Indenture, have in
all respects been duly authorized:
NOW, THEREFORE, in consideration of the premises and of the
acceptance and purchase of Bonds of MTN Series Two by the
registered owners thereof, and of the sum of One Dollar ($1) duly
paid by the Trustees to the Company, the receipt whereof is
hereby acknowledged, for the purposes of providing for the
creation of the Bonds of MTN Series Two and conveying properties
to the Trustees, all as hereinafter in this Thirty-seventh
Supplemental Indenture set forth, the Company has executed and
delivered these presents unto The First National Bank of Chicago
and J. G. Finley, as Trustees, as herein provided, and their
successors in the trusts created hereby and by the Indenture, and
to their assigns, forever.
SECTION 1. The Amended Original Indenture is hereby further
supplemented by adding thereto Article numbered Forty-Eight as
follows:
ARTICLE FORTY-EIGHT
BONDS OF MTN SERIES TWO
SECTION 48.01. The thirty-fourth series of bonds issuable
under the Indenture shall be known as and entitled "First
Mortgage Bonds, Medium-Term Notes, Series Two," (herein called
the "Bonds of MTN Series Two"), and the text of the Bonds of MTN
Series Two, and the certificate of authentication of the Trustee
to be executed thereon, shall be substantially in the form set
forth in Exhibit I attached to the Thirty-fifth Supplemental
Indenture and incorporated herein by reference, with such
appropriate variations (including any appropriate legend) as are
required or permitted by the provisions of this Indenture.
The principal amount of the Bonds of MTN Series Two which
may be issued and outstanding shall be limited to $175,000,000
(exclusive of bonds issued in lieu of other bonds of such series
theretofore authenticated and delivered, under the provisions of
Sections 2.06, 2.10, 2.11, 2.13 and 48.07 of the Indenture). The
Bonds of MTN Series Two shall be registered bonds without coupons
of the denominations of $1,000 or any amount in excess thereof
which is an integral multiple of $1,000, which shall be numbered
1 and consecutively upwards, with such prefix, if any, to
indicate the denomination thereof as the Company may from time to
time determine. Bonds of MTN Series Two shall be dated as
provided in Section 2.05. The Bonds of MTN Series Two shall
mature on such date or dates not less than nine months nor more
than forty years from date of issue, shall bear interest at such
rate or rates (which may be either fixed or variable), to be
payable on such date or dates, and shall have such other terms
and provisions not inconsistent with this Indenture as the Board
of Directors of the Company, any authorized committee of such
Board of Directors or any officer of the Company acting pursuant
to authority granted by such Board of Directors or such committee
may determine (the execution of any bond of the Bonds of MTN
Series Two by an authorized officer of the Company being, with
regard to any holder of such bond, conclusive evidence of such
approval), which terms and provisions shall be set forth in such
bonds. Bonds of MTN Series Two may have different terms from
other bonds of such series. Both the principal of and the
interest on the Bonds of MTN Series Two shall be payable in
lawful money of the United States of America at the office or
agency of the Trustee in the City of Chicago, State of Illinois
(or, if the Company shall elect to act as paying agent, at the
principal office of the Company in the City of Chicago, State of
Illinois), or, at the option of the registered owner, at the
office or agency of the Trustee in the Borough of Manhattan, The
City of New York, State of New York. Payments of interest may
also be made in any additional manner provided in the Bonds of
MTN Series Two.
Definitive Bonds of MTN Series Two may be issued in the form
of engraved bonds or bonds printed or lithographed on steel
engraved borders or may be in the form of typed bonds or produced
in any other manner, all as determined by the officers executing
the bonds, as evidenced by their execution of such bonds.
Subject to the foregoing provisions of this section, all
definitive Bonds of MTN Series Two shall be fully interchangeable
for other Bonds of MTN Series Two having identical terms and upon
surrender to the Trustee shall be exchangeable for other Bonds of
MTN Series Two of a different authorized denomination or
denominations (but otherwise having identical terms), as
requested by the registered owner surrendering the same. Subject
to the provisions of Section 48.06, the Company will execute and
the Trustee shall authenticate and deliver Bonds of MTN Series
Two whenever the same shall be required for any exchange. The
Company may issue Bonds of MTN Series Two in the form of
Registered Global Bonds as provided in Section 2.11 of the
Indenture.
SECTION 48.02. Bonds of MTN Series Two may forthwith, upon
the execution and delivery of this Thirty-seventh Supplemental
Indenture, or from time to time thereafter, but only upon
compliance by the Company with the provisions of Article Four,
Five or Six, and subject to the terms of such provisions, be
executed by the Company and delivered to the Trustee, and shall
thereupon be authenticated and delivered by the Trustee upon the
order of the Company.
SECTION 48.03. The Bonds of MTN Series Two are not
redeemable except to the extent specified therein and except as
provided in Article Thirteen at the price specified therein, plus
accrued interest to the redemption date. Bonds shall be redeemed
in the manner specified in Article Eight.
SECTION 48.04. As permitted by the second paragraph of
Section 11.01 of the Indenture, Bonds of MTN Series Two shall not
be subject to redemption for purposes of the sinking fund for
such series, the provisions of the second paragraph of Section
11.01 shall govern as to the sinking fund of Bonds of MTN Series
Two, and the Trustee shall hold any sinking fund payments
deposited with it in a separate trust fund as the sinking fund
for the benefit of the holders of Bonds of MTN Series Two to be
applied in the manner specified in the second paragraph of
Section 11.01. Notwithstanding the foregoing sentence of this
Section 48.04, effective at such time as there shall no longer be
outstanding any bonds of any series issued prior to Bonds of MTN
Series One, the foregoing sinking fund requirement shall no
longer be in effect as to Bonds of MTN Series Two and effective
at such time Article Eleven and the immediately preceding
sentence of this Section 48.04 shall thereupon be deemed to be of
no further effect and application as to Bonds of MTN Series Two.
SECTION 48.05. Notwithstanding the provisions of Section
2.12, the Company will not charge any fee for the exchange or
transfer of any Bond of MTN Series Two, but the Company may
require payment of a sum sufficient to cover any stamp tax or
other governmental charge payable in connection therewith.
SECTION 48.06. The Company shall not be required (i) to
exchange or transfer any Bonds of MTN Series Two during a period
of 10 days prior to any interest payment date; (ii) to issue,
transfer or exchange any Bonds of MTN Series Two during a period
beginning 10 days before the day of the mailing of a notice of
redemption of Bonds of MTN Series Two; or (iii) to transfer or
exchange any Bond of MTN Series Two which or any part of which
has been selected for redemption.
SECTION 48.07. Notwithstanding the provisions of Section
8.05, upon the redemption of less than the entire principal
amount of any Bond of MTN Series Two, the Trustee shall not make
notation thereof on such Bond but such Bond shall be canceled and
there shall be executed, authenticated and delivered to the
registered holder thereof a Bond or Bonds of MTN Series Two of an
authorized denomination or denominations for the unredeemed
balance of the principal amount of such Bond of MTN Series Two.
SECTION 48.08. At the Company's option, either (A) the
Company shall be deemed to have been discharged (as defined
below) from any and all of its obligations with respect to the
Bonds of MTN Series Two on the 91st day after the day the
applicable conditions set forth below have been satisfied or (B)
the Company shall cease to be under any obligation to comply (as
and to the extent specified by the Company at the time of
election of this option (B)) with any covenant, term, condition
or provision set forth in Article Nine (except Section 9.02),
Article Ten, Article Twelve, Article Thirteen and Article
Fourteen of the Indenture with respect to the Bonds of MTN Series
Two at any time after the applicable conditions set forth below
have been satisfied:
(a) the Company shall have deposited or caused to be
deposited irrevocably with the Trustee as trust funds in
trust, specifically pledged as security for, and dedicated
solely to, the benefit of the holders of the Bonds of MTN
Series Two (i) money in an amount, or (ii) U.S. government
obligations (as herein defined) which through the payment of
interest and principal in respect thereof in accordance with
their terms will provide money in an amount, or (iii) a
combination of (i) and (ii), sufficient, in the opinion
(with respect to (ii) and (iii)) of a nationally recognized
firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to
pay and discharge each installment of principal of and
interest and premium, if any, on the Bonds of MTN Series Two
on the dates such installments of principal and interest and
premium, if any, are due;
(b) if the Bonds of MTN Series Two are then listed on
the New York Stock Exchange, the Company shall have
delivered to the Trustee an opinion of counsel to the effect
that the exercise of the option hereunder should not cause
the Bonds of MTN Series Two to be delisted;
(c) no event of default or event which with notice or
lapse of time would become an event of default with respect
to the Bonds of MTN Series Two shall have occurred and be
continuing on the date of such deposit;
(d) the Company shall have delivered to the Trustee an
opinion of counsel to the effect that holders of the Bonds
of MTN Series Two will not recognize income, gain or loss
for United States Federal income tax purposes as a result of
the exercise of the option hereunder and will be subject to
United States Federal income tax in the same amount and in
the same manner and at the same times as would have been the
case if such option had not been exercised, and, in the case
where the Bonds of MTN Series Two are being discharged (as
herein defined), such opinion shall be accompanied by a
private letter ruling to that effect received from the
United States Internal Revenue Service or a revenue ruling
pertaining to a comparable form of transaction to that
effect published by the United States Internal Revenue
Service; and
(e) the Company shall have delivered to the Trustee a
certificate signed by the President or a Vice President of
the Company and an opinion of counsel, each stating that all
conditions precedent provided for in (a) through (d) above
have been complied with, and such opinion of counsel further
stating that such deposit of trust funds does not result in
the Company, the Trustee or the trust becoming an
"investment company" under the Investment Company Act of
1940.
Discharged means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by, and
obligations under, the Bonds of MTN Series Two and to have
satisfied all the obligations under the Indenture relating to the
Bonds of MTN Series Two (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the
same), provided, however, that the following shall survive until
otherwise terminated or discharged pursuant to the Indenture:
(A) the rights of holders of Bonds of MTN Series Two to receive,
from the trust fund described in subclause (a) above, payment of
the principal of and the interest and premium (if any) on such
Bonds of MTN Series Two when such payments are due; (B) the
Company's obligations with respect to the Bonds of MTN Series Two
under Sections 2.06, 2.10, 2.11, and 2.13 of the Indenture and to
maintain the Trustee or such other persons as paying agent with
respect to the Bonds of MTN Series Two in accordance with the
last sentence of the second paragraph of Section 48.01 of the
Indenture and the Indenture; and (C) the rights, powers, trusts,
duties and immunities of the Trustee under the Indenture.
U.S. government obligations means securities which are (i)
direct obligations of the United States of America for the
payment of which its full faith and credit is pledged or (ii)
obligations of a person controlled or supervised by and acting as
an agency or instrumentality of the United States of America the
payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in
either case, are not callable or redeemable at the option of the
issuer thereof, or (iii) depository receipts issued by a bank or
trust company as custodian with respect to any such aforesaid
U.S. government obligations or a specific payment of interest on
or principal of any such U.S. government obligations held by such
custodian for the account of the holder of a depository receipt,
provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the
holder of such depository receipt, in respect of such U.S.
government obligations, or from any amount received by the
custodian, in respect of such U.S. government obligations or the
specific payment of interest on or principal of such U.S.
government obligations evidenced by such depository receipt.
Anything in this Section 48.08 to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company
from time to time upon request of the Company any money or U.S.
government obligations held by it as provided in this Section
48.08 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of
the amount thereof which would then be required to be deposited
for the purpose for which such money or U.S. government
obligations were deposited.
The Company shall pay and indemnify the Trustee against any
tax, fee, or other charge imposed on or assessed against the U.S.
government obligations deposited pursuant to this Section 48.08
or the principal or interest received in respect of such U.S.
government obligations, other than any such tax, fee or other
charge which by law is for the account of the holders of the
Bonds of MTN Series Two for whose benefit such U.S. government
obligations are held.
SECTION 2. The amount of bonds issued or to be issued under
this Thirty-seventh Supplemental Indenture is not to exceed
$175,000,000 of Bonds of MTN Series Two. At the time of the
execution and delivery of this Thirty-seventh Supplemental
Indenture, the aggregate principal amount of indebtedness
outstanding under and secured by the Indenture, not including the
bonds of the series created under this Thirty-seventh
Supplemental Indenture, is $318,366,000.
SECTION 3. Words that are underlined herein generally
denote terms that are defined in the Indenture.
The Company hereby acknowledges receipt of a true and
correct copy of this Thirty-seventh Supplemental Indenture from
the Trustees.
IN WITNESS WHEREOF, said Central Telephone Company has
caused this instrument to be executed in its corporate name by
its President or one of its Vice Presidents and its corporate
seal to be hereunto affixed and to be attested by its Secretary
or one of its Assistant Secretaries, and said The First National
Bank of Chicago, as Trustee aforesaid, has caused this instrument
to be executed in its corporate name by one of its Vice
Presidents or one of its Assistant Vice Presidents and its
corporate seal to be hereunto affixed and to be attested by one
of its Assistant Secretaries or Trust Officers and said J. G.
Finley, as Co-Trustee aforesaid, has signed and sealed this
instrument in a number of counterparts (each of which
counterparts shall for all purposes be deemed to be an original
and all of which, or as many thereof as the Company and the
Trustees shall preserve undestroyed, shall together constitute
but one and the same instrument), all as of the day and year
first above written.
CENTRAL TELEPHONE COMPANY
By /s/ DALE I. PARKER
Dale I. Parker, Vice President
ATTEST:
/s/ R. C. PAGANO
R. C. Pagano, Assistant
Secretary
In the presence of:
/s/ CHRISTINE CALLOZZO
Christine Callozzo
/s/ CAROL J. CRAWFORD
Carol J. Crawford
THE FIRST NATIONAL BANK OF
CHICAGO
By:/s/ R. J. BRUNER
R. J. Bruner, Vice President
ATTEST:
/s/ S. McGRATH
S. McGrath, Trust Officer
In the presence of:
/s/ J. ARLOW
J. Arlow
/s/ J. O. ROTUNNO
J. O. Rotunno
/s/ J. G. FINLEY
J. G. Finley, as Co-Trustee
In the presence of:
/s/ J. ARLOW
J. Arlow
/s/ J. O. ROTUNNO
J. O. Rotunno
STATE OF ILLINOIS )
) ss
COUNTY OF COOK )
I do hereby certify that on this 25th day of August, 1992,
before me, Angeline Pappas, a Notary Public in and for the County
of Cook, State of Illinois, personally appeared Dale I. Parker
and R. C. Pagano, a Vice President and an Assistant Secretary,
respectively of Central Telephone Company, a Delaware
corporation, that is described in and that executed the foregoing
instrument, dated as of the 15th day of August, 1992, personally
known to me and known to be such officers, respectively, and to
be the identical persons whose names are signed to the foregoing
instrument; and being by me severally duly sworn, said Dale I.
Parker acknowledged that he is such Vice President, and said R.
C. Pagano acknowledged that he is such Assistant Secretary, and
each of them acknowledged that the seal affixed to the foregoing
instrument is the corporate seal of said corporation, that the
foregoing instrument was signed, in the name and in behalf of
Central Telephone Company, by said Dale I. Parker, as its Vice
President, and sealed with its corporate seal and attested by
said R. C. Pagano, as its Assistant Secretary, by authority of
its Board of Directors, and that the foregoing instrument is the
free and voluntary act and deed of said corporation, by it
voluntarily executed for the uses and purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal at my office, in the City of Chicago, in the County of Cook
and State of Illinois, on the date and year first above written.
/s/ ANGELINE PAPPAS
Angeline Pappas
Notary Public within and for
the County of Cook in the State
of Illinois
My commission as such Notary
Public expires April 3, 1993
STATE OF ILLINOIS )
) ss
COUNTY OF COOK )
I do hereby certify that on this 26th day of August, 1992,
before me, Somsri Helmer, a Notary Public in and for the County
of Cook, State of Illinois, personally appeared R. J. Bruner and
S. McGrath, a Vice President and a Trust Officer, respectively,
of The First National Bank of Chicago, a corporation organized
and existing under the laws of the Untied States of America, that
is described in and that executed the foregoing instrument, dated
as of the 15th day of August, 1992, personally known to be and
known to be such officers, respectively, and to be the identical
persons whose names are signed to the foregoing instrument; and
being by me severally duly sworn, said R. J. Bruner acknowledged
that he is such Vice President and said S. McGrath acknowledged
that he is such Trust Officer, and each of them acknowledged that
the seal affixed to the foregoing instrument is the corporate
seal of said corporation, that the foregoing instrument was
signed in the name and in behalf of the First National Bank of
Chicago by said R. J. Bruner, as its Vice President, and sealed
with its corporate seal and attested by said S. McGrath, as its
Trust Officer, by authority of its By-Laws, and that the
foregoing instrument is the free and voluntary act and deed of
said corporation, by it voluntarily executed, for the uses and
purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal at my office in the City of Chicago in the County of Cook
and State of Illinois, on the day and year first above written.
/s/ SOMSRI HELMER
Somsri Helmer
Notary Public within and for
the County of Cook in the State
of Illinois
My commission as such Notary
Public expires January 14, 1995
STATE OF ILLINOIS )
) ss
COUNTY OF COOK )
I do hereby certify that on this 26th day of August, 1992,
before me, Somsri Helmer, a Notary Public in and for the County
of Cook, State of Illinois, personally appeared J. G. Finley,
personally and known to me and known to be the identical person
described in and who signed as Co-Trustee the foregoing
instrument, dated as of the 15th day of August, 1992, and who
being by me duly sworn acknowledged that he executed the
foregoing instrument as his fee and voluntary act and deed, for
the uses and purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal at my office, in the City of Chicago, in the County of Cook
and State of Illinois, on the day and year first above written.
/s/ SOMSRI HELMER
Somsri Helmer
Notary Public within and for
the County of Cook in the State
of Illinois
My commission as such Notary
Public expires January 14, 1995
EXHIBIT (12)
CENTRAL TELEPHONE COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In Millions)
1993 1992 1991 1990 1989
Income before
extraordinary item and
cumulative effect of
changes in accounting
principles $ 41.4 $ 71.6 $ 143.3 $ 100.9 $ 88.0
Income tax provision 13.7 29.1 62.3 43.4 31.3
Subtotal 55.1 100.7 205.6 144.3 119.3
Fixed charges
Interest charges 43.6 43.1 45.3 43.3 42.8
Interest factor of
operating rents 7.4 7.3 6.9 6.4 5.6
Pre-tax cost of
preferred stock
dividends of
subsidiaries 0.6 0.8 0.9 0.9 1.0
Total fixed charges 51.6 51.2 53.1 50.6 49.4
Earnings, as adjusted $ 106.7 $ 151.9 $ 258.7 $ 194.9 $ 168.7
Ratio of earnings to
fixed charges 2.07 [1] 2.97 4.87 [2] 3.85 3.41
[1]Earnings as computed for the ratio of earnings to fixed
charges includes the nonrecurring merger, integration and
restructuring costs of $77.2 million recorded in 1993. In the
absence of the merger, integration and restructuring costs,
the ratio of earnings to fixed charges would have been 3.56
for 1993.
[2]Earnings as computed for the ratio of earnings to fixed
charges includes the gain on the divestiture of the Company's
Iowa and Minnesota operations of $91.6 million in 1991. In
the absence of the gain on the divestiture, the ratio of
earnings to fixed charges would have been 3.15 for 1991.
Exhibit 21
CENTRAL TELEPHONE COMPANY AND ITS SUBSIDIARIES
State of
Incorporation
Central Telephone Company . . . . . . . . . . . . . . . . Delaware
Central Telephone Building Company . . . . . . . . . Illinois
Central Telephone Company of Florida . . . . . . . . Florida
Central Telephone Company of Illinois . . . . . . . Illinois
Central Telephone Company of Virginia . . .. . . . . Virginia
EXHIBIT 23(a)
CENTRAL TELEPHONE COMPANY
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-3, No. 33-50820) of Central Telephone Company
and the related Prospectus of our report dated January 21, 1994,
with respect to the consolidated financial statements and
schedules of Central Telephone Company included in this Annual
Report (Form 10-K) for the year ended December 31, 1993.
ERNST & YOUNG
Kansas City, Missouri
March 31, 1994
EXHIBIT 23(b)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
inclusion in this Form 10-K of our report dated February 3, 1993,
covering the consolidated balance sheet of Central Telephone
Company and Subsidiaries as of December 31, 1992, and the related
consolidated statements of income, retained earnings and cash
flows and schedules for each of the two years ended December 31,
1992, incorporated by reference into Central Telephone Company's
previously filed Registration Statement No. 33-50820.
ARTHUR ANDERSEN & CO.
Chicago, Illinois
March 31, 1994
