As filed with the Securities and Exchange Commission on February 25, 1994
Registration No. 33-48956
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Post-Effective Amendment No. 3
to
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
_____________________________
Century Telephone Enterprises, Inc.
(Exact name of Registrant as specified in its charter)
<TABLE>
<C> <C> <C>
Louisiana 4813 72-0651161
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of incorporation Classification Code Number) Identification Number)
or organization)
</TABLE>
100 Century Park Drive
Monroe, Louisiana 71203
(318) 388-9500
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
___________________________________
<TABLE>
<C> <C> <C>
Copy to: HARVEY P. PERRY, ESQ. Copy to:
KENNETH J. NAJDER, ESQ. Senior Vice President, General Counsel HARRY CALCUTT, ESQ.
Jones, Walker, Waechter, and Secretary Murchie, Calcutt & Boynton
Poitevent, Carrere & Denegre Century Telephone Enterprises, Inc. 109 E. Front Street, Suite 300
201 St. Charles Avenue, 51st Floor 100 Century Park Drive Traverse City, Michigan 49684
New Orleans, Louisiana 70170-5100 Monroe, Louisiana 71203 (616) 947-7190
(504) 582-8000 (318) 388-9500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
___________________________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
Upon the effective date of the merger described in this Registration Statement.
___________________________________
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, please check the following box. X
If any of the securities being registered on this form are being
offered in connection with the formation of a holding company and there is
compliance with General Instruction G, please check the following box.
___________________________________
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to Section 8(a), may determine.
<PAGE>
CENTURY TELEPHONE ENTERPRISES, INC.
Cross Reference Sheet
Between
Items of Form S-4 and Location in
Information Statement and Prospectus
</TABLE>
<TABLE>
Item in Form S-4 Location in Prospectus
________________ ______________________
<C> <C> <C>
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus. . . . . . . . . . . . . . .Facing Page; Cross Reference Sheet;
Outside Front Cover
2. Inside Front and Outside Back
Cover Pages of Prospectus . . . . . . . . . . . . . .Available Information; Incorporation
of Certain Documents by Reference;
Table of Contents
3. Risk Factors, Ratio of
Earnings to Fixed Charges and
Other Information . . . . . . . . . . . . . . . . . .Summary; Investment Considerations
4. Terms of the Transaction. . . . . . . . . . . . . . .Summary; Investment Considerations;
Merger Agreement; Description of
Century Securities; Dissenting
Shareholders' Rights; Comparative
Rights of Century and Kingsley
Shareholders
5. Pro Forma Financial Information . . . . . . . . . . .*
6. Material Contracts with the Company Being
Acquired. . . . . . . . . . . . . . . . . . . . . . .Merger Agreement; Information About
Kingsley; Kingsley's Management's
Discussion and Analysis of Financial
Condition and Results of Operations
7. Additional Information Required for
Reoffering by Persons and Parties Deemed to
be Underwriters . . . . . . . . . . . . . . . . . . .*
8. Interests of Named Experts
and Counsel . . . . . . . . . . . . . . . . . . . . .Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities . . . . . . . . . . . . . . . . . . . . .*
10. Information with Respect to
S-3 Registrants . . . . . . . . . . . . . . . . . . .Available Information;
Incorporation of Certain Documents
by Reference; Summary; Investment
Considerations; Unaudited Pro Forma
Consolidated Condensed Financial
Information; Information About
Century; Comparative Rights of
Century and Kingsley Shareholders
11. Incorporation of Certain Information
by Reference. . . . . . . . . . . . . . . . . . . . .Incorporation of Certain Documents
by Reference
12. Information with Respect to S-2 or S-3
Registrants. . . . . . . . . . . . . . . . . . . . . *
13. Incorporation of Certain Information by
Reference. . . . . . . . . . . . . . . . . . . . . . *
________________________
*Not applicable.
<PAGE>
Item in Form S-4 Location in Prospectus
________________ ______________________
14. Information with Respect to Registrants Other
Than S-2 or S-3 Registrants . . . . . . . . . . . . .*
15. Information with Respect to
S-3 Companies . . . . . . . . . . . . . . . . . . . .*
16. Information with Respect to
S-2 or S-3 Companies. . . . . . . . . . . . . . . . .*
17. Information with Respect to
Companies Other Than S-3 or
S-2 Companies . . . . . . . . . . . . . . . . . . . .Summary; Information About
Kingsley; Kingsley's Management's
Discussion and Analysis of
Financial Condition and Results
of Operations; Comparative
Rights of Century and Kingsley
Shareholders; Index to Financial
Statements
18. Information if Proxies,
Consents or Authorizations
are to be Solicited . . . . . . . . . . . . . . . . .*
19. Information if Proxies,
Consents or Authorizations
are not to be Solicited in an
Exchange Offer. . . . . . . . . . . . . . . . . . . .Outside Front Cover Page;
Summary; Intro-duction; Merger
Agreement; Dissenting
Shareholders' Rights; Information
About Kingsley
____________________
*Not applicable.
</TABLE>
<PAGE>
KINGSLEY TELEPHONE COMPANY
110 W. Main Street
Kingsley, Michigan 49649
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS:
Notice is hereby given that a special meeting of shareholders
(the "Special Meeting") of Kingsley Telephone Company
("Kingsley") will be held on March 29, 1994 at 10:00 a.m. local
time at Northwestern Savings Bank & Trust, 625 South Garfield,
Traverse City, Michigan 49684 for the following purposes:
1. To consider and vote upon a proposal to approve the Merger
Agreement dated as of September 13, 1993, as amended (the
"Merger Agreement"), between, among others, Kingsley and
Century Telephone Enterprises, Inc. ("Century"), pursuant
to which, among other things, a subsidiary of Century will
be merged into Kingsley (the "Merger") and each
outstanding share of common stock of Kingsley (the
"Kingsley Stock"), other than those held by shareholders
who perfect dissenters rights under Michigan law, will be
converted into an aggregate of (i) 272.73 shares of
preferred stock of Century ("Century Preferred Stock")
having the rights and preferences described in the
attached Information Statement and Prospectus (the
"Information Statement"), and (ii) subject to certain
exceptions described in the Information Statement, the
number of shares of common stock of Century ("Century
Common Stock") as is derived by dividing $8,636.36 by the
average per share closing price of Century Common Stock
reported on the New York Stock Exchange composite tape for
the five trading days immediately preceding the second
trading day prior to the closing date of the Merger;
2. To transact such other business as may properly come
before the Special Meeting or any adjournment thereof.
Only Kingsley shareholders of record as of the close of
business on February 28, 1994 (the "Record Date") are entitled to
notice of and to vote at the Special Meeting.
As described further in the Information Statement, the
aggregate merger consideration is expected to consist of $4.25
million of Century securities comprised of (i) 75,000 shares of
Century Preferred Stock having an aggregate value of $1,875,000,
and (ii) Century Common Stock having an aggregate value on the
closing date of the Merger of $2,375,000. On a per share basis,
this consideration will equal $15,454.61 of Century securities.
CERTAIN SHAREHOLDERS OF KINGSLEY WHO, AS OF THE RECORD DATE,
BENEFICIALLY OWN SHARES OF KINGSLEY STOCK ENTITLING THEM TO CAST
APPROXIMATELY 76.36% OF KINGSLEY'S TOTAL VOTING POWER HAVE AGREED
TO VOTE ALL OF THEIR SHARES IN FAVOR OF THE MERGER AGREEMENT
(WHICH VOTES IN AND OF THEMSELVES WILL BE SUFFICIENT TO APPROVE
THE MERGER AGREEMENT).
KINGSLEY'S SHAREHOLDERS WHO OBJECT TO THE ADOPTION OF THE
MERGER AGREEMENT HAVE THE RIGHT TO DISSENT AND HAVE THE "FAIR
VALUE" OF THEIR STOCK JUDICIALLY DETERMINED AND PAID TO THEM IN
CASH. TO PERFECT SUCH RIGHTS, KINGSLEY'S SHAREHOLDERS MUST (i)
REFRAIN FROM VOTING IN FAVOR OF THE MERGER AGREEMENT, (ii) PRIOR
TO THE SPECIAL MEETING DELIVER TO KINGSLEY A WRITTEN OBJECTION TO
THE MERGER INCLUDING A DEMAND FOR PAYMENT, AND (iii) OTHERWISE
FOLLOW ALL OF THE PROCEDURES SET FORTH IN SECTIONS 761 THROUGH
774 OF THE MICHIGAN BUSINESS CORPORATION ACT AS MORE FULLY
DESCRIBED UNDER "DISSENTING SHAREHOLDERS' RIGHTS" IN THE ATTACHED
INFORMATION STATEMENT AND PROSPECTUS.
The Board of Directors encourages your participation in the
Special Meeting.
By Order of the Board of Directors
Harry Calcutt, President
Jack Boynton, Secretary
Kingsley, Michigan
February 28, 1994
<PAGE>
INFORMATION STATEMENT
AND
PROSPECTUS
Century Telephone Enterprises, Inc. ("Century") has filed an
amendment to its registration statement on Form S-4 (as amended,
the "Registration Statement") pursuant to the Securities Act of
1933, as amended, to register the shares of Century common stock
and accompanying preferred stock purchase rights ("Century Common
Stock") and the shares of Century's 5% Cumulative Convertible
Series K Preferred Stock ("Century Preferred Stock" and,
collectively with Century Common Stock, the "Century Stock")
issuable in connection with a proposed merger (the "Merger") of a
wholly-owned subsidiary of Century into Kingsley Telephone
Company ("Kingsley"). This document constitutes an Information
Statement of Kingsley in connection with the Merger and a
Prospectus of Century with respect to the Century Stock to be
issued if the Merger is consummated. The information contained
herein with respect to Century and its subsidiaries has been
supplied by Century and the information with respect to Kingsley
has been supplied by Kingsley.
Subject to certain exceptions, each outstanding share of
Century Common Stock entitles the holder to one vote unless it
has been beneficially owned by the same person or entity
continuously since May 30, 1987, in which case it generally
entitles the holder to ten votes per share until transfer.
Accordingly, each share of Century Stock offered hereby will
entitle the holder to one vote. Additionally, a preferred stock
purchase right is attached to and trades with each share of
Century Common Stock, including those issuable hereunder.
Century Common Stock is traded on the New York Stock Exchange
under the symbol "CTL."
Dividends on the Century Preferred Stock are cumulative at
an annual rate of $1.25 per share and payable quarterly,
commencing the last day of the calendar quarter in which the
Merger occurs. Each share of Century Preferred Stock is
convertible, at the option of the holder, and, after July 1,
1997, at Century's option, into .987 shares of Century Common
Stock based on a conversion price of $25.33, subject to
adjustment under certain specified circumstances. Each share of
Century Preferred Stock has a liquidation preference of $25.00
per share, plus accrued and unpaid dividends. See "Description
of Century Securities" and "Comparative Rights of Century and
Kingsley Shareholders."
Unless the context otherwise requires, all references to
Century will include Century and its subsidiaries.
FOR A DISCUSSION OF CERTAIN FACTORS THAT KINGSLEY'S
SHAREHOLDERS SHOULD CONSIDER IN EVALUATING CENTURY AND THE
TRANSACTION DESCRIBED HEREIN, SEE "INVESTMENT CONSIDERATIONS."
______________________
NEITHER CENTURY NOR KINGSLEY IS ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND CENTURY OR KINGSLEY A PROXY.
______________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT
AND PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
________________________
No person is authorized to give any information or to make
any representation not contained in this Information Statement
and Prospectus, and if given or made, such information or
representation should not be relied upon as having been
authorized. This Information Statement and Prospectus does not
constitute an offer to sell, or a solicitation of an offer to
purchase, the securities offered hereby, in any jurisdiction in
which, or to any person to whom, it is unlawful to make such
offer or solicitation of an offer. Neither the delivery of this
Information Statement and Prospectus nor any distribution of the
securities offered hereby shall, under any circumstances, create
any implication that there has been no change in the affairs of
Century or Kingsley since the date hereof.
_____________________
The date of this Information Statement and Prospectus is February
28, 1994.
<PAGE>ii
AVAILABLE INFORMATION
Century is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and, in accordance therewith, files reports, proxy statements and
other information with the Securities and Exchange Commission
(the "Commission"). Reports, proxy statements and other
information filed by Century with the Commission pursuant to the
informational requirements of the Exchange Act may be inspected
and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the Commission at the
following locations: 7 World Trade Center, 13th Floor, New York,
New York 10048 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60621-2511. Copies of such material may be obtained
from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
Century Common Stock is listed on the New York Stock Exchange and
its reports, proxy statements and other information may also be
inspected at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005.
In addition to the information contained in this Information
Statement and Prospectus, further information regarding Century
and the Century Stock offered hereby is contained in the
Registration Statement and the exhibits thereto, which may be
inspected and copied at the Commission's principal office in
Washington, D.C.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS INFORMATION STATEMENT AND PROSPECTUS INCORPORATES BY
REFERENCE DOCUMENTS THAT ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM HARVEY
P. PERRY, CENTURY TELEPHONE ENTERPRISES, INC., 100 CENTURY PARK
DRIVE, MONROE, LOUISIANA 71203, TELEPHONE: (318) 388-9500. IN
ORDER TO INSURE TIMELY DELIVERY OF THESE DOCUEMTNS, ANY REQUEST
SHOULD BE RECEIVED BY MARCH 22, 1994.
The following documents, which Century has filed with the
Commission pursuant to the Exchange Act, are incorporated herein
by reference:
(a)Century's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992 (exhibit 13 of which has been furnished
herewith to each Kingsley shareholder), as amended on June 29,
1993.
(b)Century's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1993, June 30, 1993 and September 30, 1993.
(c)Century's Current Reports on Form 8-K dated February 12,
1993, April 8, 1993, October 8, 1993, January 13, 1994 and
February 10, 1994.
(d)The description of Century Common Stock set forth in its
Registration Statement filed under the Exchange Act (File No. 1-
6280), as modified by Century's Current Report on Form 8-K dated
June 12, 1991.
All reports filed by Century with the Commission pursuant to
Sections 13(a), 13(c) or 14 of the Exchange Act subsequent to the
date of this Information Statement and Prospectus and prior to
the special meeting of the shareholders of Kingsley described
herein shall, except to the extent otherwise provided by
Regulation S-K or any other rule or regulation promulgated by the
Commission, be deemed to be incorporated by reference herein and
to be made a part hereof from their respective dates of filing.
Information appearing herein or in any document incorporated
herein by reference is not necessarily complete and is qualified
in its entirety by the information and financial statements
appearing in the documents incorporated herein by reference and
should be read together therewith. Any statements contained in a
document incorporated or deemed to be incorporated by reference
shall be deemed to be modified or superseded to the extent that a
statement contained herein or in any other document subsequently
filed or incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute
a part of this Information Statement and Prospectus.
<PAGE>iii
TABLE OF CONTENTS
Description Page
COVER PAGE i
AVAILABLE INFORMATION ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ii
SUMMARY v
INVESTMENT CONSIDERATIONS 1
Considerations Relating to Century Stock 1
Considerations Relating to the Merger 2
INTRODUCTION 3
Purpose of Special Meeting 3
Record Date; Quorum; Vote Required 3
MERGER AGREEMENT 4
Structure of Merger 4
Background and Reasons for the Merger 4
Effective Time of Merger 7
Conversion of Kingsley Stock 7
Certain Federal Income Tax Consequences 8
Regulatory Approvals and Other Closing Conditions 9
Indemnification by the Principal Shareholders 10
Agreement to Hold Century Stock 10
Expenses 10
Representations and Warranties 10
Non-Solicitation 11
Amendment, Waiver and Termination 11
Conduct of Business Pending the Merger 11
Accounting Treatment 11
Resales of Century Stock 11
Procedures for Receiving Century Stock 12
DISSENTING SHAREHOLDERS' RIGHTS 12
Procedures to Perfect Rights 12
Court Proceedings 13
Other Considerations 14
INFORMATION ABOUT KINGSLEY 14
Description of Kingsley's Business 14
Security Ownership of Certain Beneficial Owners and
Management 15
Dividends on and Market Prices of Kingsley Stock 16
KINGSLEY'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 16
Background 17
Year Ended December 31, 1992 Compared to 1991 17
Nine Months Ended September 30, 1993 Compared to Nine
Months Ended September 30, 1992 19
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL
INFORMATION 20
Pro Forma Balance Sheet as of September 30, 1993 21
Pro Forma Income Statement for the Nine-Month Period
Ended September 30, 1993 22
Pro Forma Income Statement for the Year Ended
December 31, 1992 23
Notes to Unaudited Pro Forma Consolidated Condensed
Financial Information 24
<PAGE>iv
INFORMATION ABOUT CENTURY 27
General 27
Recent Developments 27
Price Range of Stock 28
Selected Consolidated Operating and
Financial Data 28
DESCRIPTION OF CENTURY SECURITIES 30
Common Stock 30
Preferred Stock 30
Preferred Stock Purchase Rights 33
COMPARATIVE RIGHTS OF CENTURY AND KINGSLEY SHAREHOLDERS 35
Voting Rights of Common Stock 35
Preferred Stock 35
Preferred Stock Purchase Rights 35
Dividends, Redemptions and Stock Repurchases 35
Approval of Extraordinary Transactions 36
Liability of Directors and Officers 36
Dissenters Rights 37
Inspection Rights 37
Laws and Organizational Document Provisions with
Possible Antitakeover Effects 37
Bylaws 40
Vacancies 41
LEGAL MATTERS 41
EXPERTS 41
INDEX TO FINANCIAL STATEMENTS F-1
APPENDIX I - MERGER AGREEMENT, AS AMENDED A-I
APPENDIX II - SECTIONS 761 THROUGH 774 OF THE MICHIGAN
BUSINESS CORPORATION ACT A-II
<PAGE>v
SUMMARY
The following summary is qualified in its entirety by
reference to the Merger Agreement, which appears as Appendix I to
this Information Statement and Prospectus (the "Information
Statement"), and by the more detailed information and financial
statements appearing elsewhere herein and in the documents
incorporated herein by reference. All share and per share data
relating to the Century Common Stock contained in this
Information Statement has been adjusted for three separate stock
splits effected as 50% stock dividends distributed in June 1988,
February 1989 and December 1992. When used herein with respect
to any particular entity, the term "pop" means the population of
a licensed cellular telephone market multiplied by such entity's
proportionate equity interest in the licensed operator thereof.
General
Meeting. A Special Meeting of Kingsley's shareholders will
be held on March 29, 1994 at Northwestern Savings Bank & Trust,
625 South Garfield, Traverse City, Michigan 49684 at the time
specified in the accompanying Notice (referred to hereinafter as
the "Special Meeting"). Only holders of record of common stock
of Kingsley ("Kingsley Stock") at the close of business on
February 28, 1994 are entitled to notice of and to vote at the
Special Meeting.
Purpose of Meeting. The purpose of the Special Meeting is
to consider and vote upon a proposal to approve a Merger
Agreement dated as of September 13, 1993, as amended (the
"Agreement"), by and among Harry Calcutt and Northwestern Savings
Bank & Trust (the "Principal Shareholders"), in their capacity as
the trustees of the Sterling M. Nickerson Trust created pursuant
to Sterling M. Nickerson's will (the "Trust"), Kingsley, Century
and KTC Acquisition Corporation, a wholly-owned subsidiary of
Century ("Sub"), pursuant to which, among other things, Sub will
merge into Kingsley (the "Merger") and each outstanding share of
Kingsley Stock (other than those held by shareholders who perfect
dissenters rights under Michigan law) will be converted into the
consideration described herein. See "Introduction - Purpose of
Special Meeting" and "Merger Agreement."
Vote Required. The Agreement must be approved by the
affirmative vote of the holders of a majority of the outstanding
shares of Kingsley Stock. The Principal Shareholders own of
record approximately 76.36% of the outstanding Kingsley Stock and
have unconditionally agreed to vote in favor of the Agreement;
accordingly, if the Principal Shareholders comply with the
Agreement, the Agreement will be approved without regard to the
vote of any other shareholder. DIRECTORS AND EXECUTIVE OFFICERS
OF KINGSLEY WHO BENEFICIALLY OWN APPROXIMATELY 4.7% OF THE
OUTSTANDING KINGSLEY STOCK HAVE ADVISED KINGSLEY THAT THEY INTEND
TO VOTE AGAINST THE AGREEMENT. Although certain of these
directors and executive officers have from time to time
questioned whether the Merger is in the best financial interests
of Kingsley's shareholders, members of this group have advised
that their opposition to any business combination has been based
primarily on the view that Kingsley has historically been owned
and operated by members of the Nickerson family and should remain
an independent telephone company. See "Introduction - Record
Date; Quorum; Vote Required" and "Merger Agreement - Background
and Reasons for the Merger."
Neither the laws of Louisiana nor the rules of the New York
Stock Exchange require that the Merger or the issuance of Century
Stock thereunder be approved by the Century shareholders. See
"Introduction - Record Date; Quorum; Vote Required."
Merger Agreement
Background of the Merger. After Kingsley's Board of
Directors initially rejected a proposed transaction with Century
in September 1992, the Principal Shareholders elected additional
directors and the newly elected Board approved a letter of intent
with Century on November 11, 1992. Kingsley's Board of Directors
approved, ratified and confirmed the Agreement and the
transactions contemplated thereunder on December 8, 1993, with
two directors dissenting and one abstaining. For a more complete
discussion of the background to the Agreement and the Merger
<PAGE>vi
(including the opposition to the Merger of certain directors and
executive officers of Kingsley), see "Merger Agreement -
Background and Reasons for the Merger."
Effective Time of Merger. The Merger will become effective
on the date of filing with the Secretary of State of Michigan the
certificate of merger to be submitted by Sub and Kingsley (the
"Effective Date"). Unless Century and Kingsley otherwise agree,
the closing of the Merger will be held on the last business day
of the month in which the last of all conditions to the Merger
have been satisfied or waived (the "Closing Date"). See "Merger
Agreement - Regulatory Approvals and Other Closing Conditions."
Conversion of Kingsley Stock. On the Effective Date each of
the 275 outstanding shares of Kingsley Stock (other than shares
held by shareholders who perfect dissenters rights under Michigan
law) will be converted into an aggregate of (i) 272.73 shares of
Century Preferred Stock and (ii) such number of shares of Century
Common Stock as is derived by dividing $8,636.36 by the average
per share closing price of Century Common Stock reported on the
New York Stock Exchange composite tape for the five trading days
immediately preceding the second trading day prior to the Closing
Date (the "Average Price"). If the application of the foregoing
formula would result in more than 95,000 shares of Century Common
Stock being issued pursuant to the Merger, the Agreement provides
that Century may, at its sole option, pay an amount of cash
(without interest) equal to such excess number of shares
multiplied by the Average Price in lieu of delivering such excess
number of shares of Century Common Stock. Accordingly, the
aggregate merger consideration to be received by all holders of
Kingsley Stock will be (i) 75,000 shares of Century Preferred
Stock, which, based solely upon such stock's $25.00 par value per
share, have an aggregate value of $1,875,000, and (ii) such
number of shares of Century Common Stock having an aggregate
value on the Closing Date, based on the Average Price, of
$2,375,000 (subject to Century delivering cash in lieu of Century
Common Stock in certain circumstances described herein). The
Century Stock to be issued in connection with the Merger (giving
effect to conversion of Century Preferred Stock) is expected to
represent less than 1% of the total outstanding Century Common
Stock. See "Merger Agreement - Conversion of Kingsley Stock."
Certain Federal Income Tax Consequences. The Merger is
intended to be a "tax-free reorganization" for federal income tax
purposes, with the following principal federal income tax
consequences, which represent the views of Kingsley:
(i) A holder of Kingsley Stock who receives cash in
connection with the Merger may recognize gain in an amount not
exceeding the cash received. Any such gain should qualify for
capital gain treatment unless the reduction in such shareholder's
interest in Century from that which would have been received in
Century Stock is deemed insufficient under the Internal Revenue
Code of 1986, as amended, and certain rulings promulgated
thereunder, in which case such cash will be treated as a
dividend.
(ii) Any Kingsley shareholder who exercises his rights under
Michigan law to dissent to the Merger will be treated as if his
shares were redeemed. Such shareholder will be taxed on any gain
realized as a result of such redemption and, subject to certain
contingencies discussed elsewhere herein, such gain should be
treated as capital gain.
NEITHER CENTURY NOR KINGSLEY HAS SOUGHT OR RECEIVED AN
OPINION OF TAX COUNSEL OR OTHER TAX EXPERT REGARDING THE TAX
CONSEQUENCES OF THE MERGER. IT IS RECOMMENDED THAT EACH
SHAREHOLDER CONSULT HIS OWN TAX ADVISOR CONCERNING THE APPLICABLE
FEDERAL, STATE AND LOCAL INCOME TAX CONSEQUENCES OF THE MERGER.
For further discussion regarding the foregoing, see "Merger
Agreement - Certain Federal Income Tax Consequences."
Regulatory Approvals and Other Closing Conditions. The
obligations of Century and Kingsley to consummate the Merger are
subject to the approval of the Agreement by the requisite vote of
Kingsley's shareholders and the satisfaction of several other
customary closing conditions. The Merger was also subject to the
receipt of a final order from the Michigan Public Service
Commission approving all aspects of the Merger, which order was
issued on January 21, 1994. Century's obligation to consummate
the Merger is also subject to, among other things, (i) the number
of shares of Kingsley Stock held by the shareholders of Kingsley
who perfect dissenters rights under Michigan law with respect to
the Merger not exceeding 30 shares and (ii) the absence of a
<PAGE>vii
material adverse change in Kingsley. Although no assurance can
be given that the conditions to the Merger can or will be
satisfied or waived, the parties anticipate that all closing
conditions will be satisfied and the Merger will be consummated
at the end of March 1994. For further information concerning the
foregoing, see "Merger Agreement - Regulatory Approvals and Other
Closing Conditions."
Indemnification by the Principal Shareholders; Agreement to
Hold Century Stock. Pursuant to the Agreement, the Principal
Shareholders have agreed to indemnify Century from the assets of
the Trust for any claim, loss, expense or other liability
incurred by Century resulting from any inaccuracy of any
representation or warranty made by, or any breach or
nonperformance of any covenant or obligation of Kingsley or the
Principal Shareholders, subject to certain limitations.
Additionally, if any beneficiary of the Trust would be awarded
damages or granted injunctive relief enjoining or rescinding the
Merger in any proceeding challenging the Principal Shareholders'
power under the Trust to execute the Agreement, then all expenses
incurred in connection with the Agreement will be borne by the
party incurring them and each party will hold harmless the other
party with respect to any damages suffered in such action. The
Principal Shareholders have also agreed to refrain from disposing
of certain shares of Century Stock for a two-year period in an
effort to preserve the tax-free treatment of the Merger. See
"Merger Agreement - Indemnification by the Principal
Shareholders" and "- Agreement to Hold Century Stock."
Expenses. All fees and expenses incurred in connection with
the Merger will be paid by the party incurring them, subject to
Kingsley paying up to $50,000 of attorneys' fees incurred by the
Principal Shareholders. See "Merger Agreement - Expenses."
Amendment, Waiver and Termination. The Agreement may be
amended at any time before or after its approval by Kingsley's
shareholders subject to applicable law. Subject to certain
exceptions, any party may waive compliance with, among other
things, any of its conditions to consummate the Merger. The
Agreement may be terminated at any time prior to the Effective
Date by (a) the mutual consent of the parties, (b) Century if
there shall have been a material adverse change in Kingsley, or
(c) Century or Kingsley and the Principal Shareholders upon the
occurrence or non-occurrence of certain specified events,
including (i) the failure to consummate the Merger by April 30,
1994, and (ii) a material breach by a party of any
representations, warranties or covenants that is not or cannot be
cured within 15 days after written notice of such breach. See
"Merger Agreement - Amendment, Waiver and Termination."
Procedures for Receiving Century Stock. If the Merger is
consummated, each Kingsley shareholder will be sent instructions
with respect to submitting certificates representing Kingsley
Stock and receiving certificates representing shares of Century
Stock. Kingsley shareholders are requested not to send in stock
certificates until they have received instructions to do so. See
"Merger Agreement - Procedures for Receiving Century Stock."
Interests of Certain Persons
Kingsley currently employs Sterling G. Nickerson, his wife,
Karen Nickerson, and Jan Nickerson, and Century has indicated
that it will use its best efforts to employ each of them after
the Effective Date. See "Merger Agreement - Background and
Reasons for the Merger -- Background of the Merger --- Views of
Certain Directors and Shareholders."
Dissenters Rights
BY REFRAINING FROM VOTING IN FAVOR OF THE AGREEMENT AND
COMPLYING WITH VARIOUS OTHER PRE- AND POST-CLOSING PROCEDURES
THAT ARE REQUIRED BY SECTIONS 761 THROUGH 774 OF THE MICHIGAN
BUSINESS CORPORATION ACT AND DESCRIBED UNDER "DISSENTING
SHAREHOLDERS' RIGHTS," SHAREHOLDERS OF KINGSLEY WILL HAVE THE
RIGHT TO DISSENT TO THE MERGER, IN WHICH EVENT, IF THE MERGER IS
CONSUMMATED, THEY WILL BE ENTITLED TO RECEIVE IN CASH THE "FAIR
VALUE" OF THEIR RESPECTIVE SHARES OF KINGSLEY STOCK, AS
DETERMINED BY JUDICIAL APPRAISAL, IN LIEU OF THE CENTURY STOCK
THAT SUCH SHAREHOLDERS WOULD OTHERWISE BE ENTITLED TO RECEIVE
PURSUANT TO THE AGREEMENT. THE EXERCISE OF THESES RIGHTS MAY
RESULT IN A JUDICIAL DETERMINATION THAT THE FAIR VALUE OF A
DISSENTING SHAREHOLDER'S SHARES IS HIGHER OR LOWER THAN THE VALUE
OF THE CONSIDERATION PAYABLE TO THE NON-DISSENTING SHAREHOLDERS
<PAGE>viii
IN CONNECTION WITH THE MERGER. SHAREHOLDERS WHO OPPOSE THE
MERGER ARE URGED TO READ "DISSENTING SHAREHOLDERS' RIGHTS" IN ITS
ENTIRETY.
Century and Kingsley
Century. Century is a regional diversified
telecommunications company that provides local telephone and
cellular mobile telephone services largely in the central north-
south corridor of the United States. While regulated telephone
operations constitute the preponderant part of its business,
Century's mobile communications subsidiaries provide cellular
mobile telephone and paging services. Century's principal
executive offices are located at 100 Century Park Drive, Monroe,
Louisiana, 71203, and its telephone number is (318) 388-9500.
See "Information About Century."
Kingsley. Kingsley provides local exchange, long distance
access, directory advertising and billing and collecting services
to a 193 square-mile area surrounding Kingsley, Michigan.
Kingsley also owns a minority interest in a general partnership
that provides cellular telephone services in and around Kingsley,
Michigan. Kingsley's principal executive offices are located at
110 W. Main Street, Kingsley, Michigan 49649 and its telephone
number is (616) 263-5231. See "Information About Kingsley."
Market Prices
On September 10, 1993 (the trading day preceding the
execution of the Agreement) and on February 25, 1994 (the day
preceding the date of this Information Statement), the closing
per share sales price of Century Common Stock, as reported on the
New York Stock Exchange Composite Tape, was $29-1/4 and $______,
respectively. No assurance can be given as to the market price
of Century Common Stock on the Effective Date. See "Information
About Century - Price Range of Stock." Neither the Century
Preferred Stock nor Kingsley Stock is traded in any established
public market. In addition, see "Merger Agreement - Conversion
of Kingsley Stock" for information regarding the possible impact
on the number of shares of Century Common Stock that may be
issued pursuant to the Merger caused by the per share market
prices of Century Common Stock being below $25.00.
Comparative Per Share Data
Set forth below with respect to the Century Common Stock and
Kingsley Stock is certain unaudited per fully diluted common
share data presented on a historical, pro forma consolidated
basis and pro forma equivalent basis. The information set forth
below should be read in conjunction with Century's financial
statements incorporated herein by reference, Kingsley's financial
statements included elsewhere herein and the unaudited pro forma
consolidated condensed financial information included elsewhere
herein.
<TABLE>
<CAPTION>
As of or for
As of or for Nine Months
Year Ended Ended
December 31, 1992 September 30, 1993
_________________ __________________
<S> <C> <C>
Century Common Stock
Book Value
Historical $ 7.87 $ 9.70
Pro forma
consolidated <FN1> -- 10.33
Cash dividends
Historical $ .29 $ .23
Pro forma
consolidated <FN1> .29 .23
Income before cumulative
effect of changes in
accounting principles
Historical $ 1.22 $ .96
Pro forma
consolidated <FN1> .91 .84
<PAGE>ix
Kingsley Stock
Book value
Historical $3,035.76 $3,679.81
Pro forma
equivalent <FN2> -- 6,348,71
Pro forma
cash dividends
Historical $ 30.00 $71.00
Pro forma
equivalent<FN2> 179.27 142.18
Income before cumulative
effect of changes in
accounting principles
Historical $ 62.63 $715.06
Pro forma
equivalent<FN2> 562.54 519.27
</TABLE>
_______________________
<FN1> Gives effect to the Merger and to the Other Acquisitions as
of the dates and based on the assumptions and adjustments
described under "Unaudited Pro Forma Consolidated Condensed
Financial Information."
<FN2> Calculated by multiplying the Century pro forma consolidated
amounts by a common stock equivalent exchange factor of
618.18, assuming that the holders of Kingsley Stock receive
an aggregate of 95,000 shares of Century Common Stock valued
at $25 per share in connection with the Merger.
<PAGE>1
INVESTMENT CONSIDERATIONS
SHAREHOLDERS OF KINGSLEY SHOULD CONSIDER THE FOLLOWING
INVESTMENT CONSIDERATIONS IN DETERMINING WHETHER TO VOTE IN FAVOR
OF THE AGREEMEBNT (AS DEFINED BELOW) AND TO ACQUIRE THE CENTURY
STOCK OFFERED BY THIS INFORMATION STATEMENT AND PROSPECTUS (THE
"INFORMATION STATEMENT").
Considerations Relating to Century Stock
Regulatory, Competitive and Technological Uncertainty -
Cellular Operations. The FCC and various state public utility
commissions regulate the licensing, construction, operation,
interconnection arrangements, sale and acquisition of cellular
telephone systems and certain state public utility commissions
also regulate certain aspects of pricing by cellular operators.
Changes in the regulation of cellular operators (such as price
regulation by the FCC or increased price regulation by state
authorities, or a decision by the FCC to grant additional
licenses in each cellular market) could have a material adverse
effect on Century.
Century faces significant competition from the other
cellular licensee in each of its markets (which include McCaw,
Pacific Telecom, Centennial, Sprint, United States Cellular and
several other well-established cellular companies), resale
carriers within such markets and from other communications
technologies that now exist, including specialized mobile radio
systems (which Century believes are operating in a majority of
its markets) and paging services, and may in the future face
competition from other technologies that may be developed or
perfected. Several recent FCC initiatives have resulted in the
allocation of additional frequency spectrum or the issuance of
experimental licenses for mobile communications technologies that
will or may be competitive with cellular, including personal
communication services (for which the FCC intends to begin
auctioning operating licenses in May 1994) and mobile satellite
services. In addition, the FCC has authorized certain
specialized mobile radio service licensees to configure their
systems so as to operate in a manner similar to cellular systems,
and certain of these licensees recently announced their intention
to create a nationwide mobile communications system to compete
with cellular systems. These initiatives as well as other
continuing technological advances in the communications and
wireless data transmission industries make it impossible to
predict the extent of future competition to cellular systems.
Regulatory, Competitive and Technological Uncertainty -
Telephone Operations. The FCC and various state public utility
commissions regulate significant portions of the business of
local exchange carriers ("LECs"), including the licensing,
construction, operation, sale and acquisition of LECs. The FCC
and substantially all of the state public utility commissions
regulate the rates and authorized rates of return that LECs,
including Century's local exchange subsidiaries, are allowed to
earn. The FCC and a limited number of state regulatory
commissions have begun to relax the regulation of LEC's rates and
authorized rates of return. Coincident with this movement toward
reduced regulation is the introduction and encouragement of local
exchange competition by the FCC and various state public utility
commissions, along with the emergence of certain companies
providing competitive access and other services that compete with
LEC's services and the announcement by certain well-established
interexchange carriers of their desire to enter the LEC business.
In addition, the FCC and certain state public utility commissions
have explored or implemented initiatives to reduce the funding of
certain support mechanisms that have traditionally benefitted
several of Century's local exchange subsidiaries. There is no
assurance that these initiatives toward relaxed regulation and
increased competition will not have a material adverse effect on
Century.
In connection with the well-publicized convergence of
telecommunications, cable, video, computer and other
technologies, several large companies have recently announced
plans to offer products that would significantly enhance current
communications and data transmission services and, in some
instances, introduce new two-way video, entertainment, data,
consumer and other multimedia services. No assurance can be
given that Century will have the resources to offer these
products or services, or that the offering of these products or
services by others will not have a material adverse effect on
Century.
Developing Cellular Industry. The cellular industry has a
relatively limited operating history, and there continues to be
uncertainty regarding its future. Among other factors, there is
uncertainty regarding (i) the continued growth in the number of
customers, (ii) the usage and pricing of cellular services,
particularly as market penetration increases and lower-usage
customers subscribe for service, (iii) the number of customers
<PAGE>2
who will terminate service each month, and (iv) the impact of
changes in technology, regulation and competition (see "--
Regulatory, Competitive and Technological Uncertainty - Cellular
Operations").
Value Associated with Cellular Operations. Century's
management believes that a significant portion of the aggregate
market value of Century Common Stock is represented by the
current market value of Century's cellular interests. There can
be no assurance that the market value of Century's cellular
interests will remain at its current level. Management believes
that decreases in the market value of such interests could
materially decrease the trading price of Century Common Stock.
The market value of cellular interests is frequently
determined on the basis of the number of pops controlled by a
cellular provider. The population of a particular cellular
market, however, does not necessarily bear a direct relationship
to the number of subscribers or the revenues that may be realized
from the operation of the related cellular system. The future
market value of Century's cellular interests will depend on,
among other things, the success of its cellular operations.
Other Considerations. For further information on the
regulatory, competitive, technological and other risks inherent
in Century's cellular and telephone operations, see the documents
filed by Century pursuant to the Exchange Act that are
incorporated by reference herein. See "Incorporation of Certain
Documents by Reference" and "Available Information."
Considerations Relating to the Merger
CONTROL BY THE PRINCIPAL SHAREHOLDERS. THE PRINCIPAL
SHAREHOLDERS (AS DEFINED BELOW) OWN OF RECORD APPROXIMATELY
76.36% OF THE OUTSTANDING KINGSLEY STOCK, WHICH ENABLES THEM TO
ELECT THE ENTIRE BOARD OF DIRECTORS. DUE TO SUBSTANTIAL
OPPOSITION TO THE MERGER, THE PRINCIPAL SHAREHOLDERS, IN
SEPTEMBER 1992, INCREASED THE SIZE OF THE BOARD AND ELECTED FIVE
NEW DIRECTORS, ALL OF WHOM VOTED TO APPROVE THE AGREEMENT. ALSO,
THE PRINCIPAL SHAREHOLDERS' OBLIGATIONS TO THE BENEFICIARIES OF
THE TRUST COULD POTENTIALLY CONFLICT WITH THE INTERESTS OF THE
OTHER KINGSLEY SHAREHOLDERS. SEE "MERGER AGREEMENT - BACKGROUND
AND REASONS FOR THE MERGER."
Agreement by Principal Shareholders to Vote for the
Agreement. Pursuant to the Agreement, the Principal Shareholders
have unconditionally agreed to vote in favor of the Agreement;
accordingly, if the Principal Shareholders comply with the
Agreement, the Agreement will be approved without regard to the
vote of any other shareholder. See "Introduction - Record Date;
Quorum; Vote Required." For a description of the rights of
shareholders to dissent to the Merger under Michigan law, see
"Dissenting Shareholders' Rights."
Views of Certain Directors and Shareholders. For a
discussion of Kingsley's Board of Directors initial rejection of
the Merger in September 1992 and the dissenting views of certain
Kingsley directors and shareholders and for information
pertaining to the proceeding challenging the Principal
Shareholders' power to authorize the Merger, see "Merger
Agreement - Background and Reasons for the Merger."
Merger Consideration. The Kingsley shareholders are urged
to carefully consider the information presented herein relating
to the conversion of Kingsley Stock into Century Stock. See
"Merger Agreement - Conversion of Kingsley Stock."
Indemnification Obligations. For a discussion of the
Principal Shareholders' obligations to indemnify Century from the
assets of the Trust, see "Merger Agreement - Indemnification by
the Principal Shareholders."
Interest of Certain Persons. Kingsley currently employs
Sterling G. Nickerson, his wife, Karen Nickerson, and Jan
Nickerson, and Century has indicated that it will use its best
efforts to employ each of them after the Effective Date. See
"Merger Agreement - Background and Reasons for the Merger --
Background of the Merger --- Views of Certain Directors and
Shareholders."
Restrictions on Transferability. Resales of Century Stock
by affiliates of Kingsley will be restricted under the provisions
of the Securities Act of 1933, as amended (the "Securities Act"),
and the regulations promulgated thereunder. See "Merger
Agreement - Resales of Century Stock." For information on
<PAGE>3
additional transfer restrictions applicable to the Principal
Shareholders , see "Merger Agreement - Agreement to Hold Century
Stock."
No Prior Market for the Century Preferred Stock. The
Century Preferred Stock will not be listed for trading on the New
York Stock Exchange. Moreover, there presently exists no trading
market for the Century Preferred Stock and Century does not
anticipate that an active market will develop.
INTRODUCTION
This Information Statement has been furnished in connection
with the special meeting of Kingsley's shareholders to be held at
the time and place specified in the accompanying Notice of
Special Meeting of Shareholders, and at any adjournments thereof
(the "Special Meeting"). Only holders of record of common stock
of Kingsley, $10.00 par value per share ("Kingsley Stock"), at
the close of business on February 28, 1994 (the "Record Date")
are entitled to notice of and to vote at the Special Meeting.
This Information Statement is first being mailed to shareholders
of Kingsley on or about February 28, 1994.
Purpose of Special Meeting
The purpose of the Special Meeting is to consider and vote
upon a proposal to approve the Merger Agreement dated as of
September 13, 1993, as amended (the "Agreement"), by and among
Harry Calcutt and Northwestern Savings Bank & Trust (the
"Principal Shareholders") in their capacity as the trustees of
the Sterling M. Nickerson Trust created pursuant to Sterling M.
Nickerson's will (the "Trust"), Kingsley, Century and KTC
Acquisition Corporation, a wholly-owned subsidiary of Century
("Sub"), pursuant to which, among other things, Sub will merge
with and into Kingsley (the "Merger") and each outstanding share
of Kingsley Stock (other than those held by shareholders who
perfect dissenters rights under Michigan law) will be converted
into the consideration described herein. Kingsley's Board of
Directors is not aware of any other matters to be presented at
the Special Meeting. For further information concerning the
Agreement and the Merger, see "Merger Agreement."
Record Date; Quorum; Vote Required
date to determine those record holders of Kingsley Stock entitled
to notice of and to vote at the Special Meeting. On that date
there was outstanding 275 shares of Kingsley Stock, each of which
is entitled to one vote with respect to each matter to be voted
upon at the Special Meeting.
Kingsley's By-laws provide that the holders of a majority of
the issued and outstanding Kingsley Stock must attend the Special
Meeting in person or be duly represented by proxy in order for a
quorum to be properly constituted at such meeting.
The Michigan Business Corporation Act ("MBCA") requires that
the Agreement be approved by the affirmative vote of the holders
of a majority of the outstanding shares of Kingsley Stock. As of
the Record Date, the Principal Shareholders owned of record an
aggregate of 210 shares of the outstanding Kingsley Stock
(76.36%) and, pursuant to the Agreement, have unconditionally
agreed to vote in favor of the Agreement; accordingly, if the
Principal Shareholders comply with the Agreement, the Agreement
will be approved without regard to the vote of any other
shareholder. DIRECTORS AND EXECUTIVE OFFICERS OF KINGSLEY WHO
BENEFICIALLY OWN APPROXIMATELY 4.7% OF THE OUTSTANDING KINGSLEY
STOCK HAVE ADVISED KINGSLEY THAT THEY INTEND TO VOTE AGAINST THE
AGREEMENT. Although certain of these directors and executive
officers have from time to time questioned whether the Merger is
in the best financial interests of Kingsley's shareholders,
members of this group have advised that their opposition to any
business combination has been based primarily on the view that
Kingsley has historically been owned and operated by members of
the Nickerson family and should remain an independent telephone
company. See "Merger Agreement - Background and Reasons for the
Merger." For information concerning the amount of Kingsley Stock
beneficially owned by Kingsley's directors, executive officers
and certain shareholders and the method of determining such
beneficial ownership, see "Information About Kingsley - Security
Ownership of Certain Beneficial Owners and Management."
<PAGE>4
Each record holder of Kingsley Stock as of the Record Date
is entitled to vote in person or by proxy on all matters to come
before the Special Meeting. Any proxy given to a person must be
in writing and filed with Kingsley's Secretary. NEITHER CENTURY
NOR KINGSLEY IS ASKING ANY KINGSLEY SHAREHOLDER FOR A PROXY AND
ALL SUCH SHAREHOLDERS ARE REQUESTED TO REFRAIN FROM SENDING
CENTURY OR KINGSLEY A PROXY.
Neither the laws of Louisiana, the jurisdiction in which
Century is incorporated, nor the rules of the New York Stock
Exchange require that the Merger or the issuance of Century Stock
thereunder be approved by the Century shareholders.
MERGER AGREEMENT
Consummation of the Merger will be effected in accordance
with the terms and conditions set forth in the Agreement. The
following brief description of the Agreement and the Merger does
not purport to be complete and is qualified in its entirety by
reference to the Agreement, a copy of which is attached hereto as
Appendix I and is incorporated herein by reference.
For a description of the rights of shareholders to dissent
to the Merger under Michigan law, see "Dissenting Shareholders'
Rights." Hereinafter, shareholders of Kingsley who perfect their
dissenters rights under Michigan law are occasionally referred to
as "dissenting shareholders" and all other shareholders are
occasionally referred to as "non-dissenting shareholders."
Structure of Merger
Kingsley and the Principal Shareholders, on the one hand,
and Century and Sub, a wholly-owned subsidiary of Century that
was organized solely for the purpose of consummating the Merger,
on the other hand, are parties to the Agreement. Pursuant to the
Agreement, Sub will merge with and into Kingsley, which will
survive such merger under the name "Century Telephone of Northern
Michigan, Inc." Following consummation of the Merger, Century
Telephone of Northern Michigan, Inc. (which shall, for ease of
reference, be referred to hereinafter as "Kingsley") will be a
wholly-owned subsidiary of Century.
Background and Reasons for the Merger
Background of the Merger. In early 1992, the Principal
Shareholders received an unsolicited proposal from Telephone and
Data Systems, Inc., a publicly held telecommunications company
(the "Initial Bidder"), to acquire Kingsley through a stock-for-
stock reorganization transaction. After receiving this proposal,
the Principal Shareholders, independently and without consulting
Kingsley's Board of Directors, solicited offers from a few
publicly held telecommunications companies, including Century.
In order to provide the Trust with income and liquidity, the
Principal Shareholders sought offers for Kingsley that included,
among other things, both cumulative convertible preferred stock
and common stock traded on a national securities exchange.
Although the Principal Shareholders informed Kingsley's President
of these developments, the Principal Shareholders did not at this
time solicit the input of Kingsley's directors or officers
regarding whether a reorganization of Kingsley at this juncture
was in the best interests of all of Kingsley's shareholders. In
June 1992, Kingsley's Board of Directors was, however, informed
of the Principal Shareholder's actions; the Board discussed these
developments but did not take any action at that time. See
"Investment Considerations - Considerations Relating to Merger --
Control by the Principal Shareholders."
In mid-1992, the Principal Shareholders received an all-
stock bid from Century having an implied value of $4.1 million
based upon the sum of (i) the par value of the Century Preferred
Stock offered and (ii) the market value on the closing date of
the Century Common Stock offered (determined pursuant to a
formula that ensures a fixed dollar value as of such date, in
substantially the same manner as in the Agreement described
elsewhere herein). At the same time, the Principal Shareholders
also received an all-stock bid from the Initial Bidder having an
implied value of $4.0 million based upon the sum of (i) the par
value of the Initial Bidder's preferred stock offered and (ii)
the market value on the closing date of the Initial Bidder's
common stock offered (determined pursuant to a formula that
ensures a fixed dollar value as of such date, in substantially
the same manner as the aggregate value of the Century Common
Stock is determined pursuant to the Agreement described elsewhere
herein). Century and the Initial Bidder each proposed an
acquisition of Kingsley through a tax-free reorganization.
Neither party expressed an interest in acquiring only the
<PAGE>5
Principal Shareholders' interest in Kingsley. Prior to
presenting these bids to Kingsley's Board of Directors, the
Principal Shareholders engaged in discussions with the two
bidders in order to increase their respective offers. At the end
of July 1992, the Principal Shareholders requested that Century
and the Initial Bidder submit their highest offer for Kingsley.
The Initial Bidder declined to submit another bid and Century
presented a proposal which increased its proposed consideration
and which was otherwise substantially similar to the terms of the
Merger (the "Proposed Transaction"). The Principal Shareholders
determined that Century's Proposed Transaction was the highest
and best acquisition proposal that it would receive for Kingsley
based upon (i) the implied value of the Century Common Stock and
the Century Preferred Stock, (ii) the terms of the Century
Preferred Stock which would provide the Trust with income, (iii)
the fact that the Century Common Stock is traded on a national
securities exchange which would provide the Trust with liquidity
and (iv) the improbability of receiving any other offers with the
characteristics described in (i), (ii) and (iii) above. In
August 1992, Northwestern Savings Bank & Trust presented the
Proposed Transaction to Kingsley's Board of Directors at which
time the directors discussed the terms but did not take any
action.
Initial Rejection of the Proposed Transaction. On September
17, 1992, Kingsley's Board of Directors met and discussed the
Proposed Transaction. The directors addressed several issues,
including the calculation of the proposed purchase price and
Kingsley's growth trends in access lines and cellular activity.
At that time, the Board questioned whether the Proposed
Transaction was in the best financial interest of Kingsley's
shareholders and in the best interest of Kingsley's customers.
The Board also noted that the Proposed Transaction may be
contrary to the restrictions set forth in the Trust regarding the
disposition of the Principal Shareholders' Kingsley Stock. Based
on these findings, the Board rejected the Proposed Transaction by
a vote of five (Sterling G. Nickerson, Ruvert VanderMeulen, Max
Roland Nickerson, Jan Nickerson and Richard Weidner) to one (Jack
Boynton). See "--- Views of Certain Directors and Shareholders."
September 1992 Shareholder Meeting. A special meeting of
Kingsley's shareholders, requested by the Principal Shareholders,
was held on September 23, 1992. At this meeting, Kingsley's By-
laws were amended to increase the number of directors from six to
eleven and Eric Molvang, Harry Calcutt, David A. Eckenrode, John
Nickerson and Kathleen Nickerson Firestone were elected to fill
the vacancies created by such amendment. See "Investment
Considerations - Considerations Relating to the Merger -- Control
by the Principal Shareholders." The Principal Shareholders
granted a proxy for one of their shares of Kingsley Stock to John
Nickerson and Kathleen Nickerson Firestone, who voted such share
in favor of these actions; the Principal Shareholders also voted
209 of their shares in favor of these actions and holders of 61
shares of Kingsley Stock voted against. The shareholders then
discussed the desirability of pursuing and consummating the
Proposed Transaction and, by a vote of 209 shares in favor (all
of which were voted by the Principal Shareholders) and 62
against, the shareholders urged Kingsley's Board of Directors to
approve the Proposed Transaction.
Approval of Letter of Intent. At the November 11, 1992
regular meeting of Kingsley's Board, the directors discussed the
contents of a draft of a proposed letter of intent with Century
and approved the draft by a vote of six (Jack Boynton and newly
elected directors Eric Molvang, Harry Calcutt, David A.
Eckenrode, John Nickerson and Kathleen Nickerson Firestone) to
four, with one abstention (Sterling G. Nickerson). Sterling G.
Nickerson indicated that he was not necessarily opposed to the
Proposed Transaction as contemplated by the letter of intent but
believed that he had not yet received all of the information he
deemed relevant. The Board by the same vote of six to four, with
one abstention, also formed a committee consisting of Messrs.
Calcutt, Eckenrode and Molvang to pursue negotiations with
Century and to develop and submit a proposed form of definitive
agreement. Additionally, at the meeting, Mr. Calcutt replaced
Sterling G. Nickerson as the President of Kingsley and Mr.
Nickerson was named Senior Vice President, each approved by a
vote of six to four with one abstention. See "Investment
Considerations - Considerations Relating to the Merger -- Control
by the Principal Shareholders."
On November 12, 1992, a special meeting of Kingsley's
shareholders, requested by the Principal Shareholders, was held
at which the Proposed Transaction was discussed; holders of 233
shares of Kingsley Stock were present. Harry Calcutt, President,
explained the reasons why he believed that the consummation of
the Proposed Transaction with Century would be in the best
interests of the beneficiaries of the Trust and all of Kingsley
shareholders. See "-- Reasons for the Merger." The shareholders
then reviewed the Board's action at the November 11, 1992 meeting
approving the Proposed Transaction and the terms of the letter of
intent and accepted, ratified and confirmed such action by a vote
of the Principal Shareholders' 210 shares in favor, 19 shares
against and 4 shares abstaining.
<PAGE>6
Trust Litigation. On September 8, 1992, the Principal
Shareholders filed a Probate Court action seeking judicial
confirmation of their trust powers to authorize the Proposed
Transaction. Certain beneficiaries of the Trust, some of whom
are also shareholders of Kingsley, including Sterling G.
Nickerson, Jan Nickerson, Max Roland Nickerson and Max Ronald
Nickerson, opposed the action contending that the Trust did not
confer upon the Principal Shareholders the power to authorize the
Proposed Transaction. On October 22, 1992, the Probate Court
issued an order confirming that the Principal Shareholders have
the power to authorize the Proposed Transaction. Certain of
these beneficiaries of the Trust then filed an appeal of the
Probate Court's order; however, since the filing of such appeal,
such beneficiaries have not filed a brief or otherwise actively
pursued the appeal. For more information regarding the
consequences of this suit, see "- Regulatory Approvals and Other
Closing Conditions" and "- Indemnification by the Principal
Shareholders."
Execution of Letter of Intent and Approval of the Agreement.
Due to the filing of the appeal, Century, Kingsley and the
Principal Shareholders delayed executing the letter of intent
until May 7, 1993. At the May 26, 1993 meeting of Kingsley's
Board of Directors, the Board ratified the execution of the
letter of intent with Century by a vote of six (Jack Boynton,
Eric Molvang, Harry Calcutt, David A. Eckenrode, John Nickerson
and Kathleen Nickerson Firestone) to five (Sterling G. Nickerson,
Ruvert VanderMeulen, Max Roland Nickerson, Jan Nickerson and
Richard Weidner). See "-- Reasons for the Merger" and "--- Views
of Certain Directors and Shareholders." At Board of Directors
meetings held in July, August and September, the Board discussed
proposed drafts of the Agreement and, at its meeting held on
December 8, 1993 at which Ruvert VanderMeulen and Jan Nickerson
were absent, the Board approved, ratified and confirmed the
execution of the Agreement by a vote of 6 in favor, 2 opposed
(Max Roland Nickerson and Richard Weidner) and 1 abstention
(Sterling G. Nickerson).
Views of Certain Directors and Shareholders. Throughout the
process described above, Sterling G. Nickerson, Jan Nickerson,
Max Roland Nickerson, Ruvert VanderMeulen and Richard Weidner
voiced opposition to and concern regarding a business combination
involving Kingsley. Although certain directors and shareholders
have from time to time questioned whether the Merger is in the
best financial interests of the shareholders, opposition to any
business combination proposal has been based primarily on the
view that Kingsley has historically been owned and operated by
members of the Nickerson family and should remain an independent
telephone company. For information regarding the familial
relationships of certain of Kingsley's directors and executive
officers, see "Information About Kingsley - Security Ownership of
Certain Beneficial Owners and Management." Although certain
directors have recognized the obligations of the Principal
Shareholders to provide the Trust's beneficiaries with income,
they have from time to time contended that Kingsley could satisfy
these objectives. Concern was also raised regarding the future
of Kingsley's current employees, which include Sterling G.
Nickerson, his wife, Karen Nickerson, and Jan Nickerson. Century
has indicated that it will use its best efforts to employ
Sterling G. Nickerson, Karen Nickerson and Jan Nickerson.
Century's Offers. In addition to Kingsley's local telephone
and unregulated telecommunications operations, Kingsley holds an
approximately 11% interest in Cellular North Michigan Network
General Partnership (the "Partnership"), all of which were
evaluated by Century in connection with making its offers. In
formulating its bids for Kingsley, Century considered (i) the
favorable demographics of Kingsley's franchised telephone market
and the Partnership's licensed cellular market; (ii) the cash
flow generated from Kingsley's operations, as well as its
financial position; (iii) the location of Kingsley's and the
Partnership's operations in relation to markets currently
serviced by Century; (iv) Century's existing ownership interest
in the Partnership; and (v) the quality and sophistication of
Kingsley's telephone assets and its reputation for quality
service. For further information about Kingsley's business, see
"Information About Kingsley - Description of Kingsley's
Business." Although Century did separately review the value of
Kingsley's cellular and noncellular operations, it also made
subjective evaluations regarding the aggregate value of
Kingsley's combined enterprise, and did not assign a specific
portion of the aggregate consideration to any specific line of
business. However, Century estimates that approximately 45% to
60% of the aggregate merger consideration payable under the
Agreement is attributable to Kingsley's minority interest in the
Partnership.
Reasons for the Merger. A majority of Kingsley's Board of
Directors has determined that the Merger is in the best interests
of the shareholders of Kingsley and has approved the Agreement
and the transactions contemplated thereby. The Board principally
considered the following factors in support of the conclusions
reached: (i) the diversity among Kingsley's shareholder base,
including differing requirements relating to liquidity and tax
and estate planning considerations and differing views on the
reinvestment of Kingsley's profits, (ii) the desire of Principal
<PAGE>7
Shareholders to dispose of their shares at the highest price and
provide the Trust with income and liquidity, (iii) competitive,
technological and regulatory changes in the telecommunications
industry requiring substantial future investment and incurrence
of additional debt, (iv) attractive valuations of local exchange
carrier and cellular properties in the current equity and
corporate control markets, (v) information with respect to the
financial condition, earnings, dividends, business, operations,
assets, management and prospects of Century and Kingsley
(including the prospects of Kingsley if it continued as an
independent entity) and the historical price performance of
Century Common Stock, (vi) the degree of compatibility of the
businesses of Century and Kingsley, which would provide
Kingsley's shareholders with a continuing interest in the
telephone and cellular businesses, and (vii) that the Merger
would provide all of the shareholders of Kingsley the opportunity
to exchange their shares on a tax-free basis for an ownership
interest in Century, which has enhanced financial, technical and
marketing resources. At no time from the Principal Shareholders'
receipt of the Initial Bidder's unsolicited proposal through the
date hereof have the Principal Shareholders, Kingsley, or
Kingsley's directors or executive officers retained any financial
advisers to assist Kingsley in connection with the reorganization
of Kingsley or considered any alternative transaction other than
a business combination with those companies with whom they held
discussions.
Effective Time of Merger
The Merger will become effective at 10:59 p.m. local time on
the date of filing with the Secretary of State of Michigan the
certificate of merger to be submitted by Sub and Kingsley (such
time and date being hereinafter referred to as the "Effective
Time" and the "Effective Date," respectively). Unless Century
and Kingsley otherwise agree, the closing of the Merger will be
held on the final business day of the month in which the last of
all conditions to the Merger have been satisfied or waived (the
"Closing Date"). See "- Regulatory Approvals and Other Closing
Conditions."
Conversion of Kingsley Stock
At the Effective Time each of the 275 outstanding shares of
Kingsley Stock held by non-dissenting shareholders will be
converted into an aggregate of (i) 272.73 fully paid and
nonassessable shares of Century Preferred Stock and (ii) such
number of fully paid and non-assessable shares of Century Common
Stock as is derived by dividing $8,636.36 by the average per
share closing price of Century Common Stock reported on the New
York Stock Exchange composite tape for the five trading days
immediately preceding the second trading day prior to the Closing
Date (the "Average Price"). See "Information About Century -
Price Range of Stock." If application of the foregoing formula
would result in more than 95,000 shares of Century Common Stock
being issued pursuant to the Merger, the Agreement provides that
Century may, at its sole option, pay an amount of cash (without
interest) equal to such excess number of shares multiplied by the
Average Price in lieu of delivering such excess number of shares
of Century Common Stock. Accordingly, the aggregate merger
consideration to be received by all holders of Kingsley Stock
will be (i) 75,000 shares of Century Preferred Stock, which,
based solely upon such stock's $25.00 par value per share, have
an aggregate value of $1,875,000, and (ii) such number of shares
of Century Common Stock having an aggregate value on the Closing
Date, based on the Average Price, of $2,375,000 (subject to
Century delivering cash in lieu of Century Common Stock in
certain circumstances described herein). Accordingly, based upon
the assumptions set forth above, the Kingsley Stock will be
converted into Century Preferred Stock and Century Common Stock
having a collective aggregate value on the Closing Date of
$4,250,000, which equals $15,454.61 on a per share basis. The
Century Stock to be issued in connection with the Merger (giving
effect to conversion of Century Preferred Stock) is expected to
represent less than 1% of the total outstanding Century Common
Stock.
The number of shares of Century Common Stock issued pursuant
to the Merger will not exceed 95,000 unless the Average Price is
less than $25.00. In this instance, if Century were to exercise
its option to deliver cash, it could not, without jeopardizing
the tax-free treatment of the Merger, deliver cash in an amount
that when aggregated with the amount of cash payable to
dissenting shareholders would exceed 20% of the aggregate value
of the total consideration received by all Kingsley shareholders.
See "- Certain Federal Income Tax Consequences -- Principal
Consequences of the Merger." On February 25, 1994, the day
preceding the date of this Information Statement, the closing per
share sales price of Century Common Stock as reported on the New
York Stock Exchange composite tape was $__________. See
"Information About Century - Price Range of Stock." Century has
advised that it intends to defer its decision as to whether to
deliver cash in lieu of Century Common Stock until immediately
prior to Closing.
<PAGE>8
As of the Effective Date, each certificate evidencing
Kingsley Stock (except for shares of Kingsley Stock held by
dissenting shareholders), until surrendered and exchanged, will
be deemed, for all purposes, to evidence only the right to
receive stock certificates representing the number of shares of
Century Stock that the holder of such certificate is entitled to
receive pursuant to the Merger.
No fractional shares of Century Stock will be issued in
connection with the Merger. If calculation of the number of
shares of Century Stock to be issued to any Kingsley shareholder
in connection with consummation of the Merger results in a
fractional interest in a share of Century Stock, any rights
pertaining to such fractional interest will be waived by the
shareholder otherwise entitled thereto.
Certain Federal Income Tax Consequences
Principal Consequences of the Merger. The Merger is
intended to be a "tax-free reorganization" for federal income tax
purposes under Sections 368(a)(1)(A) and 368(a)(2)(E) of the
Internal Revenue Code of 1986, as amended (the "Code"). The
following will be the principal federal income tax consequences
of the Merger assuming it is treated as a "tax-free
reorganization":
(i) No gain or loss will be recognized by Kingsley, Sub or
Century as a result of the Merger.
(ii) No gain or loss will be recognized by Kingsley's
shareholders as a result of the Merger, except as described in
paragraphs (iv) and (vii) below.
(iii) The Merger will not result in any change in the basis
of Kingsley's assets.
(iv) A holder of Kingsley Stock will realize gain to the
extent the aggregate value of the consideration received by him
(determined as of the Effective Date) exceeds his basis in the
Kingsley Stock. Such gain will be recognized for federal income
tax purposes only to the extent that any such shareholder
receives cash in connection with the Merger. Any gain so
recognized will qualify for capital gains treatment unless the
payment of cash is equivalent to a dividend, in which case such
cash payment would be ordinary income. The cash payment will be
treated as a dividend unless the reduction in such shareholder's
interest in Century from that which such shareholder would have
received if he were paid solely in Century Stock is large enough
to constitute a "meaningful reduction" under Section 302 of the
Code. Under current rulings of the Internal Revenue Service (the
"IRS"), any Kingsley shareholder who receives cash in the Merger
should satisfy the requirements of Section 302 of the Code so
that the gain recognized in connection with receiving cash will
qualify for capital gains treatment. However, because the
provisions of Section 302 of the Code are separately applied to
each holder based upon the particular facts and circumstances at
the time of the applicable transaction, no assurance can be given
that a holder of Kingsley Stock who receives cash in the Merger
will qualify for capital gains treatment. Therefore, each holder
is advised to consult his tax advisor.
(v) The basis for tax purposes of the shares of Century
Stock received by a holder of Kingsley Stock pursuant to the
Merger will be the same as the basis for such shareholder's
Kingsley Stock surrendered in exchange therefor increased by the
amount of any gain recognized by such shareholder in connection
therewith and reduced by the amount of any cash received by such
shareholder in connection therewith, allocated between the
Century Common Stock and Century Preferred Stock received by a
shareholder in proportion to the relative fair market values of
the classes received.
(vi) A Kingsley shareholder's holding period with respect
to the shares of Century Stock received by such shareholder as a
result of the Merger will include the period for which he held
the shares of Kingsley Stock which were converted into such
shares of Century Stock, provided such shares of Kingsley Stock
were held as a capital asset on the Effective Date.
(vii) Under current IRS rulings, any Kingsley shareholder
who exercises his rights under Michigan law to dissent from the
Merger will be treated as if his Kingsley Stock was redeemed,
although it is possible that the IRS will apply the test stated
in paragraph (iv) above in light of a 1989 U.S. Supreme Court
decision. However, under the current IRS rulings, such
dissenting shareholder should recognize gain to the extent that
the amount of cash the shareholder receives for his Kingsley
shares exceeds his tax basis (or loss to the extent the tax basis
exceeds the amount received), and such gain (or loss) should be
capital gain (or loss), provided that the Kingsley Stock was held
<PAGE>9
as a capital asset by the dissenting shareholder. However, if a
redemption fails to qualify for exchange treatment under Section
302(b) of the Code (considering the attribution rules of Section
318 thereof) because the shareholder's interest is not
sufficiently reduced, a risk exists that some or all of the cash
received by a dissenting shareholder will be treated as a taxable
dividend to such shareholder.
Under the Code, in order for the Merger to constitute a tax-
free reorganization, the Kingsley Stock must be converted into an
amount of Century Stock that at the Effective Time equals at
least 80% of the aggregate value that all of the Kingsley
shareholders receive. Thus, the tax-free reorganization may be
jeopardized if Century delivers cash in an amount that when
aggregated with the amount of cash payable to dissenting
shareholders would exceed 20% of the aggregate value of the total
consideration received by all Kingsley shareholders. See "-
Conversion of Kingsley Stock." For IRS ruling purposes, in order
for the Merger to constitute a tax-free reorganization, the
amount of Century Stock received by all Kingsley shareholders in
connection with the Merger must be at least 50% of the aggregate
value of the consideration paid to all dissenting and non-
dissenting shareholders in connection with the Merger. Century
Stock received in the Merger will not count toward the 50%
threshold if the recipient disposes of such stock and such
recipient had an intention to dispose of the stock on the
Effective Date. The disposition of stock within two years of the
Effective Date may evidence that the shareholder had an intent to
dispose of the stock on the Effective Date. In an effort to
safeguard the tax-free treatment of the Merger, the Principal
Shareholders have agreed to hold a certain amount of their
Century Stock for a two-year period. See "- Agreement to Hold
Century Stock."
Consequences of Indemnity Payments. Under certain
circumstances described under "- Indemnification by Principal
Shareholders," the Principal Shareholders may be required to make
indemnification payments to Century or its officers, directors
and affiliates. Any payments under these indemnity obligations
made by the Principal Shareholders may reduce any gain recognized
as a result of the Merger, if paid during the year in which the
Merger occurs, or may result in a capital loss if paid in a year
subsequent to the Merger. The Principal Shareholders may be
required to capitalize all such indemnity payments and add the
payments to their basis in the Century Stock received. If the
indemnity payment is made in the year subsequent to the Merger,
the payment may result in a capital loss at least to the extent
of the gain recognized in connection with the Merger.
THE TAX DISCUSSION SET FORTH ABOVE SETS FORTH THE VIEWS OF
KINGSLEY, IS INCLUDED FOR GENERAL INFORAMTION ONLY, AND IS BASED
UPON PRESENT LAW. THE TAX CONSEQUENCES OF THE MERGER WILL DEPEND
IN LARGE PART ON THE FACTS AND CIRCUMSTANCES APPLICABLE TO EACH
SHAREHODLER AND UPON AN EVALUATION OF FACTS AND EVENTS THAT WILL
OCCUR IN THE FUTURE, AND AS A RESULT, THE PARTICULAR TAX
CONSEQUENCES TO A SHAREHOLDER CANNOT BE PREDICTED WITH CERTAINTY.
NEITHER CENTURY NOR KINGSLEY HAS SOUGHT OR RECEIVED AN OPINION OF
TAX COUNSEL OR OTHER TAX EXPERT REGARDING THE TAX CONSEQUENCES OF
THE MERGER. THEREFORE, EACH SHAREHOLDER IS URGED TO CONSULT HIS
OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF THE MERGER.
WITH REGARD TO TAX CONSEQUENCES UNDER THE LAWS OF STATES OR LOCAL
GOVERNMENTS OR OF ANY OTHER JURISDICTION, NO INFORMATION OR
OPINION IS PROVIDED HEREIN, AND SHAREHOLDERS ARE URGED TO
CONSULT, AND SHOULD RELY UPON, THEIR OWN TAX ADVISORS.
Regulatory Approvals and Other Closing Conditions
The obligations of Century and Kingsley to consummate the
Merger are subject to the approval of the Agreement by the
requisite vote of Kingsley's shareholders and the receipt of a
final order from the Michigan Public Service Commission ("MPSC")
approving all aspects of the Merger, which order was issued on
January 21, 1994. In addition to regulatory and shareholder
approvals, the respective obligations of Century and Kingsley to
consummate the Merger are also subject to the accuracy of the
other party's or parties' representations and warranties, the
performance by the other party or parties of their obligations
under the Agreement and the satisfaction of several other
customary closing conditions, as well as certain other
conditions, including that all conditions required for treating
the Merger as a reorganization under Section 368 of the Code have
been met. See "- Certain Federal Income Tax Consequences."
The obligation of Century to consummate the Merger is
further conditioned upon, among other things, (i) the number of
shares of Kingsley Stock held by dissenting Kingsley shareholders
being 30 or fewer and (ii) the absence of any material adverse
change in the business, financial condition, results of
operation, cash flow or prospects of Kingsley.
<PAGE>10
Although no assurance can be given that the conditions to
the Merger can or will be satisfied or waived in a timely manner
or at all, the parties anticipate that all closing conditions
will be satisfied and the Merger will be consummated at the end
of March 1994.
Indemnification by the Principal Shareholders
Pursuant to the Agreement, the Principal Shareholders have
agreed to indemnify Century and its officers, directors and
affiliates (the "Indemnified Parties") from the assets of the
Trust for any claim, loss, expense or other liability (including
without limitation the reasonable fees of attorneys and other
professional advisors) imposed or incurred by the Indemnified
Parties (collectively, "Losses") that results or arises out of
(i) any inaccuracy of any nature in any representation or
warranty made by Kingsley or the Principal Shareholders in the
Agreement (including all schedules and exhibits thereto), or any
documents delivered to Century pursuant to the Agreement, whether
or not the Indemnified Parties rely thereon or had knowledge
thereof, or (ii) any breach or nonperformance of any covenant,
agreement or other obligation of Kingsley or the Principal
Shareholders under the Agreement. The Principal Shareholders'
obligation to indemnify the Indemnified Parties will remain
enforceable for a three-year period following the Effective Date,
subject to certain exceptions. The Principal Shareholders will
not be required to make indemnification payments in excess of the
value of the Trust's assets as of the date of a claim.
Notwithstanding the indemnification provisions described
above, if any beneficiary of the Trust would be awarded damages
or granted injunctive relief enjoining or rescinding the Merger
in any proceeding challenging the Principal Shareholders' power
under the Trust to execute the Agreement, then all expenses
incurred in connection with the Agreement will be borne by the
party incurring them and each party will hold harmless the other
party with respect to any damages suffered in such action.
Agreement to Hold Century Stock
In order to safeguard the tax-free treatment of the Merger,
the Principal Shareholders have represented to Century in the
Agreement that they do not have a present intention to sell the
Century Stock to be received by them in connection with the
Merger in a manner that jeopardizes such tax-free treatment. As
described further under "- Certain Federal Income Tax
Consequences," the continuing qualification of the Merger as a
tax-free reorganization is contingent upon the Kingsley
shareholders retaining a sufficient continuing interest in
Kingsley through their ownership of Century Stock. In an effort
to insure the continuing interest of the former Kingsley
shareholders in the surviving corporation, the Agreement
obligates the Principal Shareholders, until the second
anniversary of the Effective Date, to refrain from selling,
transferring, donating or otherwise disposing of any beneficial
interest in (i) any of the shares of Century Preferred Stock,
including shares of Century Common Stock that may be issued upon
conversion of such Century Preferred Stock and (ii) that number
of shares of Century Common Stock as may be required so that the
value of such shares plus the value of the shares of Century
Preferred Stock issued to the Principal Shareholders equal 50.1%
of the aggregate value of all consideration received by all of
the dissenting or non-dissenting shareholders of Kingsley in
accordance with the Merger. Each certificate representing the
Century Stock issued to the Principal Shareholders in connection
with the Merger will contain a legend referencing these
restrictions.
Expenses
Regardless of whether the Merger is consummated, the
Agreement provides that all fees and expenses incurred in
connection with the Merger will be paid by the party incurring
them, except that, in accordance with the terms of the Agreement,
Kingsley will pay up to $50,000 of attorneys' fees incurred by
the Principal Shareholders in connection with the Merger.
Representations and Warranties
The Agreement contains various customary representations and
warranties relating to, among other things, (i) Kingsley's
capital structure and stock ownership, (ii) the authorization,
execution, delivery, performance and enforceability of the
Agreement and related matters, (iii) the absence of conflicts
under the articles of incorporation or bylaws, or violations of
applicable instruments or laws, (iv) the accuracy of Kingsley's
tax returns and timely payment or the adequate provisions for all
taxes, (v) compliance with the law and the funding of employee
<PAGE>11
benefit plans, (vi) Kingsley's organization and other corporate
matters, (vii) the absence of certain material adverse events or
changes affecting Kingsley, (viii) the absence of undisclosed
liabilities of Kingsley, (ix) the accuracy of information
supplied by Kingsley and the Principal Shareholders in connection
with preparing the Registration Statement and this Information
Statement, (x) Kingsley's litigation and compliance with law and
(xi) title to and sufficiency of the assets and permits of
Kingsley. The representations and warranties set forth in
clauses (vi) through (xi) above will survive for three years
after the Effective Time and the representations and warranties
set forth in clauses (i) through (v) above will have no
expiration date. See "- Indemnification by the Principal
Shareholders."
Non-Solicitation
The Agreement provides that Kingsley and each Principal
Shareholder will not, and will cause each of the officers,
directors, employees, affiliates and agents of Kingsley not to
solicit or encourage inquiries or proposals with respect to,
furnish any information relating to, participate in any
negotiations or discussions concerning, or consummate any
acquisition or purchase of all or a substantial portion of the
assets of, or a substantial equity interest in, or any business
combination or share exchange with, Kingsley.
Amendment, Waiver and Termination
The Agreement may be amended at any time before or after its
approval by Kingsley's shareholders, provided that no amendment
may be made after shareholder approval that decreases the
consideration to be received for the Merger or adversely affects
the rights of Kingsley's shareholders unless further shareholder
approval is obtained.
At any time prior to the Effective Time, any party may, to
the extent legally permissible, (i) waive any inaccuracies in the
representations and warranties contained in the Agreement or in
any document delivered pursuant to the Agreement or (ii) waive
compliance with any of the agreements of the other party or
parties to the Agreement or with any of the conditions to its
obligation to consummate the Merger specified in the Agreement.
Any waiver will be enforceable only if set forth in a written
instrument signed by the waiving party.
The Agreement may be terminated at any time prior to the
Effective Time by (i) the mutual consent of Century, Kingsley and
the Principal Shareholders, (ii) either Century or Kingsley and
the Principal Shareholders if (a) any condition to consummating
the Merger has not been met or waived by the appropriate party by
April 30, 1994, (b) any such condition cannot be met by such date
and has not been waived, (c) the Merger has not occurred by such
date or (d) there has been a material breach by the other party
or parties of any representations, warranties or covenants that
is not or cannot be cured within 15 days after written notice of
such breach, and (iii) Century if there shall have been a
material adverse change in the business, financial condition,
results of operation, cash flow or prospects of Kingsley.
Conduct of Business Pending the Merger
The Agreement provides that until the Effective Time,
Kingsley will conduct its business in the ordinary course of
business consistent with past practices and preserve intact its
business organization, keep available the services of its
officers and employees, and maintain good relationships with its
customers, suppliers and others having business relationships
with it. The Agreement further provides that, prior to the
Effective Time, Kingsley will not, without the prior written
consent of Century, commit or omit to do any act that (i) would
cause it to breach any of its agreements, commitments or
covenants contained in the Agreement or (ii) would cause any of
the representations or warranties contained in the Agreement to
become untrue.
Accounting Treatment
Century will account for the Merger as a purchase under
generally accepted accounting principles.
Resales of Century Stock
The Century Stock to be issued to shareholders of Kingsley
in connection with the Merger will be freely transferable under
the Securities Act, except for shares issued to the Principal
Shareholders, (see " - Agreement to Hold Century Stock"), and the
<PAGE>12
following Kingsley shareholders, each of whom is deemed to be an
"affiliate" of Kingsley for purposes of Rule 145 under the
Securities Act (the "Kingsley Affiliates"): Sterling G.
Nickerson, Jan Nickerson, Ruvert VanderMeulen, Max Roland
Nickerson and Richard E. Weidner.
Kingsley Affiliates may not sell their shares of Century
Stock acquired in connection with the Merger except (i) pursuant
to an effective registration statement under the Securities Act
covering such shares, (ii) in compliance with Rule 145
promulgated under the Securities Act, or (iii) pursuant to
another applicable exemption from the registration requirements
of the Securities Act. Under Rule 145, the sale of Century Stock
by a Kingsley Affiliate will be subject to certain restrictions,
including the requirement that such Century Stock is sold in a
"broker's transaction," which is defined under the Securities Act
generally as an unsolicited sale through a broker who receives a
normal commission.
Kingsley has agreed to use its best efforts to obtain from
each Kingsley Affiliate a written agreement that such person will
not sell, pledge, transfer or otherwise dispose of any shares of
Century Stock received in the Merger in violation of the
Securities Act ("Rule 145 Agreement"). In connection with the
mailing of this Information Statement, each Kingsley Affiliate
has been furnished with such an agreement, and is requested to
duly execute and return it in the enclosed stamped envelope
addressed to Kingsley or deliver it at the Special Meeting. For
further information concerning the ramifications of the failure
of any Kingsley Affiliate to execute a Rule 145 Agreement, see "-
Procedures for Receiving Century Stock."
Procedures for Receiving Century Stock
Immediately following the Effective Time, Century will send
to each former Kingsley shareholder a Letter of Transmittal for
use in submitting to Century certificates representing Kingsley
Stock. Century will deliver to each former Kingsley shareholder
the appropriate number of shares of Century Stock, upon its
receipt from such shareholder of a Letter of Transmittal duly
completed in accordance with its instructions, together with all
certificates previously representing shares of Kingsley Stock
held by such shareholder. Notwithstanding this requirement, if
any shareholder tendering a Letter of Transmittal is a Kingsley
Affiliate who has not yet executed a Rule 145 Agreement, Century
does not intend to deliver to such shareholder any certificates
representing Century Stock until such shareholder duly executes
and delivers such instrument. See "- Resales of Century Stock."
At all times after consummation of the Merger but prior to
such exchange, certificates previously representing Kingsley
Stock will be deemed for all purposes, other than the payment of
dividends or other distributions in respect of Century Stock, to
represent the respective number of shares of Century Stock into
which they will have been converted at the Effective Time (or,
with respect to dissenting shareholders, the right to receive the
fair value of his shares). Until certificates previously
representing shares of Kingsley Stock are surrendered to Century,
dividends or other distributions payable to record holders of
Century Stock will not be paid to the former Kingsley
shareholders who receive Century Stock in connection with the
Merger.
DISSENTING SHAREHOLDERS' RIGHTS
The Agreement provides that, notwithstanding any provision
of the Michigan Business Corporation Act (the "MBCA") to the
contrary, any record shareholder of Kingsley who objects to the
Merger and who follows the procedures proscribed by Sections 761
through 774 of the MBCA will be entitled to receive, in lieu of
the consideration proposed under the Agreement, cash equal to the
appraised "fair value" of his shares of Kingsley Stock. Set
forth below is a summary of the procedures relating to the
exercise of dissenting shareholders' rights as provided in the
MBCA. The summary does not purport to be complete and is
qualified in its entirety by reference to Sections 761 through
774 of the MBCA, which have been attached hereto as Appendix II.
Procedures to Perfect Rights
Each Kingsley shareholder who follows the procedures set
forth in Sections 761 through 774 of the MBCA may receive a cash
payment equal to the fair value of his shares of Kingsley Stock
determined as of the day immediately preceding the Special
Meeting, excluding any depreciation or appreciation in
anticipation of the Merger, unless such exclusion would be
inequitable. Unless a shareholder follows all the procedures set
forth in Sections 761 through 774, he will forfeit his right to
dissent.
<PAGE>13
To assert dissenters' rights, a shareholder must (i) prior
to the Special Meeting deliver to Kingsley a written objection to
the Merger, which includes a statement of his intent to demand
payment for his shares if the Merger is consummated, and (ii)
refrain from voting his shares in favor of the Merger. Written
objections should be signed by the shareholder of record and
include the shareholder's present address to which notice of
approval of the Merger will be delivered. Any shareholder not
filing a written objection will forfeit his right to dissent; a
vote against the Merger is not a substitute for filing the
written objection with Kingsley.
If the Merger is approved, Kingsley will send a written
dissenters' notice within 10 days after the Special Meeting to
all shareholders who satisfied the initial requirements in the
preceding paragraph. This notice will (i) state where the
payment demand must be sent and where and when the stock
certificates representing Kingsley Stock must be deposited, (ii)
inform shareholders without certificates to what extent transfer
of shares of Kingsley Stock will be restricted after the payment
demand is received, (iii) supply a form of payment demand, and
(iv) establish a due date (the "Due Date") by which Kingsley must
receive the payment demand. Before the Due Date, a dissenting
shareholder must deliver the payment demand, certify whether he
acquired a beneficial ownership of the shares before February 28,
1994, and deposit the stock certificates representing his shares
of Kingsley Stock in accordance with the Notice (the "Response
Requirements"). A dissenting shareholder who demands payment and
deposits his stock certificates as required retains all other
rights of a shareholder until such rights are canceled or
modified by the Merger. If a dissenting shareholder fails to
comply with the Response Requirements prior to the Due Date, he
will forfeit his right to dissent. A shareholder may not dissent
as to less than all of his beneficially owned shares and a
nominee or fiduciary may not dissent on behalf of a beneficial
owner as to less than all of the shares of Kingsley Stock held by
such nominee or fiduciary for such beneficial owner.
As soon as the Merger is completed or upon receipt of a
payment demand, Kingsley will pay each dissenting shareholder who
complied with the Response Requirements the amount Kingsley
estimates to be the fair value of the Kingsley Stock, plus
accrued interest. Such amount may be more or less than the value
of the consideration received by Kingsley shareholders in the
Merger. The payment will be accompanied by (i) Kingsley's most
recent annual and interim financial statements, (ii) a statement
of Kingsley's estimate of the fair value of the Kingsley Stock,
(iii) an explanation of how the interest is calculated, and (iv)
a statement of the dissenting shareholder's right to demand
payment under Section 772 of the MBCA (described below).
Kingsley may elect to withhold payment from dissenting
shareholders who acquired their shares on or after February 28,
1994, and instead, estimate the fair value of such shares, plus
accrued interest, and offer to pay this amount to each dissenting
shareholder who agrees to accept it in full satisfaction of his
demand. Kingsley will send with an offer a statement of its
estimate of the fair value of the shares, an explanation of how
the interest was calculated and a statement of the dissenting
shareholder's right to demand payment under Section 772 of the
MBCA.
Under Section 772 of the MBCA, a dissenting shareholder may
notify Kingsley in writing of his own estimate of the fair value
of his Kingsley Stock and the amount of interest due and demand
payment of his estimate (less any payment Kingsley made to him)
or reject Kingsley's offer of payment and demand payment of the
fair value of his Kingsley Stock, with interest, if (i) the
dissenting shareholder believes the amount paid or offered is
less than the fair value of his Kingsley Stock or that the
interest due is incorrectly calculated, (ii) Kingsley fails to
make payment to a dissenting shareholder who held his Kingsley
Stock prior to February 28, 1994, within 60 days of the Due Date
or (iii) Kingsley, having failed to consummate the Merger, fails
to return the deposited stock certificates within 60 days after
the Due Date. The dissenting shareholder will lose his right to
demand payment unless his demand is submitted in writing within
30 days after Kingsley pays or offers payment for the shares to
the dissenting shareholder.
Court Proceedings
If the amount of payment remains unsettled, Kingsley will,
within 60 days after receiving the dissenting shareholder's
estimate of "fair value," commence a proceeding in the Circuit
Court of Grand Traverse County, to determine the fair value of
the dissenting shareholder's Kingsley Stock. During the
proceeding, the court may appoint an appraiser, whose rights will
be governed by the order appointing him, to receive evidence and
recommend a decision on the fair value of the Kingsley Stock.
All parties to the proceeding will be bound by the court's
<PAGE>14
judgment as to the fair value of the Kingsley Stock. If Kingsley
does not timely file the proceeding, it will pay the amount
demanded to each dissenting shareholder whose demand remains
unsettled.
The court will determine the costs of an appraisal
proceeding and will assess such costs against Kingsley, except
that the court may assess any portion of such costs against any
dissenting shareholder who has acted arbitrarily, vexatiously, or
not in good faith in demanding payment. The expenses may include
reasonable compensation and expenses of experts and attorneys for
the respective parties.
Pursuant to an agreement by the parties, the court may
alternatively appoint a referee to determine the fair value. The
referee's compensation shall be agreed upon by the parties and
allocated by the court between the parties at the end of the
proceeding. In addition to having the power to examine the books
and records of Kingsley, the referee will allow the parties to
introduce evidence as to the value of the Kingsley Stock. The
referee will then prepare and file a written report of the fair
value of the Kingsley Stock held by the dissenting shareholders
(the "Referee's Report"). Within 45 days of being served a
notice of the filing of the Referee's Report, any party may serve
written objections to the Referee's Report upon the other party.
The court may then hear motions on the Referee's Report and may
receive further evidence or adopt, modify, or recommit it to the
referee with instructions. Upon adoption of the Referee's
Report, judgment will be entered in the same manner as if the
action had been tried by a court and will be subject to review in
the same manner as any other judgment of the court.
The exercise of dissenters' rights under the MBCA may result
in a judicial determination that the "fair value" of a dissenting
shareholder's Kingsley Stock is higher or lower than the value of
the consideration payable to the non-dissenting shareholders in
connection with the Merger.
Other Considerations
The MBCA provides that, in the absence of fraud or
illegality, the right to dissent is the only remedy provided to a
shareholder objecting to the Merger. Century's obligation to
consummate the Merger is subject to the condition that the number
of shares of Kingsley Stock held by dissenting shareholders will
not exceed 30 shares of Kingsley Stock. See "Merger Agreement -
Regulatory Approvals and Other Closing Conditions." For
discussion of certain tax consequences, see "Merger Agreement -
Certain Federal Income Tax Consequences."
INFORMATION ABOUT KINGSLEY
Kingsley is an independent local exchange telephone company
located in Kingsley, Michigan with an additional office in
Falmouth, Michigan. Kingsley was incorporated in 1908 and since
that date has been primarily engaged in providing regulated local
telephone services to commercial and residential customers and
access services to interexchange carriers. Kingsley is a closely
held corporation with approximately 76.4% of its stock owned by
the Principal Shareholders and approximately 4.7% owned by
directors and executive officers of Kingsley. Kingsley has 10
full-time employees.
Description of Kingsley's Business
Local Telephone Operations. Kingsley is primarily engaged
in providing (i) local exchange services to customers, (ii)
intra-Local Area Transport Area ("intraLATA") access services to
Ameritech (formerly Michigan Bell Telephone), and (iii) network
access services to AT&T Communications, Inc. and other
interexchange carriers, which permits Kingsley's customers to
enjoy high-quality long distance services. Kingsley also
provides other local telephone services such as directory
advertising and billing and collection services. Kingsley
operates approximately 2,400 access lines in its two exchanges.
Kingsley has approximately 390 route miles of line, which include
22 miles of fiber cable, serving approximately 193 square miles.
Both of Kingsley's exchanges offer equal access service, which
enables customers to access the primary long distance carrier of
their choice.
Kingsley's local and intrastate operations are regulated by
the MPSC. These regulations cover, among other things, local
rates, intrastate access charges billed to interexchange and
intraLATA carriers, encumbrance and disposition of utility
properties and various accounting matters. Due to recent changes
in statutory law, the MPSC has recently ceased routine regulation
of depreciation rates; however, the MPSC may include depreciation
rates in any rate decision. The FCC regulates various matters
<PAGE>15
relating to interstate telephone service, including interstate
access charges paid by interexchange carriers to the National
Exchange Carriers Association ("NECA") access pool to which
Kingsley belongs.
Other Operations. In 1987, Kingsley formed a wholly-owned
subsidiary, Michigan Communication Technologies, Inc. ("MCT"),
for the purpose of conducting unregulated telecommunications
activities. MCT discontinued operations in November 1991 and was
dissolved in 1992. MCT's assets and liabilities were transferred
to Kingsley along with remaining warranty and service obligations
on equipment previously installed. Kingsley now provides
services formerly provided by MCT as part of its unregulated
operations. For additional information, see Note 8 to Kingsley's
Notes to Financial Statements - December 31, 1991 and 1992.
Cellular Partnership Investment. Kingsley has an
approximately 11% interest in Cellular North Michigan Network
General Partnership (the "Partnership"). The Partnership, formed
in September 1990, provides cellular service for Michigan RSA #3
and RSA #5, which serve a market having an aggregate population
of approximately 301,000 (according to 1993 population estimates),
of which Kingsley owns approximately 33,000 pops attributable to
these markets. The Partnership, which commenced providing
cellular service in 1990, incurred losses in 1991 and 1992 but
was profitable in 1993. The Partnership competes with Oak
Cellular Associates (which operates under the Cellular One trade
name) in RSA #3 and Radiofone, Inc. in RSA #5, which entities
hold the FCC nonwireline licenses for these markets.
A subsidiary of Century, Century Cellunet, Inc. ("CCI"), has
an approximately 22% interest in, and is the operator of, the
Partnership. Accordingly, upon consummation of the Merger,
Century will own, through its subsidiaries, a 33% interest in the
Partnership, or approximately 99,000 pops. During 1991 and 1992,
CCI loaned Kingsley an aggregate of approximately $240,000 to
assist Kingsley in meeting its capital requirements to the
Partnership, which loans remain outstanding. For additional
information, see Note 2 to Kingsley's Notes to Financial
Statements - December 31, 1991 and 1992.
Real Property. Kingsley owns facilities for offices,
equipment and remote line switches in both Kingsley and Falmouth,
Michigan. Kingsley estimates the value of its real property,
buildings and improvements to be approximately $500,000.
Further Information. For further information regarding
Kingsley and its business, see "Kingsley's Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and Kingsley's financial statements included
elsewhere herein.
Security Ownership of Certain Beneficial Owners and Management
As of the Record Date, there were outstanding 275 shares of
Kingsley Stock, the only class of capital stock of Kingsley. The
following table shows the number of shares of Kingsley Stock
owned of record or beneficially as of the Record Date by (i) each
person known by Kingsley to own beneficially 5% or more of the
outstanding Kingsley Stock, (ii) each of Kingsley's directors and
executive officers and (iii) all directors and executive officers
of Kingsley as a group. Beneficial ownership has been determined
in accordance with Rule 13d-3 promulgated under the Exchange Act.
<TABLE>
<CAPTION>
Name of Position with Amount and Nature of Percent of
Beneficial Owner<FN1> Kingsley Beneficial Ownership Class
________________ _____________ ____________________ __________
<S> <C> <C> <C>
Principal Shareholders,<FN2> <FN3> 210 76.36%
as trustees of the Trust
Sterling G. Nickerson Senior Vice President, 4 1.45%
General Manager, Assistant
Treasurer and Director
Jan Nickerson Treasurer, Assistant 1<FN4> *
Secretary and Director
</TABLE>
<PAGE>16
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Jack E. Boynton Secretary and Director 0 0%
Ruvert VanderMeulen Vice President and Director 2<FN5> *
Max Roland Nickerson Vice President and 6<FN6> 2.18%
Director
Richard E. Weidner Director 1 *
Eric Molvang Director 0 0%
John Nickerson Director 0 0%
Kathleen Firestone Director 0 0%
All of the directors and
executive officers as a
group (11 persons) -- 223 81.09%
</TABLE>
____________________
* less than 1%
<FN1> Sterling G. Nickerson, John Nickerson and Kathleen Firestone
are siblings and are the nephews and niece of Max Roland
Nickerson; Jan Nickerson is the daughter of Max Roland
Nickerson.
<FN2> As indicated above, Harry Calcutt and Northwestern Savings
Bank & Trust are co-trustees of the Trust, and in such
capacity are the record holders of 210 shares of Kingsley
Stock and, subject to certain limitations in the Trust, have
voting power and investment power with respect to such
Kingsley Stock. The address of Mr. Calcutt is 109 E. Front
Street, Traverse City, Michigan 49684 and the address of
Northwestern Savings Bank & Trust is P.O. Box 809, Traverse
City, Michigan 49684.
<FN3> Mr. Calcutt currently serves as Kingsley's President and as
a director; David A. Eckenrode, Vice President and Trust
Officer of Northwestern Savings Bank & Trust, currently
serves as a director of Kingsley.
<FN4> Owned jointly with Max Roland Nickerson.
<FN5> The Principal Shareholders have an option to acquire one
share of Kingsley Stock from Mr. VanderMeulen for $50.00.
<FN6> Includes one share owned jointly with Jan Nickerson.
Dividends on and Market Prices of Kingsley Stock
No established trading market exists with respect to shares
of Kingsley Stock. As of the Record Date, there were 29 holders
of record of Kingsley Stock.
Kingsley declared and paid per share cash dividends with
respect to the Kingsley Stock of $30.00 in March 1991, $50,00 in
January 1993, and $21.00 in May 1993. Kingsley also declared per
share cash dividends with respect to the Kingsley Stock of $30.00
in March 1992, which were paid in May 1992.
KINGSLEY'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis of Kingsley's financial
condition and results of operations should be read in conjunction
with the financial statements of Kingsley included elsewhere
herein.
<PAGE>17
Background
As shown in the table below, Kingsley derives its revenues
from providing (i) local telephone service, (ii) network access
services, and (iii) other related services. Local service
revenues are derived from providing regulated local exchange
telephone services in Kingsley's franchised service area.
Network access revenues relate to services provided by Kingsley
to interexchange carriers (which provide intrastate and
interstate long distance services) in connection with the
completion of long distance telephone calls. Interstate network
access revenues are received by Kingsley through a pooling
arrangement administered by NECA, which receives access charges
billed by Kingsley and other participating local exchange
carriers to interstate long distance carriers for their use of
the local network to complete long distance calls. The charges
to the long distance carriers are based on tariffed access rates
that are filed by NECA on behalf of Kingsley and other
participating local exchange carriers and that are subject to FCC
approval. Kingsley derives intrastate network access revenues
through a pooling arrangement administered by the Michigan
Exchange Carrier Association ("MECA"). Kingsley's other revenues
primarily consist of billing and collection services for
interexchange carriers and directory revenues.
<TABLE>
<CAPTION>
Year Ended December 31, Nine Months Ended September 30,
___________________________ _______________________________
<S> <C> <C> <C> <C>
Revenues 1992 1992 1993 1993
____ ____ ____ ____
Local service $ 313,869 $ 317,536 $ 237,864 $ 249,041
Network access 743,603 900,064 629,267 805,238
Other 102,996 120,350 90,085 115,316
_________ _________ _________ _________
1,160,468 1,337,950 957,216 1,169,595
_________ _________ _________ _________
Expenses
Plant operations 251,124 287,607 221,794 194,245
Customer operations 160,283 210,285 156,128 151,876
Corporate operations 457,417 337,747 229,631 269,403
Depreciation and
amortization 223,459 243,118 185,042 186,757
_________ _________ _________ _________
1,092,283 1,078,757 792,595 802,281
_________ _________ _________ _________
Operating income 68,185 259,193 164,621 367,314
Interest expense (98,802) (188,368) (140,354) (143,424)
Income (loss) from Partnership -0- (65,880) (91,729) 34,000
Other income 35,279 6,250 4,456 3,383
Income tax (expense) benefit 52,456 6,027 4,959 (64,632)
Income (loss) before cumulative
effect of change in accounting
principle 57,118 17,222 (58,047) 196,641
Cumulative effect of change in
accounting principle -- 46,731 46,731 --
_________ _________ _________ _________
Net income (loss) $ 57,118 $ 63,953 $(11,316) $196,641
========= ========= ========= =========
</TABLE>
Year Ended December 31, 1992 Compared to Year Ended December 31,
1991
Results of Operations. Income before the cumulative effect
of a change in accounting principle during 1992 decreased $40,000
to $17,000 from $57,000 in 1991. An increase in operating income
of $191,000 was more than offset by an increase in interest
expense of $90,000, Kingsley's share ($66,000) of losses of the
Partnership, and a decrease of $46,000 of income tax benefit.
Net income for the year ended December 31, 1992 includes
approximately $47,000 that represents the cumulative effect of a
change in accounting principle related to the adoption of
Statement of Financial Accounting Standards No. 109 ("SFAS 109"),
"Accounting for Income Taxes." SFAS 109 required a change from
the deferred accounting method required under Accounting
Principles Board Opinion No. 11 to an asset and liability
approach for financial accounting and reporting for income taxes.
Revenues and Operating Expenses. Revenues increased
approximately $177,000 in 1992 compared to 1991. Network access
revenues increased approximately $156,000 in 1992 compared to
1991 due primarily to increased minutes of use resulting in
larger settlements from both the interstate and intrastate access
pools.
<PAGE>18
Plant operations expenses, customer operations expenses and
corporate operations expenses increased primarily as a result of
normal increases in salaries and wages and other general
operating items. Such increase in corporate operations expenses
was more than offset by a reduction in expenses as a result of
the discontinuance of operations in November 1991 of a wholly-
owned subsidiary of Kingsley.
Depreciation and amortization increased approximately
$20,000 in 1992 primarily due to higher levels of plant in
service. This increase was partially offset by a reduction in
depreciation adjustments ordered by the MPSC.
Interest Expense. Interest expense increased approximately
$90,000 for 1992 compared to 1991 primarily as a result of an
increase in average debt outstanding.
Loss From Cellular Partnership. Kingsley recorded a $66,000
loss in 1992 which represented its share of losses from the
Partnership since the Partnership's inception in September 1990.
See "Information About Kingsley - Description of Kingsley's
Business -- Cellular Partnership Investment."
Income Tax (Expense) Benefit. Income tax benefit decreased
approximately $46,000 in 1992 compared to 1991 primarily due to a
reduction in amortization of deferred investment tax credits and
the adjustment, in each year, of prior year tax accruals.
Inflation. The effects of increased costs are mitigated by
the ability to recover such costs through the rate-making
process. While the regulatory process does not consider
replacement cost of physical plant, Kingsley, based upon past
experience, should be able to recover and earn a return on any
increased cost of its net investment when facilities are
replaced.
Liquidity and Capital Resources. During 1992 and 1991,
Kingsley's primary sources of funds were cash provided by
operating activities and proceeds from the issuance of debt.
Net cash provided by operating activities for 1992 and 1991
was $359,000 and $157,000, respectively. For additional
information, see "-- Results of Operations."
Net cash used in investing activities was $1,096,000 during
1992 as compared to $1,987,000 during 1991. Payments for
property, plant and equipment were $641,000 less in 1992 compared
to 1991 primarily due to the substantial completion in 1991 of a
construction project that involved the replacement and updating
of switching equipment.
Kingsley invested $260,000 in the Partnership in 1991, which
excludes the portion of capital calls funded by CCI. During 1991
and 1992 Kingsley incurred debt of $175,124 and $64,454,
respectively, to meet its capital calls to the Partnership. See
"Information About Kingsley - Description of Kingsley's Business
-- Cellular Partnership Investment" and Notes 2 and 9 to
Kingsley's Notes to Financial Statements.
Net cash provided by financing activities was $711,000
during 1992 as compared to $1,409,000 during 1991 due primarily
to lower amounts of debt incurred related to plant construction.
Substantially all of the plant construction has been completed
and Kingsley's management does not currently envision significant
additional borrowing requirements for construction.
During a construction project in 1991, a contractor hired by
Kingsley ruptured an oil pipeline causing significant damage to
both the pipeline and the surrounding area. Although Kingsley's
management, after consulting with outside counsel, believes
Kingsley is not liable for this accident, the Michigan Department
of Natural Resources named Kingsley as a potential responsible
party. The pipeline owner has also initiated litigation against
Kingsley and its insurer, among others, to recover the cleanup
costs that the pipeline owner incurred, which are estimated to be
in excess of $300,000. Kingsley's insurer is providing
Kingsley's legal representation in this matter. No provision for
any potential liability has been made in Kingsley's financial
statements.
Accounting Changes. In December 1990, the Financial
Accounting Standards Board (the "FASB") issued Statement of
Financial Accounting Standards No. 106 ("SFAS 106"), "Employers'
Accounting for Postretirement Benefits Other Than Pensions."
<PAGE>19
SFAS 106 requires, among other things, that Kingsley change from
accounting for postretirement health care and life insurance
benefits on a pay-as-you-go basis by requiring accrual, during
the years that an employee renders the necessary service, of the
expected costs of providing those benefits. Kingsley adopted the
statement in the first quarter of 1993, the effect of which was
not material to its financial statements.
In November 1992, the FASB issued Statement of Financial
Accounting Standards No. 112 ("SFAS 112"), "Employers' Accounting
for Postemployment Benefits." SFAS 112 requires Kingsley to
adopt accrual accounting for workers compensation, disability and
other benefits provided after employment but before retirement by
requiring accrual of the expected cost when it is probable that a
benefit obligation has been incurred and the amount is reasonably
estimable. SFAS 112 is required to be adopted for fiscal years
beginning after December 15, 1993. Kingsley has not quantified
the impact of the adoption of SFAS 112 at this time.
<PAGE>19
Nine Months Ended September 30, 1993 Compared to Nine Months
Ended September 30, 1992
Results of Operations. Income before the cumulative effect
of change in accounting principle for the nine months ended
September 30, 1993 was $197,000 compared to a loss of $58,000
during the nine months ended September 30, 1992. The improvement
of $255,000 was primarily due to an increase in operating income
of $203,000 and an improvement of $125,000 in Kingsley's share of
the results of operations of the Partnership.
Revenues and Operating Expenses. Network access revenues
increased approximately $176,000 for the nine months ended
September 30, 1993 compared to the nine months ended September
30, 1992 due primarily to increased minutes of use and changes in
the average schedule formulas, both of which resulted in larger
settlements from both the interstate and intrastate access pools.
Operating expenses, exclusive of depreciation and
amortization, increased approximately $8,000 for the nine months
ended September 30, 1993 compared to the nine months ended
September 30, 1992 primarily as a result of an increase in
salaries and wages and other general operating items.
Depreciation and amortization increased approximately $2,000
as a result of higher levels of plant in service.
Income (Loss) From Cellular Partnership. Kingsley's share
of income from the Partnership was $34,000 for the nine months
ended September 30, 1993 as compared to a loss of $92,000 during
the nine months ended September 30, 1992. The loss recorded
during 1992 included approximately $64,000 relating to the period
from the Partnership's inception in 1990 through December 1991.
Income Tax (Expense) Benefit. Income tax expense for the
nine months ended September 30, 1993 was $65,000 as compared to a
$5,000 income tax benefit for the nine months ended September 30,
1992. This change was primarily due to an increase in income
before taxes.
Liquidity and Capital Resources. During the nine months
ended September 30, 1993 and 1992, Kingsley's primary sources of
funds were cash provided by operating activities and proceeds
from the issuance of debt.
Net cash provided by operating activities was $343,000 and
$250,000 during the nine months ended September 30, 1993 and
1992, respectively. For additional information, see "Results of
Operations."
Net cash used in investing activities was $227,000 and
$1,029,000 for the nine months ended September 30, 1993 and 1992,
respectively, all of which related to payments for property,
plant and equipment.
Net cash provided by financing activities was $156,000 and
$731,000 during the nine months ended September 30, 1993 and
1992, respectively. Substantially all of the change was due to a
decrease of $522,000 in long-term borrowings related to plant
construction projects. Kingsley does not currently envision
significant additional borrowing requirements for construction.
Accounting Changes. See "- Year Ended December 31, 1992
Compared to Year Ended December 31, 1991 -- Accounting Changes."
<PAGE>20
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma consolidated condensed
financial information (the "pro forma information") separately
reflects the effects under the purchase method of accounting of
(i) the Merger and (ii) Century's acquisition of Celutel, Inc. on
February 10, 1994 (such company and such acquisition being
hereinafter referred to as the "Acquiree" and the "Acquisition,"
respectively) and Century's acquisition during 1992 and 1993 of
certain other companies (all such companies and acquisitions,
including the Acquiree and the Acquisition, being hereinafter
referred to collectively as "Other Acquirees" and "Other
Acquisitions," respectively). Pro forma adjustments applicable
to the Merger, and the assumptions on which they are based, are
described under "- Notes to Unaudited Pro Forma Consolidated
Condensed Financial Information."
The pro forma information is presented for illustrative
purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred if such
transactions had been consummated in accordance with the
assumptions set forth below, nor is it necessarily indicative of
future operating results or financial position. The pro forma
information is prepared on the assumptions that the Merger and
the Other Acquisitions took place as of the dates indicated
below; however, Century's actual financial statements reflect or
will ultimately reflect each such respective acquisition from and
after its respective closing date.
The pro forma information should be read in conjunction with
the consolidated financial statements and notes thereto of
Century, which are incorporated herein by reference, and the
financial statements and notes thereto of Kingsley, which are
included elsewhere herein.
<PAGE>21
Pro Forma Balance Sheet as of September 30, 1993 (unaudited; in thousands)
The following unaudited pro forma consolidated condensed balance sheet
as of September 30, 1993 gives effect to the Merger and the Proposed
Acquisition as if such transactions had occurred on September 30, 1993.
<TABLE>
<CAPTION>
Pro Pro
Pro Forma Pro
Forma Conso- Forma Pro
Adjust- lidated Adjust- Forma
ments Before ments- Conso-
Century Acquiree Acquiree Merger Kingsley Kingsely lidated
_______ ________ ________ _______ ________ ________ _______
ASSETS (Note 6) (Note 11) (Note 7)
______
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash
equivalents $ 31,975 $ 1,196 $ 0 $ 33,171 $ 460 $ 0 $ 33,631
Accounts receivable 54,946 4,417 0 59,363 223 (240) 59,346
Materials & supplies, at cost 5,846 530 0 6,376 61 0 6,437
Other 3,690 199 0 3,889 37 0 3,926
________ ________ _______ _________ ______ ______ _________
96,457 6,342 0 102,799 781 (240) 103,340
________ ________ _______ _________ ______ ______ _________
NET PROPERTY, PLANT & EQUIPMENT 794,099 13,764 0 807,863 4,359 0 812,222
________ ________ _______ _________ ______ ______ _________
INVESTMENTS AND OTHER ASSETS
Excess cost of net assets
acquired 296,019 22,176 114,105 432,300 0 3,238 435,538
Other investments 92,640 0 0 92,640 549 0 93,189
Deferred charges and other
assets 21,020 1,667 (929) 21,758 56 0 21,814
________ ________ _______ _________ ______ ______ _________
409,679 23,843 113,176 546,698 605 3,238 550,541
________ ________ _______ _________ ______ ______ _________
TOTAL ASSETS $1,300,235 $ 43,949 $ 113,176 $1,457,360 $ 5,745 $ 2,998 $1,466,103
========= ======== ======= ========= ====== ====== =========
LIABILITIES AND EQUITY
______________________
CURRENT LIABILITIES
Current maturities of
long-term debt $ 15,529 $ 12 $ 3,392 $ 18,933 $ 227 $ 0 $ 19,160
Notes payable 65,000 0 0 65,000 0 0 65,000
Accounts payable 53,664 1,433 0 55,097 225 0 55,322
Accrued expenses and other
liabilites 47,350 2,431 0 49,781 41 0 49,822
Advance billings and
customer deposits 9,434 0 0 9,434 16 0 9,450
________ ________ _______ _________ ______ ______ _________
190,977 3,876 3,392 198,245 509 0 198,754
________ ________ _______ _________ ______ ______ _________
LONG-TERM DEBT 462,479 41,264 52,558 556,301 4,039 (240) 560,100
________ ________ _______ _________ ______ ______ _________
DEFERRED CREDITS AND OTHER
LIABILITIES 149,140 5,435 0 154,575 185 0 154,760
________ ________ _______ _________ ______ ______ _________
PREFERRED STOCK - redeemable 0 38,425 (38,425) 0 0 0 0
________ ________ _______ _________ ______ ______ _________
STOCKHOLDERS' EQUITY
Common stock 51,262 703 1,197 53,162 3 92 53,257
Paid in capital 261,868 0 48,700 310,568 0 2,280 312,848
Retained earnings 193,775 (45,754) 45,754 193,775 1,009 (1,009) 193,775
Employee Stock Ownership Plan
commitment (9,720) 0 0 (9,720) 0 0 (9,720)
Preferred stock - non-redeemable 454 0 0 454 0 1,875 2,329
________ ________ _______ _________ ______ ______ _________
497,639 (45,051) 95,651 548,239 1,012 3,238 552,489
________ ________ _______ _________ ______ ______ _________
TOTAL LIABILITIES AND EQUITY $1,300,235 $ 43,949 $ 113,176 $1,457,360 $ 5,745 $ 2,998 $1,466,103
========= ======== ======= ========= ====== ====== =========
</TABLE>
See "- Notes to Unaudited Pro Forma Consolidated Condensed
Financial Information."
<PAGE>22
Pro Forma Income Statement for the Nine-Month Period Ended
September 30, 1993 (unaudited; in thousands, except per share
amounts)
The following unaudited pro forma consolidated condensed
income statement for the nine-month period ended September 30,
1993 gives effect to the Merger and the Other Acquisitions as if
each such transaction had occurred on January 1, 1992.
<TABLE>
<CAPTION>
Pro Pro
Forma Forma Pro
Adjust- Conso- Forma Pro
ments- lidated Adjust- Forma
Other Other Before ments- Conso-
Century Acquirees Acquirees Merger Kingsley Kingsley lidated
_______ _________ _________ _______ ________ ________ _______
REVENUES (Note 6) (Note 12) (Note 8)
<S> <C> <C> <C> <C> <C> <C> <C>
Telephone $255,918 $ 5,221 $ 0 $261,139 $ 1,170 $ 0 $262,309
Mobile Communications 61,010 21,173 0 82,183 0 0 82,183
_______ _______ _____ _______ _______ _____ _______
Total revenues 316,928 26,394 0 343,322 1,170 0 344,492
_______ _______ _____ _______ _______ _____ _______
EXPENSES
Cost of Sales and operating
expenses 167,288 20,787 0 188,075 616 0 188,691
Depreciation and amortization 56,553 2,893 1,945 61,391 187 65 61,643
_______ _______ _____ _______ _______ _____ _______
Total expenses 223,841 23,680 1,945 249,466 803 65 250,334
_______ _______ _____ _______ _______ _____ _______
OPERATING INCOME 93,087 2,714 (1,945) 93,856 367 (65) 94,158
_______ _______ _____ _______ _______ _____ _______
OTHER INCOME (EXPENSE)
Interest expense (22,186) (2,512) (3,255) (27,953) (143) 0 (28,096)
Gain on sales of sales assets 1,661 (1) 0 1,660 0 0 1,660
Other income, net 7,283 (72) (30) 7,181 38 0 7,219
_______ _______ _____ _______ _______ _____ _______
Total other income (expense) (13,242) (2,585) (3,285) (19,112) (105) 0 (19,217)
_______ _______ _____ _______ _______ _____ _______
INCOME BEFORE INCOME TAXES 79,845 129 (5,230) 74,744 262 (65) 74,941
INCOME TAXES 29,992 397 (1,140) 29,249 65 0 29,314
_______ _______ _____ _______ _______ _____ _______
NET INCOME (LOSS) $ 49,853 $ (268) $ (4,090) $ 45,495 $ 197 $ (65) $ 45,627
======= ======= ====== ======= ======= ===== =======
PRIMARY EARNINGS PER SHARE $ 0.98 $ 0.85 $ 0.85
======= ======= =======
FULLY DILUTED EARNINGS PER SHARE $ 0.96 $ 0.84 $ 0.84
======= ======= =======
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
PRIMARY 51,003 53,618 53,713
======= ======= =======
FULLY DILUTED 55,703 58,318 58,487
======= ======= =======
</TABLE>
See " - Notes to Unaudited Pro Forma Consolidated Condensed Financial
Information."
<PAGE>23
Pro Forma Income Statement for the Year Ended December 31, 1992
(unaudited; in thousands, except per share amounts)
The following unaudited pro forma consolidated condensed
income statement for the year ended December 31, 1992 gives
effect to the Merger and the Other Acquisitions as if each such
transaction had occurred on January 1, 1992.
<TABLE>
<CAPTION>
Pro Pro
Forma Forma Pro
Adjust- Conso- Forma Pro
ments- lidated Adjust- Forma
Ohter Other Before ments- Conso-
Century Acquirees Acquirees Merger Kingsley Kingsley lidated
_______ _________ _________ _______ ________ ________ _______
REVENUES (Note 6) (Note 13) (Note 9)
<S> <C> <C> <C> <C> <C> <C> <C>
Telephone $ 297,510 $ 32,294 $ 0 $ 329,804 $ 1,338 $ 0 $331,142
Mobile Communications 62,092 22,261 0 84,353 0 0 84,353
_______ ______ _______ ________ _______ ______ _______
Total revenues 359,602 54,555 0 414,157 1,338 0 415,495
_______ ______ _______ ________ _______ ______ _______
EXPENSES
Cost of sales and operating
expenses 187,076 42,913 0 229,989 836 0 230,825
Depreciation and amortization 62,898 7,028 4,752 74,678 243 87 75,008
_______ ______ _______ ________ _______ ______ _______
Total expenses 249,974 49,941 4,752 304,667 1,079 87 305,833
_______ ______ _______ ________ _______ ______ _______
OPERATING INCOME 109,628 4,614 (4,752) 109,490 259 (87) 109,662
_______ ______ _______ ________ _______ ______ _______
OTHER INCOME (EXPENSE)
Interest expense (27,166) (5,248) (7,650) (40,064) (188) 0 (40,252)
Gain on sales of assets 3,985 54 0 4,039 0 0 4,039
Other income, net 6,125 1,767 (120) 7,772 (60) 0 7,712
_______ ______ _______ ________ _______ ______ _______
Total other income (expense) (17,056) (3,427) (7,770) (28,253) (248) 0 (28,501)
_______ ______ _______ ________ _______ ______ _______
INCOME BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES 92,572 1,187 (12,522) 81,237 11 (87) 81,161
INCOME TAXES 32,599 2,646 (2,600) 32,645 (6) 0 32,639
_______ ______ _______ ________ _______ ______ _______
NCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGES IN ACCOUNTING
PRINCIPLES $ 59,973 $ (1,459) $ (9,922) $ 48,592 $ 17 $ (87) $ 48,522
======= ====== ======= ======== ======= ====== =======
PRIMARY EARNINGS PER SHARE BEFORE
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES $ 1.23 $ 0.91 $ 0.91
======= ======== =======
FULLY DILUTED EARNINGS PER
SHARE BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING
PRINCIPLES $ 1.22 $ 0.91 $ 0.91
======= ======== =======
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
PRIMARY 48,500 53,175 53,270
======= ======== =======
FULLY DILUTED 52,814 53,327 53,496
======= ======== =======
</TABLE>
See - "Notes to Unaudited Pro Forma Consolidated Condensed
Financial Information."
<PAGE>24
Notes to Unaudited Pro Forma Consolidated Condensed Financial
Information
(1) Basis of Presentation. Certain reclassifications have been
made to the historical financial information to conform to
the presentation of the pro forma information.
(2) Purchase Price. The pro forma information has been prepared
assuming a $4,250,000 purchase price which is comprised of
the following:
75,000 shares of Century's 5% Cumulative
Convertible Series K Preferred
Stock, $25 par value $1,875,000
95,000 shares of Century Common Stock,
valued at $25 per share 2,375,000
$4,250,000
(3) Tax effects. The Merger is expected to qualify as a "tax-
free reorganization" for federal income tax purposes. See
"Merger Agreement - Certain Federal Income Tax
Consequences."
(4) Operations. In connection with integrating Kingsley's
operations with its operations, Century does not anticipate
incurring any material expenses or realizing any material
savings in the near term, and no provision has been made in
the pro forma information for such expenses or savings.
(5) Other Transactions. The pro forma adjustments do not
reflect the effects of Century's dispositions of certain
properties during 1992 and 1993, nor do they reflect the
effect of Century's acquisition of a start-up company in the
third quarter of 1993, the aggregate effect of which is not
material to Century's ongoing operations.
(6) Other Acquisitions. For purposes of the pro forma
information, the Other Acquisitions include, in addition to
the Acquisition, the April 1992 acquisition of a local
exchange telephone company in Ohio, the December 1992
acquisition of an MSA wireline cellular market in Louisiana
and the April 1993 acquisition, through mergers, of a local
exchange telephone company and an affiliated
telecommunications company in Texas. In the unaudited pro
forma consolidated condensed income statements, the
operations of the Other Acquirees subsequent to the date of
the acquisition of each respective Other Acquiree are
included in the amounts reflected as Century historical
financial information. The operations of each respective
Other Acquiree prior to its respective acquisition date
during the nine-month period ended September 30, 1993 and
the year ended December 31, 1992, as applicable, are
reflected in the pro forma income statements as Other
Acquiree financial information. The pro forma adjustments
applicable to the Other Acquirees primarily relate to
amortization of excess cost of net assets acquired and
interest expense on debt associated with the Other
Acquisitions and the related tax impact.
(7) September 30, 1993 Balance Sheet Pro Forma Adjustments -
Kingsley. Set forth below are the pro forma adjustments
applicable to the Merger for the unaudited pro forma
consolidated condensed balance sheet as of September 30,
1993:
<PAGE>25
<TABLE>
<CAPTION>
Pre-
ferred
Long- Paid Stock-
Excess Accounts term Common in Retained Non-
Cost Receivable Debt Stock Capital Earnings redeemable
______ __________ _____ _______ _______ ________ __________
(All amount in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Eliminate intercompany
indebtednesss $(240) $(240)
Purchase Kingsley:
Deliver Consideration $3,238 $95 $2,280 $1,875
Eliminate Kingsley
Equity (3) (1,009)
______ _____ ______ ______ ______ ______ ______
$3,238 $(240) $(240) $92 $2,280 $(1,009) $1,875
====== ===== ====== ====== ====== ====== ======
</TABLE>
(8) September 30, 1993 Income Statement Pro Forma Adjustments -
Kingsley. Set forth below is the pro forma adjustment
applicable to the Merger for the unaudited pro forma
consolidated condensed statement of income for the nine-
month period ended September 30, 1993:
Depreciation
and Amortization
________________
(In thousands)
Amortization of excess cost of net assets acquired
(Assuming a 40-year amortization period) $65
===
(9) December 31, 1992 Income Statement Pro Forma Adjustments -
Kingsley. Set forth below is the pro forma adjustment
applicable to the Merger for the unaudited pro forma
consolidated condensed statement of income for the year
ended December 31, 1992:
Depreciation
and Amortization
________________
(In thousands)
Amortization of excess cost of net assets acquired
(Assuming a 40-year amortization period) $87
===
(10) Earnings per share. The fully diluted earnings per share
before the cumulative effect of changes in accounting
principles and fully diluted weighted average common shares
outstanding for both the pro forma consolidated before
<PAGE>26
Merger and the pro forma consolidated on the unaudited pro
forma consolidated condensed statement of income for the
year ended December 31, 1992 do not reflect the conversion
of certain securities because the effect of such conversion
would be antidilutive.
(11) September 30, 1993 Balance Sheet Pro Forma Adjustments -
Acquiree. The $114,105,000 increase in excess cost of net
assets acquired is primarily composed of approximately
$136,000,000 of excess cost incurred in connection with the
acquisition of the Acquiree, net of approximately
$22,000,000 of excess cost of net assets acquired which was
reflected as an asset on the financial statements of the
Acquiree. The purchase price was approximately $102,000,000
of which $51,400,000 was paid in cash and the remainder in
Century Common Stock (approximately 1,900,000 shares).
The increase of $52,558,000 in long-term debt is composed of
borrowings of approximately $94,000,000 less the retirement
of the long-term debt of the Acquiree of $41,700,000.
Century funded the cash portion of the Acquisition and the
refinancing of Acquiree's long-term debt from proceeds
received under a bridge term loan. Although Century is
currently reviewing several long-term financing alternatives
and has made no final determination as to which alternative
to pursue, the assumption has been made that Century will
obtain long-term financing at an assumed interest rate of
6.5%.
Of the $1,197,000 net change in common stock, $1,900,000
represents the issuance of 1,900,000 shares of Century
Common Stock, the issuance of which increased paid in
capital $48,700,000. The redeemable preferred stock of the
Acquiree was assumed to be converted to common stock of the
Acquiree. Such conversion increased common stock and paid
in capital of the Acquiree which then was eliminated as a
result of the Acquisition, along with the accumulated
deficit of the Acquiree.
(12) September 30, 1993 Income Statement Pro Forma Adjustments -
Other Acquirees. Of the $1,945,000 increase in depreciation
and amortization and the $3,255,000 increase in interest
expense, approximately $1,444,000 and $2,728,000,
respectively, represents amortization of excess cost of net
assets acquired and interest expense, both of which are
applicable to the acquisition of the Acquiree, and the
remainder is applicable to the acquisition of the two
companies in Texas in April 1993 (see note 6). The pro
forma income tax adjustment reflects the tax benefit of the
interest expense. Of the $.12 decrease in fully diluted
earnings per share, $.11 was attributable to the
Acquisition. Of the 2,615,000 increase in the weighted
average common shares outstanding, 1,900,000 shares were
applicable to the acquisition of the Acquiree and the
remainder was applicable to the acquisition of the local
exchange telephone company in Texas in April 1993. A 1/8
percent change in the assumed interest rate applicable to
the borrowings incurred in connection with the Acquisition
would have changed pro forma net income by approximately
$34,000.
(13) December 31, 1992 Income Statement Pro Forma Adjustments -
Other Acquirees. Of the $4,752,000 increase in depreciation
and amortization and the $7,650,000 increase in interest
expense, approximately $1,925,000 and $3,637,000,
respectively, represents amortization of excess cost of net
assets acquired and interest expense, both of which are
applicable to the acquisition of the Acquiree, and the
remainder is applicable to the acquisitions of the Other
Acquirees other than the Acquiree (see note 6). The pro
forma income tax adjustment reflects the tax benefit of the
interest expense. Of the $.31 decrease in fully diluted
earnings per share, $.21 was attributable to the
Acquisition. Of the 4,675,000 increase in the weighted
average common shares outstanding for the calculation of
primary earnings per share, 1,900,000 shares were applicable
to the acquisition of the Acquiree and the remainder was
applicable to the acquisition of certain of the Other
Acquirees. For purposes of calculating the weighted average
common shares outstanding for fully diluted earnings per
share, the increase of 4,675,000 mentioned above was
substantially offset by incremental common shares
attributable to certain convertible securities which under
generally accepted accounting principles must be excluded
from the calculation because the effect of including such
incremental shares would be antidilutive. A 1/8 percent
<PAGE>27
change in the assumed interest rate applicable to the
borrowings incurred in connection with the Acquisition would
have changed pro forma net income by approximately $46,000.
(14) Additional Pro Forma Information. The unaudited pro forma
consolidated condensed financial information has been
prepared assuming an average Century Common Stock price per
share of $25. Although the number of shares of Century
Common Stock to be issued will depend on the average price
per share, the effect on pro forma earnings per share within
a range of $20 to $40 would not be material.
INFORMATION ABOUT CENTURY
General
Century is a regional diversified telecommunications company
that is primarily engaged in providing local telephone and
cellular mobile telephone services largely in the central, north-
south corridor of the United States. While regulated telephone
operations constitute the preponderant part of its business,
Century's mobile communications subsidiaries provide cellular
mobile telephone and paging services.
Century is the fifteenth largest local exchange telephone
company in the United States, based on the number of access lines
served. At September 30, 1993, 90% of Century's access lines
were serviced by digital switching technology, which permits
Century to offer additional services to its customers.
Century is the fifteenth largest operator of cellular
telephone systems in the United States, based on "population
equivalents" (which refers to the population of its respective
markets, based on the 1992 Donnelly Marketing Information
Services estimates, multiplied by the percentage interest that it
owns in an entity licensed to operate a cellular system in each
such respective market). Century's business strategy for its
cellular operations is to secure operating control of service
areas that are geographically clustered. Clustered cellular
systems result in operating and service advantages and aid
Century's marketing efforts by providing subscribers with
expanded calling areas.
Century's general strategy has been to provide diversified
telecommunications services and to achieve growth principally
through the acquisition of attractive telecommunications
companies. Century is continually evaluating the possibility of
acquiring additional telephone access lines and cellular
interests, either in exchange for cash or securities of Century,
or both. Although Century's primary focus will be on acquiring
telephone and cellular interests that are proximate to Century's
properties, other communications interests may also be acquired.
Century's executive offices are located at 100 Century Park
Drive, Monroe, Louisiana, 71203, and its telephone number is
(318) 388-9500. For further information, see "Incorporation of
Certain Documents by Reference."
Recent Developments
On February 10, 1994, Century acquired all of the capital
stock of Celutel, Inc. ("Celutel") pursuant to a statutory merger
(the "Celutel Merger") in exchange for approximately $51.4
million cash and approximately 1.9 million shares of Century
Common Stock. Prior to the Celutel Merger, Celutel was a
telecommunications company based in Annapolis, Maryland that
provided cellular service in five metropolitan statistical areas
in Mississippi and Texas having an aggregate population of
approximately 1.4 million; Celutel controlled approximately 1.1
million pops. For further information regarding the Celutel
Merger, see "Unaudited Pro Forma Consolidated Condensed Financial
Information" and Century's Current Reports on Form 8-K dated
October 8, 1993, January 13, 1994 and February 10, 1994 that are
incorporated herein by reference.
Price Range of Stock
<PAGE>28
Century Common Stock is listed on the New York Stock
Exchange and is traded under the symbol CTL. The following table
sets forth the high and low per share sales prices of Century
Common Stock as reported on the New York Stock Exchange composite
tape for each of the quarters indicated:
High Low
____ ___
1992:
First quarter 24-7/8 18-5/8
Second quarter 25-3/8 18-3/8
Third quarter 25 18-5/8
Fourth quarter 28-7/8 22-7/8
1993:
First quarter 33-3/8 26
Second quarter 33-1/8 28
Third quarter 31-5/8 27-1/8
Fourth quarter 30-3/8 23-1/4
1994:
First quarter (through February 25, 1994)____________
On September 10, 1993, the trading day preceding the
execution of the Agreement, and on February 25, 1994, the day
preceding the date of this Information Statement, the closing per
share sales price of Century Common Stock as reported on the New
York Stock Exchange composite tape was $29-1/4 and $__________,
respectively. As of February 25, 1994, there were approximately
__________ shareholders of record of Century Common Stock. NO
ASSURANCE CAN BE GIVEN AS TO THE MARKET PRICE OF CENTURY COMMON
STOCK BEFORE, AT OR AFTER THE EFFECTIVE DATE. For a description
of certain effects of the Century Common Stock trading below $25
per share, see "Merger Agreement - Conversion of Kingsley Stock."
No established trading market exists with respect to shares
of Century Preferred Stock and there are currently no shares of
Century Preferred Stock issued. See "Description of Century
Securities."
Selected Consolidated Operating and Financial Data
The following table presents certain selected consolidated
operating and financial data for Century as of and for each of
the years ended in the five-year period ended December 31, 1992
and as of September 30, 1993 and for the nine-month periods ended
September 30, 1992 and 1993. The data, except for the selected
operating data, for each of the years in the five-year period
ended December 31, 1992 are derived from Century's consolidated
financial statements, which have been audited by KPMG Peat
Marwick, independent certified public accountants. The
consolidated financial statements as of December 31, 1991 and
1992 and for each of the years in the three-year period ended
December 31, 1992 and the report thereon, are incorporated by
reference herein. The unaudited financial information as of
September 30, 1993 and for the nine-month periods ended September
30, 1992 and 1993 has not been examined by independent public
accountants; however, in the opinion of management, all
adjustments (which include only normal recurring adjustments)
necessary to present fairly the results of operations for the
nine-month periods have been included therein. The results of
operations for the first nine months of 1993 are not necessarily
indicative of the results of operations which might be expected
for the entire year.
<TABLE>
<CAPTION>
December 31, September 30,
_______________________________________________
1988 1989 1990 1991 1992 1993
____ ____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C> <C>
Selected Operating Data:
Telephone access lines 239,207 296,034 304,915 314,819 397,300 432,599
</TABLE>
<PAGE>29
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Cellular units in service -
majority owned markets 11,140 23,199 35,815 51,083 73,084 96,337
</TABLE>
<TABLE>
<CAPTION>
Nine Months
Ended
Year Ended December 31, September 30,
_______________________________________________ _____________
1988 1989 1990 1991 1992 1992 1993
____ ____ ____ ____ ____ ____ ____
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Income Statement Data:
Revenues:
Telephone $173,470 $190,538 $215,771 $235,796 $297,510 $213,075 $255,918
Mobile Communications 12,270 24,852 34,594 45,231 62,092 45,324 61,010
_______ _______ _______ _______ _______ _______ _______
Total revenues $185,740 $215,390 $250,365 $281,027 $359,602 $258,399 $316,928
======= ======= ======= ======= ======= ======= =======
Operating income (loss):
Telephone $ 58,254 $ 61,153 $ 70,654 $ 80,039 $103,672 $ 72,592 $ 83,431
Mobile Communications (13,822) (13,970) (9,553) (4,952) 5,956 4,372 9,656
_______ _______ _______ _______ _______ _______ _______
Total operating income 44,432 47,183 61,101 75,087 109,628 76,964 93,087
Gain on sales of assets 2,550 --- 4,094 --- 3,985 1,055 1,661
Interest expense (20,405) (22,417) (24,132) (22,504) (27,166) (20,345) (22,186)
Other income, net 7,850 8,138 7,431 4,906 6,125 4,472 7,283
_______ _______ _______ _______ _______ _______ _______
Income before income taxes
and cumulative effect of
changes in accounting
principles 34,427 32,904 48,494 57,489 92,572 62,146 79,845
Income taxes (11,063) (10,740) (17,396) (20,070) (32,599) (22,250) (29,992)
_______ _______ _______ _______ _______ _______ _______
Income before cumulative
effect of changes in
accounting principles 23,364 22,164 31,098 37,419 59,973 39,896 49,853
Cumulative effect of
changes in accounting
princples --- --- --- --- (15,668) (15,668) ---
_______ _______ _______ _______ _______ _______ _______
Net income $ 23,364 $ 22,164 $ 31,098 $ 37,419 $ 44,305 $ 24,228 $ 49,853
======= ======= ======= ======= ======= ======= =======
Primary earnings per
share:
Primary earnings per
share before cumulative
effect of changes in
accounting principles $ 0.57 $ 0.49 $ 0.66 $ 0.79 $ 1.23 $ 0.82 $ 0.98
Cumulative effect of
changes in accounting
principles --- --- --- --- (0.32) (0.32) ---
_______ _______ _______ _______ _______ _______ _______
Primary earnigns per
share $ 0.57 $ 0.49 $ 0.66 $ 0.79 $ 0.91 $ 0.50 $ 0.98
======= ======= ======= ======= ======= ======= =======
Fully diluted earnings
per share:
Fully diluted earnings
per shares before
cumulative effect of
changes in accounting
principles $ 0.57 $ 0.49 $ 0.66 $ 0.79 $ 1.22 $ 0.82 $ 0.98
Cumulative effect of
changes in accounting
principles --- --- --- --- (0.30) (0.30) ---
_______ _______ _______ _______ _______ _______ _______
Fully diluted earnings
per share $ 0.57 $ 0.49 $ 0.66 $ 0.79 $ 0.92 $ 0.52 $ 0.96
======= ======= ======= ======= ======= ======= =======
Dividends per common
share $ .264 $ .272 $ .280 $ .287 $ .293 $ .220 $ .233
======= ======= ======= ======= ======= ======= =======
Common shares for
computing primary
earnings per share 40,532 44,400 46,809 47,305 48,500 48,370 51,003
======= ======= ======= ======= ======= ======= =======
Common shares for
computing fully diluted
earnigns per share 40,739 44,540 46,944 47,432 52,814 52,527 55,703
======= ======= ======= ======= ======= ======= =======
Ratio of earnings to
combined fixed charges
and preferred stock
dividends 2.66 2.45 3.00 3.55 4.40 4.05 4.59
======= ======= ======= ======= ======= ======= =======
</TABLE>
<PAGE>30
<PAGE>31
<TABLE>
<CAPTION>
December 31, September 30,
____________________________________________________
1988 1989 1990 1991 1992 1993
____ ____ ____ ____ ____ ____
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Selected Balance Sheet Data:
Net property, plant and
equipment $400,807 $474,158 $490,957 $534,998 $675,878 $794,099
Excess cost of net assets
acquired, net 32,198 109,197 110,013 114,258 217,688 296,019
Total assets 497,768 691,569 706,411 764,539 1,040,487 1,300,235
Long-term debt 180,096 257,708 230,715 254,753 391,944 462,479
Stockholders' equity 152,889 256,530 280,915 319,977 385,449 497,639
</TABLE>
DESCRIPTION OF CENTURY SECURITIES
Century's authorized capital stock consists of 100,000,000
shares of common stock, of which 51,261,965 shares were
outstanding as of September 30, 1993, and 2,000,000 shares of
preferred stock, of which 18,162 shares were outstanding as of
September 30, 1993. Each share of Century Common Stock has
attached to it one preferred stock purchase right. The following
descriptions of Century Common Stock, Century's preferred stock
and the preferred stock purchase rights are qualified in their
entirety by reference to the relevant provisions of (i) the
Louisiana Business Corporation Law ("LBCL"), (ii) the Articles of
Incorporation of Century (the "Century Articles"), (iii) the
Bylaws of Century (the "Century Bylaws"), and (iv) Century's
registration statement filed under the Exchange Act, as modified
by its Current Report on Form 8-K dated June 12, 1991, which has
been incorporated herein by reference. See "Incorporation of
Certain Documents by Reference."
Common Stock
Under the Century Articles, each share of Century Common
Stock that has been beneficially owned by the same person
continuously since May 30, 1987 generally entitles the holder
thereof to ten votes on all matters duly submitted to a vote of
shareholders. Otherwise, each share entitles the holder thereof
to one vote per share. Accordingly, each share of Century Common
Stock issued in connection with the Merger will entitle the
<PAGE>30
holders to one vote, and, subject to certain potential
exceptions, each other share of Century Common Stock issued by
Century in the future will entitle the holder to one vote.
Holders of Century Common Stock do not have cumulative voting
rights. As a result, the holders of more than 50% of the voting
power may elect all of the directors if they so desire. As of
September 30, 1993, the trustee for two of Century's employee
benefit plans was the record holder of Century Common Stock
having approximately 39% of the total voting power of all classes
of Century's capital stock. The trustee votes these shares in
accordance with the instructions of Century's employees. For a
discussion of the possible antitakeover effects of these
provisions, see under the heading "Comparative Rights of Century
and Kingsley Shareholders - Laws and Organizational Document
Provisions with Possible Antitakeover Effects." Except as set
forth below under "Preferred Stock Purchase Rights," holders of
Century Common Stock do not have the right to subscribe to any
additional capital stock that may be issued by Century.
Preferred Stock
General. Under the Century Articles, Century's Board of
Directors is authorized, without shareholder action, to issue
preferred stock from time to time and to establish the
designations, preferences and relative, optional or other special
rights and qualifications, limitations and restrictions thereof,
as well as to establish and fix variations in the relative rights
as between holders of any one or more series thereof. The
authority of Century's Board of Directors includes, but is not
limited to, the determination or establishment of the following
with respect to each series of preferred stock that may be
issued: (i) the designation of such series, (ii) the number of
shares initially constituting such series, (iii) the dividend
rate and conditions and the dividend and other preferences, if
any, in respect of Century Common Stock or among the series of
preferred stock, (iv) whether, and upon what terms, the preferred
stock would be convertible into or exchangeable for other
securities of Century, (v) whether, and to what extent, holders
<PAGE>32
of preferred stock will have voting rights, and (vi) the
restrictions, if any, that are to apply on the issue or reissue
of any additional shares of preferred stock.
As of September 30, 1993, 18,162 shares of certain series of
preferred stock were outstanding. At such time, such shares were
convertible into a total of approximately 121,500 shares of
Century Common Stock, and 4,260 of such shares were immediately
redeemable at the option of the Board of Directors. Each holder
of Century's currently outstanding preferred stock is entitled to
receive cumulative dividends prior to the distribution or
declaration of dividends in respect of the Century Common Stock
and is entitled to vote as a single class with the Century Common
Stock. Because each such share has been beneficially owned by
the same person continuously since May 30, 1987, such holders are
currently entitled to cast ten votes per share. For more
information on the voting rights of holders of voting preferred
stock, see "- Common Stock." Upon the dissolution, liquidation
or winding up of Century, the holders of Century's currently
outstanding preferred stock are entitled to receive, pro rata
with all other such holders, a per share amount equal to $25.00
plus any unpaid and accumulated dividends thereon.
For a discussion of the possible antitakeover effects of the
existence of undesignated preferred stock, see "Comparative
Rights of Century and Kingsley Shareholders - Laws and
Organizational Document Provisions with Possible Antitakeover
Effects."
Century Preferred Stock. Century has authorized the
issuance of a series, consisting of 75,000 shares of preferred
stock, that will constitute the Century Preferred Stock, which
when issued, will be duly and validly issued, fully paid and
nonassessable and the holders thereof will have no preemptive
rights in connection therewith. The following is a description
of the preferences, limitations and relative rights of the
Century Preferred Stock.
Voting Rights. Holders of Century Preferred Stock will be
entitled to cast one vote per share, voting with holders of
shares of Century Common Stock and with holders of other series
of voting preferred stock as a single class on any matter to come
before a meeting of the shareholders, except with respect to the
casting of ballots on those matters as to which holders of
preferred stock or a particular series thereof are required by
law to vote separately. See "- Preferred Stock -- General."
<PAGE>31
Dividends. Holders of Century Preferred Stock are entitled
to receive, when and if declared by Century's Board of Directors
out of the funds of Century legally available therefor, an annual
cash dividend of $1.25 on each share of Century Preferred Stock,
payable quarterly on each March 31, June 30, September 30 and
December 31, commencing on the last day of the calendar quarter
in which the Merger occurs. Dividends on the Century Preferred
Stock shall accrue and be cumulative from and after the date of
issuance and dividends payable for any partial quarterly period
shall be calculated on a pro rata basis. Dividends shall be
payable to the holders of record as they appear on Century's
stock transfer books at the close of business on the record date
for such payment. Accrued but unpaid dividends will not bear
interest.
If accrued dividends are not paid in full with respect to
Century Preferred Stock and all other securities ranking on
parity with the Century Preferred Stock, all dividends declared
with respect to such securities shall be declared pro rata on a
share-by-share basis among all shares of Century Preferred Stock
and such parity securities outstanding at the time. Except as
set forth above, unless all cumulative dividends accrued on
Century Preferred Stock have been paid, (i) no dividend or other
distribution may be declared or paid or set apart for payment on
Century Common Stock or on any other securities ranking junior to
or on parity with the Century Preferred Stock (other than a
dividend or distribution paid in shares of, or warrants, rights
or options exercisable for or convertible into, Century Common
Stock or other junior securities) and (ii) no Century Common
Stock or any other securities ranking junior to Century Preferred
Stock may be redeemed, purchased or otherwise acquired, except by
conversion into or by exchange for securities of Century ranking
junior to the Century Preferred Stock.
Under Louisiana law, Century may declare and pay dividends
or make other distributions on its capital stock only out of
surplus, as defined in the LBCL, or, if there is no such surplus,
out of its net profits for the fiscal year in which the dividend
<PAGE>33
or distribution is declared or the preceding fiscal year. In
addition, no dividends or distributions may be declared, paid or
made if Century is or would be rendered insolvent by virtue of
such dividend or distribution or if such dividend or distribution
would be contrary to any restrictions contained in the Century
Articles.
Optional and Mandatory Conversion. Subject to Century's
mandatory conversion rights discussed below, each share of
Century Preferred Stock will be convertible, at any time, at the
option of the holder into that number of shares of Century Common
Stock obtained by dividing $25.00 by the conversion price then in
effect. Each such conversion will be deemed to have been
effected immediately prior to the close of business on the date
on which the certificates representing the Century Preferred
Stock being converted shall have been delivered to the Transfer
Agent (as defined below), accompanied by the written notice
jointly addressed to Century and the Transfer Agent of such
conversion.
At any time after July 1, 1997, Century, at its option, may
convert, in whole but not in part, each outstanding share of
Century Preferred Stock into that number of shares of Century
Common Stock obtained by dividing $25.00 by the conversion price
then in effect. In order to effect such conversion, Century will
mail notice of the conversion date to each record holder of the
Century Preferred Stock at least 30 but not more than 60 days
prior to the date fixed for conversion.
As of the close of business on the conversion date, the
Century Preferred Stock converted will be deemed to cease to be
outstanding and all rights of any holder thereof will be
extinguished except for the rights arising under the Century
Common Stock issued in exchange therefore and the right to
receive accrued and unpaid dividends on Century Preferred Stock
through the conversion date.
Except as described below, no payment or adjustment will be
made in connection with any conversion on account of any
dividends accrued on the Century Preferred Stock surrendered for
conversion or on account of any dividends on the Century Common
Stock issued upon conversion. If the conversion date with
respect to any Century Preferred Stock occurs after any record
date with respect to the payment of a dividend on the Century
Preferred Stock and on or prior to the dividend due date, then
(i) the dividend due on such dividend due date will be payable to
the holder of record of such stock as of the dividend record date
and (ii) the dividend that accrues from the close of business on
the dividend record date through the conversion date shall be
payable to the holder of record as of the conversion date.
In order for a holder of Century Preferred Stock to effect a
conversion, the holder must deliver to Society Shareholder
Services, Inc., Dallas Texas, or such other agent as may be
designated by Century's Board of Directors as the transfer agent
for the Century Preferred Stock (the "Transfer Agent"), the
certificates representing the shares, transfer instruments
satisfactory to Century and sufficient to transfer to Century the
shares of Century Preferred Stock being converted free of any
adverse interest or claims, and, in the case of an optional
conversion, a written notice of conversion as specified in the
Century Articles. As promptly as practicable after the surrender
of the Century Preferred Stock, Century, through the Transfer
Agent, will issue and deliver to such holder certificates for the
number of whole shares of Century Common Stock issuable upon
conversion.
Conversion Price. The initial conversion price is $25.33;
thus, unless and until the price is adjusted in the manner
described below, each share of Century Preferred Stock will be
convertible into .987 shares of Century Common Stock, although no
fractional shares or securities representing fractional shares of
Century Common Stock will be issued upon conversion. In lieu of
any fractional interest, the holder will receive a cash payment
based on the last sale price of the Century Common Stock at the
close of business on the last trading day preceding the date of
conversion.
The conversion price is subject to adjustment (under
formulas set forth in the Century Articles) upon the occurrence
of certain specified events, including the issuance of Century
Common Stock as a dividend or distribution on any class of the
capital stock of Century, subdivisions and combinations of the
Century Common Stock, the issuance to all holders of Century
Common Stock of rights, warrants or other securities convertible
<PAGE>34
into Century Common Stock entitling them to subscribe for or
purchase Century Common Stock at less than the current market
price (as defined in the Century Articles), and the distribution
to all holders of Century Common Stock of capital stock or
evidences of indebtedness of Century or cash or other assets of
Century (excluding cash dividends or distributions from
earnings).
In case of any reclassification or change in outstanding
shares of Century Common Stock (with certain exceptions) or
Century's consolidation with, merger with or into, or statutory
share exchange with, any other entity that results in a
reclassification, change, conversion, exchange or cancellation of
outstanding shares of Century Common Stock (with certain
exceptions), all holders of Century Preferred Stock after the
reclassification, change, consolidation, merger or share exchange
will have the right to convert their shares of Century Preferred
Stock into the kind and amount of securities, cash and other
property which the holders would have been entitled to receive
upon the reclassification, change, consolidation, merger or share
exchange if the holders had held the Century Common Stock
issuable upon conversion of their shares of Century Preferred
Stock immediately prior to the reclassification, change,
consolidation, merger or share exchange.
No adjustment in the conversion price will be required
unless the adjustment would require a change of at least one
percent in the conversion price then in effect; provided, that
any adjustment that would otherwise be required to be made will
be carried forward and taken into account in any subsequent
adjustment. Century reserves the right to make such reduction in
the conversion price, in addition to those required under the
provisions described above, as Century in its discretion may
determine to be advisable in order that certain stock-related
distributions which may be made by Century to its shareholders
will not be taxable. Except as stated above, the conversion
price will not be adjusted for the issuance of Century Common
Stock or any securities convertible into or exchangeable for
Century Common Stock, or carrying the right to purchase any such
securities.
Liquidation Rights. Upon any voluntary or involuntary
dissolution, liquidation, or winding up of Century, the holder of
each share of Century Preferred Stock then outstanding will be
entitled to be paid out of Century's assets available for
distribution to its shareholders, before any distribution of
assets is made to holders of Century Common Stock and of any
other securities ranking junior to the Century Preferred Stock,
an amount equal to $25.00 per share plus all dividends (whether
or not declared or due) accrued and unpaid on such share through
the date fixed for the distribution of Century's assets.
If upon any dissolution, liquidation, or winding up of
Century, the assets available for distribution to the holders of
Century Preferred Stock and any securities ranking on parity with
the Century Preferred Stock then outstanding will be insufficient
to pay in full the liquidation distributions to the holders of
the outstanding Century Preferred Stock and parity securities in
accordance with the terms of the Century Articles, then the
holders of such shares shall share ratably in such distribution
of assets.
After payment of the full amount of the liquidating
distribution to which they are entitled, the holders of shares of
Century Preferred Stock will not be entitled to any further
participation in any distribution of assets by Century. Neither
a consolidation or merger of Century with another corporation nor
a sale, lease, transfer or exchange of all or substantially all
of Century's assets will be considered a liquidation, dissolution
or winding up of Century for these purposes.
Preferred Stock Purchase Rights
In November 1986, Century's Board of Directors declared a
distribution of one preferred stock purchase right (a "Right")
for each outstanding share of Century Common Stock, payable to
shareholders of record at the close of business on November 28,
1986, and authorized the issuance of one Right with respect to
each share of Century Common Stock (including the shares to be
issued in connection with the Merger) issued between such date
and the Distribution Date (as defined below). Each Right
entitles the registered holder to purchase from Century one
one-hundredth of a share of a new series of preferred stock,
<PAGE>35
designated as Series AA Junior Participating Preferred Stock,
$25.00 par value (the "Series AA Preferred Stock"), at a price of
$85 per one one-hundredth of a share (the "Purchase Price"). The
Rights are represented by the Century Common Stock certificates
and are not exercisable or transferable apart from the Century
Common Stock certificates until the close of business on the
tenth day following the earlier to occur of (i) a public
announcement that a person or group of affiliated or associated
persons (an "Acquiring Person"), other than Century, any
subsidiary of Century or any employee benefit plan or employee
stock plan of Century or of any subsidiary of Century (an "Exempt
Person"), has acquired, or obtained the right to acquire,
beneficial ownership of securities of Century representing 15% or
more of the outstanding Century Common Stock or such date as a
majority of the Board of Directors shall become aware of such
acquisition of the Century Common Stock (the "Stock Acquisition
Date") or (ii) the commencement of, or public announcement of an
intention to make, a tender or exchange offer (other than a
tender or exchange offer by an Exempt Person) the consummation of
which would result in the ownership of 30% or more of the out-
standing Century Common Stock (the earlier of such dates being
called the "Distribution Date"). As soon as practicable
following the Distribution Date, separate certificates evidencing
the Rights will be mailed to holders of record of Century Common
Stock as of the close of business on the Distribution Date and
such separate certificates alone will evidence the Rights from
and after the Distribution Date and could begin trading
separately from the Century Common Stock.
The Rights will expire at the close of business on November
27, 1996 unless earlier redeemed by Century as described below.
Until a Right is exercised, the holder, as such, will have no
rights as a shareholder of Century, including, without
limitation, the right to vote or to receive dividends.
If (i) any Acquiring Person acquires or obtains the right to
acquire beneficial ownership of 15% or more of the outstanding
shares of Century Common Stock (other than pursuant to an all-
cash tender offer for all of the outstanding Century Common Stock
that increases such Acquiring Person's beneficial ownership to
80% or more of the outstanding shares of Century Common Stock and
as to which Century has received an opinion from its investment
bankers that the per share price offered is not inadequate), or
(ii) during such time as there is an Acquiring Person there shall
occur any reclassification of securities (including any reverse
stock split), recapitalization of Century, or any merger or
consolidation of Century with any of its subsidiaries or any
other transaction or transactions involving Century or any of its
subsidiaries (whether or not involving the Acquiring Person) that
have the effect of increasing by more than 1% the proportionate
share of the outstanding shares of any class of equity securities
of Century or any of its subsidiaries directly or indirectly
owned or controlled by the Acquiring Person, then proper
provision will be made so that each holder of record of a Right,
other than Rights beneficially owned by an Acquiring Person
(which will become void), will thereafter be entitled to receive,
upon payment of the Purchase Price, that number of shares of
Century Common Stock having a market value at the time of the
transaction equal to two times the Purchase Price. The holder of
any Rights that are or were at any time, on or after the earlier
of the Stock Acquisition Date or the Distribution Date,
beneficially owned by an Acquiring Person which is or was
involved in or which caused or facilitated, directly or
indirectly, the event or transaction or transactions described in
this paragraph shall not be entitled to the benefit of the
adjustment described in this paragraph.
At any time until ten days following the Stock Acquisition
Date (subject to extension by the Board of Directors), Century-
may redeem the Rights in whole, but not in part, at a price of
$.05 per Right. Under certain circumstances, the decision to
redeem shall require the concurrence of a majority of the
Continuing Directors (which is generally defined as those members
of the Board of Directors of Century who are members of the Board
immediately prior to the Stock Acquisition Date). Immediately
upon the action of the Board of Directors of Century authorizing
redemption of the Rights, the right to exercise the Rights will
terminate and the only right of the holders of Rights will be to
receive the redemption price without any interest thereon.
The number of shares of Series AA Preferred Stock or other
securities issuable upon exercise of the Rights and the Purchase
Price are subject to certain adjustments from time to time upon
certain occurrences. For a discussion of the possible
antitakeover effects of the Rights, see the discussion below
under "Comparative Rights of Century and Kingsley Shareholders -
Laws and Organizational Document Provisions with Possible
Antitakeover Effects."
<PAGE>36
COMPARATIVE RIGHTS OF CENTURY AND KINGSLEY SHAREHOLDERS
If the Merger is consummated, all shareholders of Kingsley,
other than dissenting shareholders, will become shareholders of
Century. The rights of Century's shareholders are governed by
and subject to the provisions of the LBCL, the Century Articles
and the Century Bylaws, rather than the provisions of the MBCA
and the Articles of Incorporation and By-laws of Kingsley that
currently govern the rights of Kingsley's shareholders. The
following is a brief summary of certain differences between the
rights of shareholders of Century and the rights of shareholders
of Kingsley and is qualified in its entirety by reference to the
relevant provisions of (i) the LBCL, (ii) the MBCA, (iii) the
Century Articles, (iv) the Articles of Incorporation of Kingsley
(the "Kingsley Articles"), (v) the Century Bylaws, (vi) the By-
laws of Kingsley (the "Kingsley By-laws") and (vii) Century's
Registration Statement filed under the Exchange Act, as modified
by its Current Report on Form 8-K dated June 12, 1991, which has
been incorporated herein by reference. See "Incorporation of
Certain Documents by Reference."
Voting Rights of Common Stock
The holders of Kingsley Stock are entitled to one vote per
share on all matters duly submitted to a shareholder vote.
Holders of Kingsley Stock do not have cumulative voting rights.
For a discussion of the voting rights of Century Common Stock,
see "Description of Century Securities - Common Stock."
Preferred Stock
The Kingsley Articles do not authorize the issuance of
preferred stock, and no shares of Kingsley preferred stock are
outstanding. For a discussion of Century's preferred stock, see
"Description of Century Securities - Preferred Stock."
Preferred Stock Purchase Rights
Kingsley does not have any preferred stock purchase rights
or similar rights outstanding. For a discussion of Century's
preferred stock purchase rights, see "Description of Century
Securities - Preferred Stock Purchase Rights."
Dividends, Redemptions and Stock Repurchases
Under both the LBCL and MBCA, dividends may be declared by
the Board of Directors and paid out of surplus, provided that in
no event shall dividends be paid when the corporation is
insolvent or would thereby be made insolvent. Unlike the MBCA,
the LBCL provides that if no surplus is available, dividends may,
subject to certain exceptions, be paid out of any net profits for
the then current fiscal year or the preceding fiscal year, or
both. The LBCL further provides that shareholders must be
notified of any dividend paid out of capital surplus.
Under the LBCL, a corporation may redeem or repurchase its
shares out of surplus or, in certain circumstances, stated
capital, provided in either event that it is solvent and will not
be rendered insolvent thereby, and provided further that the net
assets are not reduced to a level below the aggregate liquidation
preferences of any shares that will remain outstanding after the
redemption. Under the MBCA, a corporation may redeem or
repurchase its outstanding shares if after giving effect thereto
the corporation is solvent.
The Century Articles, in accordance with the LBCL, provides
that cash, property or share dividends, shares issuable to
shareholders in connection with a reclassification of stock, and
the redemption price of redeemed shares that are not claimed by
the shareholders entitled thereto within one year after the
dividend or redemption price became payable or the shares became
issuable revert in full ownership to Century, and Century's
obligation to pay such dividend or redemption price or issue such
shares, as appropriate, will thereupon cease, subject to the
power of the Board of Directors to authorize such payment or
issuance following the reversion. The Kingsley Articles do not
contain a similar provision.
<PAGE>37
Approval of Extraordinary Transactions
To authorize any (i) merger or consolidation, (ii) sale,
lease or exchange of all or substantially all of a corporation's
assets, (iii) voluntary liquidation or (iv) amendments to the
articles of incorporation of a corporation, the MBCA requires,
subject to certain limited exceptions, the affirmative vote of
the holders of a majority of the outstanding shares of the voting
stock. To authorize these same transactions, the LBCL requires,
subject to certain limited exceptions, the affirmative vote of
the holders of two-thirds (or such larger or smaller proportion,
not less than a majority, as the articles of incorporation may
provide) of the voting power present or represented at the
shareholder meeting at which the transaction is considered and
voted upon. The Century Articles provide that certain provisions
thereof (primarily those relating to approving certain business
combinations, holding shareholder meetings, removing directors,
considering tender offers and amending bylaws) may be amended
only upon, among other things, the affirmative vote of 80% of the
votes entitled to be cast by all shareholders and two-thirds of
the votes entitled to be cast by all shareholders other than
Related Persons (which is defined therein substantially similarly
to the definition of Acquiring Persons set forth under
"Description of Century Securities - Preferred Stock Purchase
Rights"). For a discussion of certain supermajority votes
required to approve certain business combinations or to amend the
Century Bylaws, see the discussion below under "- Laws and
Article Provisions with Possible Antitakeover Effects --
Louisiana Fair Price Statute" and "- Bylaws."
The MBCA and LBCL provide that the holders of outstanding
shares of a class of stock shall be entitled to vote as a class
in connection with any proposed amendment to the corporation's
articles of incorporation, whether or not such holders are
entitled to vote thereon by the articles of incorporation, if
such amendment would have certain specified adverse effects on
the holders of such class of stock.
Liability of Directors and Officers
Under both the MBCA and LBCL, shareholders are entitled to
bring suit, generally in an action on behalf of the corporation,
to recover damages caused by breaches of the duty of care and the
duty of loyalty owed to a corporation and its shareholders by
directors and, to a certain extent, officers. The LBCL permits
corporations to (i) include provisions in their articles of
incorporation that limit personal liability of directors and
officers for monetary damages resulting from breaches of the duty
of care, subject to certain exceptions that are substantially the
same for each state, and (ii) indemnify officers and directors in
certain circumstances for their expenses and liabilities incurred
in connection with defending pending or threatened suits, as more
fully described below.
The Century Articles include a provision that eliminates the
personal liability of a director or officer to Century and its
shareholders for monetary damages resulting from breaches of the
duty of care to the full extent permitted by Louisiana law and
further provides that any amendment or repeal of this provision
will not affect the elimination of liability accorded to any
director or officer for acts or omissions occurring prior to such
amendment or repeal.
Under both the MBCA and LBCL, corporations are permitted,
and in some circumstances required, to indemnify, among others,
current and prior officers, directors, employees or agents of the
corporation for expenses and liabilities incurred by such parties
in connection with defending pending or threatened suits
instituted against them in their corporate capacities, provided
certain specified standards of conduct are determined to have
been met. These corporate statutes further permit corporations
to purchase insurance for indemnifiable parties against liability
asserted against or incurred by such parties in their corporate
capacities. Both a Michigan and a Louisiana corporation may
provide indemnification rights more expansive than those
permitted by statute (subject only to the limitation that no
payments be made in respect of willful or intentional
misconduct).
The Century Bylaws provide for mandatory indemnification for
current and former directors and officers of Century to the full
extent permitted by Louisiana law. The Kingsley By-laws do not
provide indemnification rights.
<PAGE>38
Dissenters Rights
Under the LBCL, a shareholder has the right to dissent from
most types of mergers or consolidations, or from the sale, lease,
exchange or other disposition of all or substantially all of the
corporation's assets, if such transaction is approved by less
than 80% of the corporation's total voting power. The right to
dissent is not available with respect to sales pursuant to court
orders of or sales for cash on terms requiring distribution of
all or substantially all of the net proceeds to the shareholders
in accordance with their respective interests within one year
after the date of the sale. Moreover, no dissenters' rights are
available with respect to (i) shareholders holding shares of any
class of stock that are listed on a national securities exchange,
subject to certain exceptions, or (ii) shareholders of a
surviving corporation whose approval is not required in
connection with the transaction. The MBCA does not extend
appraisal rights where the shares are listed on a national
securities exchange or held of record by 2,000 or more
shareholders, or where the consideration received is cash or
shares listed on a national securities exchange or held of record
by 2,000 or more shareholders or a combination of cash and such
shares. For a more complete description of dissenters' rights
under the MBCA, see "Dissenting Shareholders' Rights," and the
relevant sections of the MBCA attached as Appendix II.
In order to exercise dissenters rights under the LBCL, a
dissenting shareholder must follow certain procedures similar to
the procedures that a dissenting shareholder under the MBCA must
follow as discussed above under "Dissenting Shareholders'
Rights."
Inspection Rights
Under the LBCL, any shareholder, except a business
competitor, who has been the holder of record of at least 5% of
the outstanding shares of any class of the corporation's stock
for a minimum of six months has the right to examine the records
and accounts of the corporation for any proper and reasonable
purpose. Two or more shareholders who have each held shares for
six months may aggregate their stock holdings to attain the
required 5% threshold. Business competitors, however, must have
owned at least 25% of all outstanding shares for a minimum of six
months to obtain such inspection rights. As shareholders of a
public company subject to the Exchange Act, Century's
shareholders are entitled to receive periodic reports concerning
Century's operations and performance.
Under the MBCA, any shareholder of record shall have the
right, subject to certain limited exceptions, to examine for any
proper purpose the corporation's relevant books and accounts.
Moreover, upon the written request of any shareholder, the
corporation is obligated to furnish such shareholder its balance
sheet and earnings statement for the prior fiscal year.
Laws and Organizational Document Provisions with Possible
Antitakeover Effects
Both the LBCL and MBCA permit corporations to include in
their articles of incorporation any provisions not inconsistent
with law that regulates the internal affairs of the corporation,
including provisions that are intended to encourage any person
desiring to acquire a controlling interest in the corporation to
do so pursuant to a transaction negotiated with the corporation's
board of directors rather than through a hostile takeover
attempt. These provisions are intended to assure that any
acquisition of control of the corporation will be subject to
review by the board to take into account the interests of all of
the corporation's shareholders. However, some shareholders may
find these provisions to be disadvantageous to the extent that
they could limit or preclude meaningful shareholder participation
in certain transactions such as mergers or tender offers and
render more difficult or discourage certain takeovers in which
shareholders might receive for some or all of their shares a
price that is higher than the prevailing market price at the time
the takeover attempt is commenced. These provisions might
further render more difficult or discourage proxy contests, the
assumption of control by a person of a large block of the
corporation's voting stock or any other attempt to influence or
replace the corporation's incumbent management.
Unlike the Kingsley Articles, the Century Articles contain
provisions that are designed to ensure meaningful participation
of the Board of Directors in connection with proposed takeovers.
Moreover, Louisiana has adopted statutes that regulate takeover
<PAGE>39
attempts. Set forth below is a discussion of the provisions of
the Century Articles, Century Bylaws and the LBCL that may
reasonably be expected to affect the incidence and outcome of
takeover attempts.
Louisiana Fair Price Statute. Louisiana has adopted a
statute (the "Louisiana Fair Price Statute") that is intended to
deter the use of "two-tier" tender offers in which an "Interested
Shareholder" obtains a controlling interest in the shares of a
Louisiana corporation having 100 or more beneficial shareholders
at a price in excess of the market value of the corporation's
voting stock and subsequently seeks in the "second tier" to
compel a "Business Combination" in which the consideration paid
to the remaining shareholders is greatly reduced. Under the
statute, an Interested Shareholder is defined to include any
person (other than the corporation, its subsidiaries or its
employee benefit plans) who is the beneficial owner of shares of
capital stock representing 10% or more of the total voting power
of a corporation. The term Business Combination is broadly
defined to include most corporate actions that an Interested
Shareholder might contemplate after acquiring a controlling
interest in a corporation in order to increase his or her share
ownership or reduce his or her acquisition debt. These "second
tier" transactions include any merger or consolidation of the
corporation involving an Interested Shareholder, any disposition
of assets of the corporation to an Interested Shareholder, any
issuance to an Interested Shareholder of securities of the
corporation meeting certain threshold amounts and any
reclassification of securities of the corporation having the
effect of increasing the voting power or proportionate share
ownership of an Interested Shareholder. Under the Louisiana Fair
Price Statute, a Business Combination must be recommended by the
board of directors and approved by the affirmative vote of the
holders of 80% of the corporation's total voting power and two-
thirds of the total voting power excluding the shares held by the
Interested Shareholder (in addition to any other votes required
under law or the corporation's articles of incorporation), unless
the transaction is approved by the board of directors prior to
the time the Interested Shareholder first obtained such status or
the Business Combination satisfies certain minimum price, form of
consideration and procedural requirements. Although the statute
protects shareholders by encouraging an Interested Shareholder to
negotiate with the board of directors or to satisfy the minimum
price, form of consideration and procedural requirements imposed
thereunder, it does not prevent an acquisition of a controlling
interest of a corporation by an Interested Shareholder who does
not contemplate initiating a "second tier" transaction. The
Century Articles contain an article that provides for
substantially similar protections.
Louisiana Control Share Statute. The Louisiana Control
Share Statute adopted in 1987 provides that, subject to certain
exceptions, any shares of certain publicly-traded Louisiana
corporations acquired by a person or group (an "Acquiror"), other
than an employee benefit plan or related trust of the
corporation, in an acquisition that causes such Acquiror to have
the power to vote or direct the voting of shares in the election
of directors in excess of 20%, 33-1/3% or 50% thresholds shall
have only such voting power as shall be accorded by the
affirmative vote of, among others, the holders of a majority of
the votes of each voting group entitled to vote separately on the
proposal, excluding all "interested shares" (as defined below),
at a meeting that, subject to certain exceptions, is required to
be called for that purpose upon the Acquiror's request.
"Interested shares" is defined by the statute to sterilize the
vote of the corporation's management and the Acquiror, and
includes all shares as to which the Acquiror, any officer of the
corporation and any director of the corporation who is also an
employee of the corporation may exercise or direct the exercise
of voting power. If either the Acquiror fails to comply with
certain specified notice requirements or the shareholders vote
against according voting rights to the shares obtained by the
Acquiror, the corporation has the right to redeem the shares held
by the Acquiror for their fair value. Although the statute
permits the articles of incorporation or bylaws of a corporation
to be amended to exclude from its application share acquisitions
occurring after the adoption of the amendment, neither the
Century Articles nor the Century Bylaws contain any such
amendment.
Unlike the Louisiana Fair Price Statute, the Louisiana
Control Share Statute establishes a referendum format by which
disinterested shareholders may, in effect, demonstrate their
support or opposition to a proposed tender offer or share
acquisition by their vote as to whether to accord or deny voting
rights to the Acquiror with respect to the shares acquired by him
or her. On the one hand, the possibility that voting rights
might be denied with respect to interested shares may encourage
the Acquiror to negotiate a non-hostile acquisition with the
board of directors. On the other hand, Acquirors that commence a
tender offer at a price in excess of prevailing market values may
be able to readily obtain the shareholder vote re-enfranchising
<PAGE>40
his or her shares, which in all likelihood would significantly
reduce the pressure on the Acquiror to negotiate with the board
of directors and the willingness of the board to oppose the
transaction.
Evaluation of Tender Offers. The Century Articles expressly
require, and the LBCL expressly permits, the Board of Directors,
when considering a tender offer, exchange offer, or Business
Combination (defined therein substantially similarly to the
definition of such term set forth above under "-- Louisiana Fair
Price Statute"), to consider, among other factors, the social and
economic effects of the proposal on the corporation, its
subsidiaries, and their respective employees, customers,
creditors and communities. One effect of this provision may be
to discourage, in advance, an acquisition proposal to the extent
it strengthens the position of Century's Board of Directors in
dealing with any potential offeror who seeks to enter into a
negotiated transaction with Century prior to or during a takeover
attempt. Another effect of such provision may be to dissuade
shareholders who might potentially be displeased with the Board's
response to an acquisition proposal from engaging Century in
costly and time-consuming litigation.
Unissued Stock. As discussed above under "Description of
Century Securities - Preferred Stock," the Board of Directors of
Century is authorized, without action of its shareholders, to
issue Century preferred stock. One of the effects of the
existence of undesignated preferred stock (and authorized but
unissued common stock) may be to enable the Board of Directors to
make more difficult or to discourage an attempt to obtain control
of Century by means of a merger, tender offer, proxy contest or
otherwise, and thereby to protect the continuity of Century's
management. If, in the due exercise of its fiduciary
obligations, the Board of Directors were to determine that a
takeover proposal was not in Century's best interest, such shares
could be issued by the Board of Directors without shareholder
approval in one or more transactions that might prevent or make
more difficult or costly the completion of the takeover
transaction by diluting the voting or other rights of the
proposed acquiror or insurgent shareholder group, by creating a
substantial voting block in institutional or other hands that
might undertake to support the position of the incumbent Board of
Directors, by effecting an acquisition that might complicate or
preclude the takeover, or otherwise. In this regard, the Century
Articles grant the Board of Directors broad power to establish
the rights and preferences of the authorized and unissued Century
Preferred Stock, one or more series of which could be issued
entitling holders (i) to vote separately as a class on any
proposed merger or consolidation; (ii) to elect directors having
terms of office or voting rights greater than those of other
directors; (iii) to convert Century preferred stock into a
greater number of shares of Century Common Stock or other
securities; (iv) to demand redemption at a specified price under
prescribed circumstances related to a change of control; or (v)
to exercise other rights designed to impede or discourage a
takeover. The issuance of shares of Century preferred stock
pursuant to the Board of Directors' authority described above may
adversely affect the rights of the holders of Century Common
Stock.
Time-Phase Voting. As discussed above, each outstanding
share of Century Common Stock entitles the holder to one vote
unless it has been beneficially owned by the same person or
entity continuously since May 30, 1987, in which case it
generally entitles the holder to ten votes until transfer. The
existence of multi-vote stock may render more difficult a change
of control of Century or the removal of incumbent management. To
the extent that voting power will be concentrated in shareholders
entitled to ten votes per share, it may be difficult or
impossible to consummate a merger, tender offer, proxy contest or
similar transaction opposed by such shareholders. Because this
provision also has the effect of increasing the voting power of
the shares held by Century's management, employees and benefit
plans, a takeover attempt or an effort to remove incumbent
directors or management that is opposed by management or the
employees of Century could be less likely to succeed. For more
information on the voting rights associated with the Century
Stock and the voting power controlled by the trustee for two of
Century's employee benefit plans, see "Description of Century
Securities - Common Stock."
Preferred Stock Purchase Rights. As discussed above under
the heading "Description of Century Securities - Preferred Stock
Purchase Rights," Century has issued Rights entitling the
registered holder to purchase certain securities of Century. The
Rights will cause substantial dilution to a person or group that
attempts to acquire Century without conditioning the offer on the
redemption of the Rights. The Rights should not interfere with
any merger or other business combination approved by the Board of
<PAGE>41
Directors of Century since the Board of Directors may, at its
option, at any time until ten days following the Stock
Acquisition Date, redeem all but not less than all the then
outstanding Rights for a redemption price of $.05 per Right.
Classified Board of Directors. Both the MBCA and the LBCL
permit Boards of Directors to be divided into classes of
directors, with each class to be as nearly equal in size as
possible, serving staggered multi-year terms. Unlike the
Kingsley Articles, the Century Articles provide for three classes
of directors serving staggered three-year terms. Classification
of the Board of Directors of Century tends to make more difficult
the change of a majority of its composition and to assure the
continuity and stability of Century's management and policies,
since a majority of the directors at any given time will have
served on the Board of Directors for at least one year. Absent
the removal of directors, a minimum of two annual meetings of
shareholders is necessary to effect a change in control of the
Board of Directors. The classified Board provision applies to
every election of directors, regardless of whether Century is or
has been the subject of an unsolicited takeover attempt. The
shareholders may, therefore, find it more difficult to change the
composition of the Board of Directors for any reason, including
performance, and the classified Board structure will thereby tend
to perpetuate existing management of Century. In addition,
because the provision will make it more difficult to change
control of the Board of Directors, it may discourage tender
offers or other transactions that shareholders may believe would
be in their best interests.
Removal of Directors. The MBCA provides that each director
shall hold office for the term for which he is elected and until
his successor is elected and qualified, unless removed from
office with or without cause by a majority vote of the
shareholders at any annual or special shareholders meeting,
unless the articles of incorporation provide that a director may
be removed only for cause. The Kingsley Articles do not contain
such a provision.
Under the LBCL, subject to certain exceptions, the
shareholders by vote of a majority of the total voting power may
at any time remove from office any director. The Century
Articles, however, provide that directors of Century may be
removed from office only for cause and only by vote of the
holders of at least 50% of the total voting power and, at any
time that there is a Related Person (as defined above), by the
holders of a majority of the votes entitled to be cast by all
shareholders other than the Related Person, voting as a separate
group. This provision precludes a third party from gaining
control of Century's Board of Directors by removing incumbent
directors without cause and filling the vacancies created thereby
with his or her own nominees. However, such provision also tends
to reduce, and in some instances eliminate, the power of
shareholders, even those with a majority interest in Century, to
remove incumbent directors.
Restrictions on Taking Shareholder Action. The MBCA
provides that special meetings of shareholders may be called by
the Board of Directors and by such person or persons as so
authorized by the articles of incorporation or the bylaws. The
Kingsley By-laws provide that special meetings of shareholders
may be called by the President and Secretary, and must be called
by the President or Secretary at the written request of the Board
of Directors or shareholders of record owning 10% of Kingsley's
issued and outstanding capital stock. Under the Century
Articles, holders of a majority of the total voting power are
entitled to call a special meeting of shareholders. This higher
threshold substantially reduces the ability of shareholders
interested in effecting corporate action from calling a special
meeting between annual meetings.
Under the MBCA, shareholders may effect corporate action
without a meeting if a consent describing the action is signed by
all the shareholders. The articles of incorporation may provide
that such shareholder action may be taken upon the written
consent of less than all of the outstanding shares; the Kingsley
Articles does not so provide. Under the Century Articles,
shareholder action may be taken only at a duly called annual or
special meeting of shareholders.
Bylaws
Under the Century Articles, the Century Bylaws may be
amended and new bylaws may be adopted by the shareholders, upon
the affirmative vote of the holders of 80% of the total voting
power and two-thirds of the votes entitled to be cast by all
shareholders other than Interested Shareholders (as defined
<PAGE>42
above), or by the Board of Directors, upon, among other things,
the affirmative vote of a majority of all directors, other than
those affiliated with any Interested Shareholder, who served
prior to the time such Interested Shareholder obtained such
status.
Under the Kingsley By-laws, the power to adopt, amend or
repeal the Kingsley By-laws is vested in the board of directors
and Kingsley's shareholders.
Vacancies
Under the LBCL, any vacancy on the board of directors
(including those resulting from an increase in the authorized
number of directors) may be filled by the remaining directors,
subject to the right of the shareholders to fill such vacancy.
Under the Century Articles, changes in the number of directors
may not be made without, among other things, the affirmative vote
of 80% of the directors. Louisiana Law expressly provides that a
board of directors may declare vacant the office of a director if
he or she is interdicted or adjudicated an incompetent, is
adjudicated a bankrupt or becomes incapacitated by illness or
other infirmity and cannot perform his or her duties for a period
of six months or longer.
Pursuant to the Kingsley By-laws, any vacancy on the Board
of Directors of Kingsley may be filled by the vote of the
remaining directors.
LEGAL MATTERS
Certain legal matters in connection with this offering have
been passed upon for Century by Jones, Walker, Waechter,
Poitevent, Carrere & Denegre, New Orleans, Louisiana.
EXPERTS
The consolidated financial statements and related schedules
of Century as of December 31, 1991 and 1992, and for each of the
years in the three-year period ended December 31, 1992
incorporated by reference herein have been incorporated by
reference in reliance upon the reports of KPMG Peat Marwick,
independent certified public accountants, which are also
incorporated by reference herein, and upon the authority of such
firm as experts in accounting and auditing. The report of KPMG
Peat Marwick covering the December 31, 1992 consolidated
financial statements refers to changes in the methods of
accounting for income taxes and postretirement benefits other
than pensions.
The balance sheet of Kingsley as of December 31, 1992 and
the related statements of income and retained earnings and cash
flows for each of the years in the two-year period ended December
31, 1992 included elsewhere herein have been so included in
reliance on the report of McCartney and McIntyre, P.C.,
independent certified public accountants, also included elsewhere
herein, given on the authority of such firm as experts in
accounting and auditing.
The balance sheets of Celutel, Inc. as of April 30, 1993 and
1992, and related statements of income, stockholders' deficit and
cash flows for each of the years in the three-year period ended
April 30, 1993 incorporated herein by reference to Century's
Current Report on Form 8-K dated October 8, 1993, have been
incorporated by reference in reliance upon the report of Coopers
& Lybrand, independent certified public accountants, which is
also incorporated herein by reference, given on the authority of
such firm as experts in accounting and auditing.
_______________________________
<PAGE>F-1
INDEX TO KINGSLEY FINANCIAL STATEMENTS
Page
Independent Auditor's Report F-2
Balance Sheets as of December 31, 1992 and
September 30, 1993 (unaudited) F-3
Statements of Income and Retained Earnings for
the years ended December 31, 1991 and 1992 and
the nine months ended September 30, 1992 and
1993 (unaudited) F-4
Statements of Cash Flows for the years ended
December 31, 1991 and 1992 and the nine months
ended September 30, 1992 and 1993 (unaudited) F-5
Notes to Financial Statements - December 31, 1991 and 1992 F-6
<PAGE>F-2
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Kingsley Telephone Company
We have audited the accompanying balance sheet of Kingsley
Telephone Company as of December 31, 1992, and the related
statements of income, retained earnings, and cash flows for the
years ended December 31, 1992 and 1991. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements 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 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Kingsley Telephone Company as of December 31, 1992, and the
results of its operations and its cash flows for the years ended
December 31, 1992 and 1991 in conformity with generally accepted
accounting principles.
As discussed in Note 5 to the accompanying financial statements,
Kingsley Telephone Company changed its method of accounting for
income taxes in 1992.
McCARTNEY AND McINTYRE, P.C.
Lansing, Michigan
March 5, 1993
<PAGE>F-3
KINGSLEY TELEPHONE COMPANY
Balance Sheets
as of December 31, 1992 and September 30, 1993
<TABLE>
<CAPTION>
December 31, September 30,
1992 1993
____________ _____________
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 187,770 $ 460,023
Due from subscribers (net of allowance for
doubtful accounts of $723 for
December 31, 1992) 29,701 34,116
Other accounts receivable 158,044 188,853
Material and supplies inventory 10,565 12,771
Equipment held for resale 51,003 48,571
Prepaid expenses 29,252 37,372
_________ _________
Total current assets 466,335 781,706
_________ _________
INVESTMENTS AND OTHER ASSETS
Other investments 506,897 548,551
Deferred charges 55,912 56,072
_________ _________
Total investments and other assets 562,809 604,623
_________ _________
PROPERTY, PLANT AND EQUIPMENT
Plant in service 5,395,369 5,462,656
Plant under construction -- 26,497
Accumulated depreciation (943,667) (1,130,277)
_________ _________
Net property, plant and equipment 4,451,702 4,358,876
_________ _________
TOTAL ASSETS $5,480,846 $5,745,205
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 226,981 $ 226,981
Accounts payable 162,632 114,868
Construction accounts payable 243,353 110,640
Customer deposits 13,196 15,824
Other taxes accrued 8,498 24,690
Other current liabilities 15,662 16,327
_________ _________
Total current liabilities 670,322 509,330
_________ _________
LONG-TERM DEBT 3,863,654 4,039,017
_________ _________
DEFERRED TAXES 112,037 184,909
_________ _________
STOCKHOLDERS' EQUITY
Capital stock, $10 par value, authorized
1,000 shares; issued and outstanding, 275
shares 2,750 2,750
Retained earnings 832,083 1,009,199
_________ _________
Total stockholders' equity 834,833 1,011,949
_________ _________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,480,846 $5,745,205
========= =========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>F-4
KINGSLEY TELEPHONE COMPANY
Statements of Income and Retained Earnings
for the Years Ended December 31, 1991 and 1992
and the Nine Months Ended September 30, 1992 and 1993
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 31, September 30,
_______________________ ______________________
1991 1992 1992 1993
_________ __________ _________ __________
(consolidated) (unaudited)
<S> <C> <C> <C> <C>
REVENUES
Local service $ 313,869 $ 317,536 $ 237,864 $ 249,041
Network access 743,603 900,064 629,267 805,238
Other 102,996 120,350 90,085 115,316
_________ _________ _________ _________
1,160,468 1,337,950 957,216 1,169,595
_________ _________ _________ _________
EXPENSES
Plant operations 251,124 287,607 221,794 194,245
Customer operations 160,283 210,285 156,128 151,876
Corporate operations 457,417 337,747 229,631 269,403
Depreciation and amortization 223,459 243,118 185,042 186,757
_________ _________ _________ _________
1,092,283 1,078,757 792,595 802,281
_________ _________ _________ _________
OPERATING INCOME 68,185 259,193 164,621 367,314
_________ _________ _________ _________
OTHER INCOME (EXPENSE)
Interest expense (98,802) (188,368) (140,354) (143,424)
Income (loss) from cellular
partnership -- (65,880) (91,729) 34,000
Other income 35,279 6,250 4,456 3,383
_________ _________ _________ _________
(63,523) (247,998) (227,627) (106,041)
_________ _________ _________ _________
INCOME (LOSS) BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 4,662 11,195 (63,006) 261,273
INCOME TAX EXPENSE (BENEFIT) (52,456) (6,027) (4,959) 64,632
_________ _________ _________ _________
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE 57,118 17,222 (58,047) 196,641
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE -- 46,731 46,731 --
_________ _________ _________ _________
NET INCOME (LOSS) 57,118 63,953 (11,316) 196,641
RETAINED EARNINGS - BEGINNING 727,512 776,380 776,380 832,083
CASH DIVIDENDS (8,250) (8,250) (8,250) (19,525)
_________ _________ _________ _________
RETAINED EARNINGS - ENDING $ 776,380 $ 832,083 $ 756,814 $1,009,199
========= ========= ========= =========
WEIGHTED AVERAGE SHARES
OUTSTANDING 275 275 275 275
========= ========= ========= =========
EARNINGS (LOSS) PER AVERAGE
COMMON SHARE:
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE $ 207.70 $ 62.63 $ (211.08) $ 715.06
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE -- 169.93 169.93 --
_________ _________ _________ _________
EARNINGS (LOSS) PER AVERAGE
COMMON SHARE $ 207.70 $ 232.56 $ (41.15) $ 715.06
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>F-5
KINGSLEY TELEPHONE COMPANY
Statements of Cash Flows for the Years Ended December 31, 1991
and 1992 and the Nine Months Ended September 30, 1992 and 1993
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 31, September 30,
_____________________ ____________________
1991 1992 1992 1993
_________ _______ ________ _________
(consolidated) (unaudited)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income (loss): $ 57,118 $ 63,953 $ (11,316) $196,641
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Depreciation and Amortization 223,459 243,118 185,042 186,757
Amortization of investment
tax credits (26,857) (4,273) (3,204) (3,204)
Change in deferred taxes (593) 4,334 4,334 76,076
Cash surrender value of
life insurance (10,206) (10,206) (7,655) (7,655)
Provision for losses on accounts
receivable (4,517) -- 93 4,426
(Income) loss from cellular
partnership -- 65,880 91,729 (34,000)
Cumulative effect of change in
accounting principle -- (46,731) (46,731) --
Increase in prepaid pension expense -- (18,413) -- --
Change in operating assets and
liabilities:
Change in accounts receivable (38,899) 15,960 26,537 (39,650)
Change in inventories 34,798 13,541 (12,787) 226
Change in prepaid expenses (9,479) (15,897) (21,941) (8,120)
Change in accounts payable (39,156) 45,111 25,989 (47,764)
Change in other current liabilities
and accrued expenses (28,426) 2,542 20,353 19,485
________ _______ _______ _______
Net Cash Provided by Operating
Activities 157,242 358,919 250,443 343,218
________ _______ _______ _______
INVESTING ACTIVITIES
Purchase of property, plant and
equipment (1,732,256) (1,090,769) (1,028,974) (226,803)
Investment in cellular operations (259,642) -- -- --
Salvage (cost of removal) on
disposed assets 4,400 (5,510) -- --
________ _______ _______ _______
Net Cash Used in Investing
Activities (1,987,498) (1,096,279) (1,028,974) (226,803)
_________ _________ _________ _______
FINANCING ACTIVITIES
Proceeds from issuance of debt 1,492,950 797,000 797,000 275,000
Principles payments on debt (75,564) (77,840) (58,068) (99,637)
Dividends paid (8,250) (8,250) (8,250) (19,525)
________ _______ _______ _______
Net Cash Provided by (Used in)
Financing Activities 1,409,136 710,910 730,682 155,838
________ _______ _______ _______
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (421,120) (26,450) (47,849) 272,253
CASH AND CASH EQUIVALENTS -
BEGINNING 635,340 214,220 214,220 187,770
________ _______ _______ _______
CASH AND CASH EQUIVALENTS -
ENDING $ 214,220 $ 187,770 $ 166,371 $460,023
========= ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>F-6
KINGSLEY TELEPHONE COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1991 and 1992
1. Statement of Accounting Policies
Kingsley Telephone Company (the "Company") is a telephone
company located in Grand Traverse County, Michigan providing
local exchange service and access to the toll network. The
Company grants credit to customers, substantially all of
whom are local residents. Other accounts receivable consist
primarily of amounts due from interexchange carriers.
Accounting policies used in the preparation of these
financial statements conform to generally accepted
accounting principles. The accounting records of the
Company are maintained in accordance with the Uniform System
of Accounts for Class A and B Telephone Companies prescribed
by the Michigan Public Service Commission.
Beginning in 1984, the Company began to provide access
services to common (long distance) carriers to access the
exchanges of the Company. The Company now receives
settlements based on average schedules for providing access
service from the Michigan Exchange Carrier Association
(Intrastate) and the National Exchange Carrier Association
(Interstate). Toll service, access revenues and local
service revenues are recognized when earned, regardless of
the period in which they are billed.
Fluctuations in the rate of return earned by the interstate
and intrastate access pools can create prior period income
or expense adjustments. Prior period revenue adjustments of
approximately $17,210 and $24,859 were recorded in 1991 and
1992, respectively.
Property, Plant and Equipment
Additions to telephone plant and replacements of significant
units of property are capitalized at their original cost.
Normal asset retirements are charged against the
depreciation reserve along with the costs of removal less
salvage, with no gain or loss recognized. In the case of
extraordinary retirements, the unrecovered costs of
telephone plant removed substantially in advance of the
expected service life of the plant are deferred and
amortized over a period of years specified by the
appropriate regulatory commission. The composite rate of
depreciation for 1991 and 1992 was 6.10% and 5.45%,
respectively.
Depreciation and amortization for 1991 and 1992 was
allocated as follows:
1991 1992
_________ _________
Depreciation expense $ 174,016 $ 216,260
Depreciation expense - inside wiring 8,035 -0-
Depreciation - MPSC ordered adjustment 41,408 26,858
_________ _________
Total Depreciation $ 223,459 $ 243,118
========= =========
Investment tax credits are amortized to income over the
productive lives of the applicable property additions. The
amount amortized for 1991 and 1992 was $26,857 and $4,273,
respectively, and was used to reduce federal income tax
expense.
Supplemental Cash Flow Disclosures
Cash and cash equivalents includes cash and those short-
term, highly liquid investments with original maturities of
three months or less.
The Company, on a cash basis, paid interest in the amount of
$97,493 and $185,670 for 1991 and 1992, respectively. The
Company made no cash payments of federal income taxes for
1991 and 1992.
<PAGE>F-7
2. Long-Term Debt
Long-term debt includes 35-year and 24-year notes to the
United States of America through the Rural Electrification
Administration (the "REA"). These notes are payable in
equal quarterly installments including interest. Also
included are notes to Century Cellunet, Inc. for capital
calls related to the construction of the cellular network in
which the Company participates as a partner (Note 9).
Interest is payable quarterly with the full principal due at
the date of maturity. Installments payable within the next
twelve months include approximately $226,981 in principal.
The notes are as follows:
Amount Maturity Rate 12/31/92
REA Notes - $ 305,000 10/27/94 2.0% $ 31,920
383,000 12/06/02 2.0% 149,143
460,000 7/01/06 2.0% 230,028
350,000 9/18/07 2.0% 189,975
500,000 6/14/11 5.0% 378,020
675,000 5/02/15 5.0% 587,234
2,453,000 2/28/15 5.0% 2,290,000
Century
Cellunet, Inc. 74,414 10/29/93 Prime 74,414
100,710 1/14/94 Prime 100,710
64,454 7/14/93 Prime 64,454
_________
Subtotal $ 4,095,898
Deduct: Prepayments 5,263
Current maturities 226,981
_________
Total Long-Term Indebtedness $ 3,863,654
=========
Funds advanced on the REA notes, but not yet disbursed by
the Company, are held in a separate bank account. REA holds
$163,000 in approved but unadvanced funds. The telephone
plant has been pledged as collateral for these notes. The
loan agreements also contain certain restrictions on the
payment of dividends. Under the REA loan agreement formula,
at December 31, 1992, the Company had $15,988 of retained
earnings, which are unrestricted and available for dividend
distribution.
Principal and interest installments on the above REA notes
are due quarterly in equal amounts of approximately $65,542
in 1992. The maturities of all long-term debt for each of
the five years succeeding December 31, 1992 are as follows:
1993 $226,981
1994 $187,296
1995 $ 83,158
1996 $ 86,055
1997 $ 89,010
3. Investments
Other investments consist of the following at December 31,
1992:
Investment in cellular operations, at equity $ 439,803
Cash value of life insurance policies 42,342
Investments in stock 24,752
_______
Total Other Investments $ 506,897
=======
4. Income Taxes
For financial reporting purposes, the Company computes
federal income tax by applying the statutory rate to all of
its taxable income.
<PAGE>F-8
Total income tax benefit for the year ended December 31,
1992 was allocated as follows:
Income before cumulative effect of change in
accounting principle $ (6,027)
Cumulative effect of change in accounting
principle (46,731)
_______
Total income tax benefit in the statement of
income $ (52,758)
=======
Income tax benefit attributable to income before the
cumulative effect of a change in accounting principle is
composed of the following:
1991 1992
__________ __________
Federal
Current $(12,720) $(6,088)
Deferred (39,736) 61
_______ ______
$(52,456) $(6,027)
======= ======
For the year ended December 31, 1992, deferred taxes were
provided for certain temporary differences between the book
basis and tax basis of assets and liabilities (principally
property, plant and equipment due to depreciation
differences). Investment tax credits resulting from
investments in telephone plant and equipment prior to
January 1, 1986 have been deferred and amortized to income
over the services lives of the related property.
For the year ended December 31, 1991, deferred tax benefit
resulted from timing differences in the recognition of
revenue and expense for tax and financial reporting
purposes. The sources of these timing differences and the
tax effects of each are as follows:
1991
________
Excess book depreciation over tax
depreciation $ (12,879)
Amortization of investment tax
credits (26,857)
________
$ (39,736)
========
The following table reconciles the statutory federal income
tax expense to the effective federal income tax benefit.
1991 1992
________ _________
Federal income tax expense at
statutory rate of 34% $ 1,585 $ 3,806
Surcharge exemptions (886) (2,131)
Amortization of investment tax
credits (26,857) (4,273)
True-up of prior years accruals (26,298) (3,429)
_______ _______
$(52,456) $ (6,027)
======= =======
5. Change in Accounting Principle
<PAGE>F-9
In 1992 the Company elected to adopt Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for
Income Taxes." SFAS 109 requires an asset and liability
approach for financial accounting and reporting of income
taxes. The cumulative effect of this change in accounting
principle is $46,731 and is presented separately in the
statement of income and retained earnings.
6. Pension Plan
The Company has a defined benefit pension plan covering
substantially all of its employees. The benefits are based
on years of service and the employee's compensation during
the last five years of employment. The Company's funding
policy is to contribute annually the maximum amount that can
be deducted for federal income tax purposes. Contributions
are intended to provide not only for benefits attributed to
service to date but also for those expected to be earned in
the future.
The following table sets forth the plan's funded status and
amounts recognized in the Company's statement of financial
position at December 31, 1992:
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
venefits of #331,232 $ (332,316)
=========
Projected benefit obligation for service rendered
to date $ (371,172)
Plan assets at fair value 317,105
_________
Projected benefit obligation in excess of plan assets $ (54,067)
Unrecognized net gain from past experience different
from that assumed and effects of changes in
assumptions 13,956
Unrecognized net obligation at January 1, 1992, being
recognized over 21 years 58,524
_________
Prepaid pension cost included in other assets $ 18,413
=========
Net pension cost for 1992 included the following
components:
Service cost-benefits earned during the period $ 19,354
Interest cost on projected benefit obligation 26,155
Actual return on plan assets (9,300)
Net amortization and deferral (12,306)
_________
Net Periodic Cost $ 23,903
=========
The weighted-average discount rate and rate of increase in
future compensation levels used in determining the actuarial
present value of the projected benefit obligation were 6%
and 3%, respectively. The expected long-term rate of return
on assets was 8%.
7. Construction Program and Proposed New Financing
The Company is currently involved in a construction project
that involves the replacement of Falmouth switching
equipment with new digital switching equipment, updating
switching equipment in Kingsley and adding a remote switch
in the Summit City area. A majority of this construction
program has been completed while the balance will take place
over the next few years and will also include additions and
improvements to outside plant including installation of some
fiber optic cable. This project is being funded with
proceeds from an REA loan in the amount of $2,453,000. See
Note 2.
8. Investment in Subsidiary
During 1987, the Company formed a wholly owned subsidiary,
Michigan Communication Technologies, Inc. ("MCT") for the
purpose of conducting deregulated communications and related
business. The operations of MCT were consolidated with the
operations of Kingsley in the financial statements.
Due to continuing losses and the lack of any certainty of
the subsidiary company being able to reach levels of ongoing
revenues that would sustain the subsidiary company's
operations, the Company, as its sole shareholder,
discontinued MCT's operations on November 30, 1991 and
dissolved MCT in 1992.
<PAGE>F-10
The MCT assets and liabilities were transferred to the
Company, along with any remaining warranty or service
obligations on equipment previously installed. The Company
intends to sell the equipment and materials it received in
this transfer, as well as handle any future sales or
services formerly provided by MCT, as part of its own
deregulated operations.
9. Cellular Telephone Service
The Company has an approximately 11% interest in Cellular
North Michigan Network General Partnership (the
"Partnership"). The Partnership, formed in September 1990,
provides cellular service for Michigan RSA #3 and RSA #5,
which serve a market having a population of approximately
292,000. The Partnership, which commenced providing
cellular service in 1990, incurred losses in 1991 and in
1992.
During 1991 and 1992, Century Cellunet, Inc., which has an
approximately 22% interest in, and is the operator of, the
Partnership, loaned the Company an aggregate of
approximately $240,000 to assist the Company in meeting its
capital requirements to the Partnership, which loans remain
outstanding. For additional information, see Note 2.
10. Michigan Public Service Commission Settlement Agreements
Because of earnings in excess of its allowed rate of return,
the Company, during 1990, agreed to a $1.00 per month, per
subscriber, temporary local service credit. This credit
began with the January 1, 1990 billing period, was extended
for a period beginning with the October 1, 1990 billing
period, and terminated with the September 30, 1991 billing
period. As a result of continued excess earnings the credit
was continued through March 1, 1993 but at a reduced rate of
$.68. These temporary credits had the effect of reducing
local service revenue by approximately $22,300 and $15,974
in 1991 and 1992, respectively. Local service revenue will
be reduced by approximately $2,960 in 1993.
Additionally, as part of the excess earnings settlement
agreements with the Staff of the Michigan Public Service
Commission, (Case Nos. U-9692 and U-8757) the Company
recorded $41,408 and $26,858 in additional depreciation for
1991 and 1992, respectively.
The Company also agreed to a reduced access settlement from
the Michigan Exchange Carriers Association for a period of
twelve months beginning in October 1991 and terminating
after September 1992. This caused a reduction in access
revenues of $17,370 and $52,110 in 1991 and 1992,
respectively.
11. Contingent Liabilities
During a construction project in 1991, a contractor hired by
the Company ruptured an oil pipeline causing significant
damage to both the pipeline and the surrounding area.
Although the Company's management, after consulting with
outside counsel, believes the Company is not liable for this
accident, the Michigan Department of Natural Resources named
the Company as a potential responsible party. The pipeline
owner has also initiated litigation against the Company and
its insurer, among others, to recover the cleanup costs that
the pipeline owner incurred, which are estimated to be in
excess of $300,000. The Company's insurer is providing the
Company's legal representation in this matter. No provision
for any potential liability has been made in the Company's
financial statements.
12. Subsequent Event (unaudited)
On September 13, 1993, the Company entered into a Merger
Agreement with Century Telephone Enterprises, Inc.
("Century"), among others, pursuant to which a wholly-owned
subsidiary of Century will be merged with and into the
Company. This transaction is expected to be consummated
during the first quarter of 1994.
<PAGE>
APPENDIX I
MERGER AGREEMENT
Dated as of September 13, 1993
By and Among
Century Telephone Enterprises, Inc.
KTC Acquisition Corporation,
Kingsley Telephone Company
and
The Principal Shareholders of Kingsley Telephone Company
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. THE MERGER 2
1.1 Merger.........................................2
1.2 Closing; Effective Date........................2
1.3 Articles of Incorporation and By-laws..........2
1.4 Directors and Officers.........................2
1.5 Conversion of Shares...........................2
1.6 No Fractional Shares...........................3
1.7 Exchange of Stock Certificates.................3
1.8 Dissenting Shares..............................3
SECTION 2. REPRESENTATIONS AND WARRANTIES
OF KINGSLEY AND THE PRINCIPAL SHAREHOLDERS 4
2.1 Existence and Good Standing....................4
2.2 Capitalization; Stock Ownership................4
2.3 Authorization..................................4
2.4 Enforceable Agreement..........................5
2.5 Compliance with Applicable Laws................5
2.6 Permits; Regulatory Matters....................5
2.7 Litigation; Adverse Facts......................6
2.8 Employment Relations...........................6
2.9 Financial Statements...........................7
2.10 Property.......................................7
2.11 Undisclosed Liabilities........................8
2.12 Books and Records..............................8
2.13 Material Contracts.............................8
2.14 Insurance......................................9
2.15 Tax Matters....................................9
2.16 Employee Benefit Plans........................10
2.17 Environmental Matters.........................11
2.18 Customers and Suppliers.......................12
2.19 Absence of Certain Changes....................12
2.20 Information Statement.........................13
2.21 Shareholder Approval..........................13
2.22 Continuity of Investment......................13
2.23 Broker's Fees.................................13
2.24 Full Disclosure...............................13
SECTION 3. REPRESENTATIONS AND WARRANTIES OF
CENTURY 13
3.1 Existence and Good Standing...................13
3.2 Organization of Sub...........................13
3.3 Authorization.................................14
3.4 Enforceable Agreement.........................14
3.5 Century Stock.................................14
3.6 Registration Statement........................14
3.7 Broker's Fees.................................14
SECTION 4. PRE-CLOSING COVENANTS 15
4.1 Cooperation and Best Efforts..................15
4.2 Press Releases................................15
4.3 Amendment to Registration Statement...........15
4.4 Approval of Shareholders; Information
Statement.....................................15
4.5 Rule 145......................................16
4.6 Conduct of Business of Kingsley...............16
4.7 Notification of Changes.......................16
4.8 Prohibited Negotiations.......................17
4.9 Due Diligence Review..........................17
4.10 Century Preferred Stock.......................17
4.11 Litigation....................................17
SECTION 5. CONDITIONS PRECEDENT 17
5.1 Conditions to All Parties.....................17
5.2 Additional Conditions to Century's
Obligations...................................18
5.3 Additional Condition to Kingsley's and
the Principal Shareholders' Obligations.......19
SECTION 6. POST CLOSING COVENANTS 20
6.1 Dispositions of Century Stock.................20
6.2 Further Assurances............................20
6.3 Notification of Regulatory Authorities........21
6.4 Releases......................................21
SECTION 7. INDEMNIFICATION 21
7.1 Indemnification Rights........................21
7.2 Limitations; Certain Expenses.................21
SECTION 8. TERMINATION AND ABANDONMENT 22
8.1 Termination...................................22
8.2 Effect of Termination; Survival...............22
SECTION 9. MISCELLANEOUS 22
9.1 Notices.......................................22
9.2 Knowledge.....................................23
9.3 Waiver........................................23
9.4 Expenses......................................23
9.5 Integrated Agreement..........................23
9.6 Choice of Law.................................23
9.7 Parties in Interest...........................23
9.8 Amendment.....................................23
9.9 Remedies......................................24
9.10 Survival......................................24
9.11 Headings......................................24
9.12 Gender........................................24
9.13 Counterparts..................................24
LIST OF SCHEDULES
Schedule 2.2 Ownership of Kingsley Common Stock
Schedule 2.8 Compensation of Certain Employees
Schedule 2.10 Real Property
Schedule 2.13 Material Contracts
Schedule 2.14 Insurance
Schedule 2.16 Employee Benefit Plans
LIST OF EXHIBITS
Exhibit A Preferences, Limitations and Relative Rights of Century
Preferred Stock
Exhibit B Certificate of Merger
Exhibit C Financial Statements of Kingsley
Exhibit D Rule 145 Letter Agreement
Exhibit E Opinion of Counsel to the Principal Shareholders
Exhibit F Opinion of Counsel to Kingsley
<PAGE>
MERGER AGREEMENT
MERGER AGREEMENT (the "Agreement"), dated as of September
13, 1993, by and among Century Telephone Enterprises, Inc., a
Louisiana corporation ("Century"), KTC Acquisition Corporation, a
Michigan corporation and wholly-owned subsidiary of Century
("Sub"), Kingsley Telephone Company, a Michigan corporation
("Kingsley"), and Harry Calcutt and Northwestern Savings Bank &
Trust (formerly Northwestern Savings & Loan), a banking
association organized under the laws of Michigan
("Northwestern"), both appearing herein in their capacities as
the sole trustees of the Sterling M. Nickerson Trust created
pursuant to Article IV of the Last Will and Testament of Sterling
M. Nickerson (the "Trust"). Mr. Calcutt and Northwestern are
collectively referred to herein as the "Principal Shareholders."
WITNESSETH:
WHEREAS, the respective Boards of Directors of Century, Sub
and Kingsley deem it desirable and in the best interests of their
respective shareholders to merge Sub with and into Kingsley
pursuant to the terms and conditions hereof (the "Merger");
WHEREAS, the Principal Shareholders, who in their capacities
as trustees of the Trust are the record owners of approximately
76.4% of the issued and outstanding capital stock of Kingsley,
deem it desirable and in the best interests of Kingsley's
shareholders, the Trust and the Trust's beneficiaries to
consummate the Merger pursuant to the terms and conditions
hereof;
WHEREAS, pursuant to the Merger each of the 275 issued and
outstanding shares of common stock, $10.00 par value per share,
of Kingsley ("Kingsley Common Stock") will be converted into
shares of 5% Cumulative Convertible Series K Preferred Stock,
$25.00 par value per share, of Century having the preferences,
limitations and relative rights set forth on Exhibit A hereto
("Century Preferred Stock") and shares of common stock, $1.00 par
value per share, of Century (hereinafter referred to separately
as the "Century Common Stock" and collectively with the Century
Preferred Stock as the "Century Stock"); and
WHEREAS, the parties intend the Merger to be carried out in
accordance with the provisions of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), in order to
qualify the Merger as a reorganization within the meaning
thereof;
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained herein, the
parties agree as follows:
SECTION 1. THE MERGER
1.1 Merger. Subject to the terms and conditions of this
Agreement, as of the Effective Time (as defined below) Sub shall
be merged with and into Kingsley in accordance with the Michigan
Business Corporation Act (the "MBCA"), the separate existence of
Sub shall cease, and Kingsley shall be the surviving corporation
(the "Surviving Corporation") and shall continue its corporate
existence under the name "Century Telephone of Northern Michigan,
Inc."
1.2 Closing; Effective Date. (a) The closing of the
transactions contemplated hereunder (the "Closing") shall take
place at the New Orleans offices of Jones, Walker, Waechter,
Poitevent, Carrere & Denegre, commencing at 10:00 a.m. local time
on (i) the last business day of the month in which all of the
conditions set forth in Section 5 have been satisfied or duly
waived or (ii) on any other mutually agreeable date (the "Closing
Date").
(b) At the Closing, the parties shall, upon delivery
to the other of the certificates, opinions and other instruments
contemplated by Section 5 of this Agreement (collectively,
"Closing Instruments") or otherwise providing proof of the
satisfaction or waiver of each of the conditions set forth in
Section 5, cause the Merger to be consummated by duly filing with
the Secretary of State of Michigan a properly executed
Certificate of Merger (the "Certificate of Merger") in
substantially the form attached as Exhibit B in accordance with
the provisions of the MBCA. In accordance with the MBCA and the
terms of the Certificate of Merger, the Merger shall be effective
as of 10:59 p.m. local time on the date of such filing (such time
and date being hereinafter referred to respectively as the
"Effective Time" and the "Effective Date").
1.3 Articles of Incorporation and By-laws. The Articles of
Incorporation of Kingsley, as amended and restated as of the
Effective Time in the manner provided in the Certificate of
Merger, and the By-laws of Kingsley shall be the Articles of
Incorporation and By-laws of the Surviving Corporation after the
Effective Time unless and until amended in accordance with their
terms and as provided by law.
1.4 Directors and Officers. The directors and officers of
Sub immediately prior to the Effective Time shall be the initial
directors and officers of the Surviving Corporation after the
Effective Time, each to hold office until their respective
successors are duly elected and qualified. Immediately after the
Effective Time, Century shall take, or cause the Surviving
Corporation to take, any actions necessary to effectuate this
subsection 1.4.
1.5 Conversion of Shares. As of the Effective Time, by
virtue of the Merger and without any further action on the part
of Century, Sub, Kingsley, the Surviving Corporation or any
holder of any of the following securities:
(a) All shares of Kingsley Common Stock that are held
in the treasury of Kingsley shall be cancelled;
(b) Each share of Kingsley Common Stock issued and
outstanding immediately prior to the Effective Time, other than
Dissenting Shares (as defined in subsection 1.8) and shares of
Kingsley Common Stock to be cancelled pursuant to subsection
1.5(a), shall be converted into an aggregate of (i) 272.73 fully
paid and nonassessable shares of Century Preferred Stock and (ii)
such number of fully paid and nonassessable shares of Century
Common Stock as is derived by dividing $8,636.36 by the average
per share closing price of Century Common Stock reported on the
New York Stock Exchange Composite Tape for the five trading days
immediately preceding the second trading day prior to the Closing
Date (the "Average Price"), provided, however, that if the
application of the foregoing formula would result in more than
95,000 shares of Century Common Stock being issued, then Century
shall have the option, in lieu of delivering such excess number
of shares, to pay an amount of cash (without interest) equal to
such excess number of shares multiplied by the Average Price; and
(c) All issued and outstanding shares of capital stock
of Sub shall be converted into 100 fully paid and nonassessable
shares of common stock of the Surviving Corporation.
1.6 No Fractional Shares. Notwithstanding any other
provision of this Agreement, no interest with respect to
fractional shares of Century Stock shall accrue or be recognized
in connection with the consummation of the Merger.
1.7 Exchange of Stock Certificates. After the Effective
Date, each holder of an outstanding certificate or certificates
previously representing shares of Kingsley Common Stock (other
than treasury shares and shares as to which dissenters' rights
have been perfected and not withdrawn pursuant to the MBCA) shall
be entitled, upon surrender to Century or its designated agent of
such certificates accompanied by a properly completed and
executed letter of transmittal to be prepared by Century, to
receive certificates representing the whole number of shares of
Century Stock into which the shares of Kingsley Common Stock
previously represented by the certificate or certificates so
surrendered shall have been converted, along with any cash that
Century may elect to deliver pursuant to subsection 1.5(b).
Until surrendered, each outstanding certificate shall be deemed
for all purposes to represent the number of whole shares of
Century Stock into which the shares of Kingsley Common Stock
previously represented thereby shall have been converted,
provided, however, that Century may, at its option, refuse to pay
to the holders of certificates previously representing shares of
Kingsley Common Stock that have not been surrendered for exchange
any dividend or other distribution payable in respect of shares
of Century Stock.
1.8 Dissenting Shares. Notwithstanding anything in this
Agreement or the MBCA to the contrary, the parties agree that
shares of Kingsley Common Stock outstanding immediately prior to
the Effective Time and held by a holder who has not voted in
favor of the Merger and who has delivered to Kingsley a written
objection to the Merger in accordance with Section 763 of the
MBCA ("Dissenting Shares") shall not be converted into shares of
Century Stock pursuant to subsection 1.5(b), but, instead, shall
entitle such holder to payment of the fair value of his
Dissenting Shares in accordance with the provisions of Sections
761 through 774, inclusive, of the MBCA. Kingsley shall give
Century prompt written notice of any such objections or demands
received by it, shall permit Century to participate in all
negotiations and proceedings with respect thereto and, except
with the prior written consent of Century, shall not make any
payment with respect to, or settle or offer to settle, any such
objections or demands.
SECTION 2. REPRESENTATIONS AND WARRANTIES
OF KINGSLEY AND THE PRINCIPAL SHAREHOLDERS
Kingsley and the Principal Shareholders jointly and
severally hereby make the following representations and
warranties to Century:
2.1 Existence and Good Standing; Subsidiaries. (a)
Kingsley is a corporation duly organized, validly existing and in
good standing under the laws of the State of Michigan, which is
the only jurisdiction in which the conduct of its business
requires it to be qualified to do business, and Kingsley has all
requisite power and authority to own its property and to carry on
its business as it is now being conducted.
(b) Except for its general partnership interest in the
Cellular North Michigan Network General Partnership (the
"Partnership"), a Michigan general partnership formed pursuant to
the Partnership Agreement dated as of December 31, 1990 (the
"Partnership Agreement"), Kingsley has no subsidiaries and does
not own or have the right or obligation to acquire, directly or
indirectly, any capital stock or other interest in any entity.
2.2 Capitalization; Stock Ownership. (a) The authorized
capital stock of Kingsley consists solely of 1,000 shares of
common stock, $10.00 par value per share, of which 275 shares are
issued and outstanding and none are held as treasury shares.
There are no outstanding options or other rights to acquire any
shares of capital stock of Kingsley or any security convertible
into such shares, nor any obligation or commitment to issue, sell
or deliver any of the foregoing. All of the issued and
outstanding shares of Kingsley's capital stock are validly
issued, fully paid and nonassessable.
(b) Schedule 2.2 hereto sets forth all of the
shareholders of Kingsley (the "Shareholders"), the number of
shares of Kingsley Common Stock owned of record by each and the
state in which each Shareholder is domiciled.
2.3 Authorization. (a) Mr. Calcutt has the full legal
right, power, capacity and authority to execute, deliver and
perform this Agreement and all Closing Instruments to be
delivered by him hereunder, without the consent or authority of
any other person.
(b) Northwestern has full power and authority to
execute, deliver and perform this Agreement and all Closing
Instruments to be delivered by it hereunder, without any consents
or corporate proceedings on the part of Northwestern or any other
person.
(c) Kingsley has full power and authority to execute
and deliver this Agreement and all Closing Instruments to be
delivered by it hereunder and, subject to the requisite approval
of this Agreement by the Shareholders, to consummate the
transactions contemplated hereby. The execution, delivery and
performance by Kingsley of this Agreement and all Closing
Instruments to be delivered by it hereunder have been duly
authorized by Kingsley's Board of Directors, and no other
corporate proceedings (other than the requisite approval of this
Agreement by the Shareholders) on the part of Kingsley are
necessary or required.
2.4 Enforceable Agreement. This Agreement and each Closing
Instrument to be delivered under subsection 5.2 is, or upon
execution by each party thereto will be, a legal, valid and
binding obligation of each of the Principal Shareholders and
Kingsley, enforceable against each of them in accordance with its
terms. Neither the execution, delivery nor performance of this
Agreement or the Closing Instruments will (a)(i) violate,
conflict with, or result in a breach of any provisions of, (ii)
constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, (iii) result in
the termination of or accelerate the performance required by, or
(iv) result in the creation of any adverse claim against any of
the properties or assets of Kingsley or the Trust under, any of
the provisions of the articles of incorporation or by-laws of
Kingsley, the Trust or any note, lease, license, agreement or
other instrument or obligation to which Kingsley, the Trust or
either of the Principal Shareholders is a party, or by which any
of them or their assets are bound; (b) violate any judgment,
order, statute, rule or regulation ("Applicable Law") of any
federal, state or local court or other legislative, judicial,
regulatory or other governmental body ("Governmental Body") to
which Kingsley, the Trust or either of the Principal Shareholders
are subject or by which they are bound; or (c) require the
approval, consent or authorization of, or the making of any
declaration, filing or registration with, any Governmental Body
or any third party that transacts business with them.
2.5 Compliance with Applicable Laws. Without limiting the
scope of any other representation or warranty made in this
Section 2, Kingsley has complied with and is not in material
default in any respect under, and it has not been charged or
threatened with or come under investigation with respect to, any
Applicable Law.
2.6 Permits; Regulatory Matters. (a) Kingsley is a
regulated public utility in the State of Michigan, holds a
Certificate of Convenience and Necessity and is duly registered
with the Michigan Public Service Commission ("PSC").
(b) Kingsley possesses all other federal, state and
local franchises, permits, licenses, certificates, approvals and
other authorizations necessary to own or lease and operate its
properties and to conduct its business as now conducted, all of
which are hereinafter referred to collectively with the
certificate referred to in paragraph (a) as the "Permits."
(c) All Permits are in full force and effect, have
been legally and validly issued, and will continue in full force
and effect without modification after the Effective Date without
the consent of, or the making of any filing with, any
Governmental Body. Kingsley is not in default under the terms of
any Permit and has not received notice of any default thereunder
or any similar indication that any Governmental Body intends to
modify, revoke or review any Permit.
(d) Kingsley has no inventory, plant or equipment that
has been disallowed from rate base or excluded from the revenue
calculations for any pool (unless due to the deregulation of the
service for which such assets are used) in any rate order issued
by the PSC or the Federal Communications Commission ("FCC") or
any determination by an administrator of an interstate or
intrastate pool, or received notification that the PSC or the FCC
or any pool administrator proposes to effect any such exclusions.
(e) Kingsley has not elected to file interexchange
tariffs under Sections 61.41 - 61.49 of the FCC's price cap
rules.
2.7 Litigation; Adverse Facts. (a) The order entered on
October 22, 1992 by the Probate Court for the County of Grand
Traverse, State of Michigan, Probate Court No. 15,872, confirming
the power of the Principal Shareholders to execute, deliver and
perform this Agreement (the "Order") (i) is in full force and
effect and (ii) has at no time been suspended or stayed by the
Claim of Appeal (the "Appeal") filed by certain beneficiaries of
the Trust (the "Petitioners") on November 12, 1992 in the Court
of Appeals, State of Michigan. Since the filing of the Appeal,
the Petitioners have not filed a brief or otherwise actively
pursued the Appeal.
(b) Kingsley is currently a party to a legal
proceeding (the "Proceeding") in which the Company's insurance
carrier is providing legal representation. To the best knowledge
of Kingsley and the Principal Shareholders, the Proceeding, which
resulted from the Kingsley's contractor causing damage to a
pipeline owned by Dart Oil Company, will not have an adverse
effect on the business, financial condition, results of
operation, cash flow or prospects of Kingsley.
(c) Except for the actions set forth in paragraphs (a)
and (b) above, there are no actions, suits, proceedings,
arbitrations or investigations pending or, to the best knowledge
of Kingsley and the Principal Shareholders, threatened before any
Governmental Body, to restrain, prohibit or otherwise challenge
the transactions contemplated hereby or against or affecting the
business, financial condition, results of operation, cash flow or
prospects of Kingsley, nor is there any reasonable basis
therefor.
2.8 Employment Relations. (a) There are no unfair labor
practice charges pending or, to the best knowledge of Kingsley
and the Principal Shareholders, threatened against Kingsley
before the National Labor Relations Board or otherwise, and are
no strikes, disputes, slowdowns, or other labor disruptions
pending or, to the best knowledge of Kingsley and the Principal
Shareholders, threatened against Kingsley. There is no labor
union that claims to represent Kingsley's employees and no
collective bargaining agreement currently being negotiated by
Kingsley with respect to its employees.
(b) Set forth on Schedule 2.8 is an accurate and
complete list showing the names, titles and annual compensation
of all of the Company's employees.
2.9 Financial Statements. (a) Attached hereto as Exhibit
C are true and complete copies of (i) the balance sheets at
December 31, 1992, 1991 and 1990, and the related statements of
income, retained earnings and cash flow, and related notes
thereto for the fiscal years then ended, all of which have been
prepared in accordance with generally accepted accounting
principles consistently applied ("GAAP") and have been audited by
McCartney and McIntyre, P.C. in accordance with generally
accepted auditing standards (collectively, the "Financial
Statements"), and (ii) the unaudited balance sheet of Kingsley at
June 30, 1993 (the "Interim Balance Sheet") and the related
unaudited statements of income, retained earnings and cash flow
for the period then ended (together with the Interim Balance
Sheet, the "Interim Financial Statements"), all of which have
been prepared in accordance with GAAP.
(b) The Financial Statements and Interim Financial
Statements present fairly the financial condition, results of
operations and cash flows of Kingsley to which they relate as of
the respective dates thereof and for the periods referred to
therein. Kingsley has not had, nor were any of its assets
subject to, any liability, commitment, indebtedness or obligation
of any kind whatsoever that is not reflected or adequately
reserved against in the Interim Balance Sheet. The Interim
Financial Statements reflect all adjustments that are necessary
for a fair statement of the financial condition, results of
operation and cash flow for the interim periods presented
therein.
(c) Kingsley has delivered to Century a true and
complete copy of Kingsley's capital expenditure budget for 1993,
and each subsequent amendment thereto.
(d) The accounts receivable of Kingsley reflected in
the Interim Balance Sheet or arising since the date thereof (i)
have been accrued and recorded in the ordinary course of business
consistent with past practices and in accordance with GAAP, and
(ii) are current and collectible net of the reserve reflected on
the Interim Balance Sheet or in the accounting records of
Kingsley as of the Effective Date (which reserves are adequate
and calculated consistent with past practice).
2.10 Property; Access Lines. (a) Kingsley is the lawful
owner of, and has good and marketable title to, an 11.19% general
partnership interest in the Partnership, free and clear of any
liens, mortgages, pledges, charges, encumbrances, restrictions,
claims, security interests or other adverse claims of any kind
(collectively, "Liens").
(b) Kingsley validly owns or leases all properties and
assets necessary for the continued conduct of its business in the
ordinary course consistent with past practices and has good,
valid and marketable title to, or valid leasehold interests in,
all its properties and assets reflected in the Interim Balance
Sheet (or which would be reflected if not fully depreciated or
amortized), and all of the assets thereafter acquired by it
through the Effective Date, free and clear of any Liens. The
equipment and other tangible personal property owned or leased by
Kingsley are in good operating condition and repair, conform to
all Applicable Laws or Permits relating to their use and are
suitable for the purposes for which they are used.
(c) Schedule 2.10 hereto contains an accurate and
complete list of all real property owned or leased by Kingsley
and includes the name of the record title holder thereof.
Kingsley has good and marketable title to all real property
specified as owned by it on Schedule 2.10 (or required to be set
forth on such schedule), free and clear of any Liens, except for
Liens set forth thereon. All of the buildings and other
improvements on the real property listed on Schedule 2.10 (or
required to be set forth on such schedule) are in good operating
condition and repair and are suitable for the purposes for which
they are used. None of such buildings or improvements (or any
equipment therein), nor the operation or maintenance thereof,
violates any Applicable Law (including any zoning regulations or
historic preservation laws) or encroaches on any property owned
by others.
(d) Kingsley does not own or control, or have any
right, license or interest in, any patents, trademarks, service
marks, trade names, copyrights or other intellectual property,
nor any applications or registrations therefor, and has not
infringed upon or violated the intellectual property rights of
any other person.
(e) Kingsley provides telephone service to not less
than 2,400 access lines.
2.11 Undisclosed Liabilities. Kingsley does not have any
outstanding indebtedness, claims, obligations, liabilities or
commitments of any nature whatsoever, whether absolute, accrued,
contingent, known, unknown, matured or unmatured, except (i)
liabilities reflected on the Interim Balance Sheet and (ii)
liabilities that have arisen since June 30, 1993 in the ordinary
course of business consistent with past practices that are not
material individually or in the aggregate.
2.12 Books and Records. All of the books and records
(including minutes of board of director and shareholder
proceedings) of Kingsley and all files, data and other materials
relating to the business of Kingsley have been prepared and
maintained in accordance with good business practices and comply
with all Applicable Laws. The accounting records of Kingsley
have been prepared and maintained in accordance with customary
accounting practices consistently applied.
2.13 Material Contracts. (a) Except as set forth on
Schedule 2.13, Kingsley is neither a party to, nor is it or its
assets bound by or subject to, (i) any collective bargaining
agreement or employment agreement, (ii) any powers of attorney,
(iii) any agreement, contract or commitment relating to capital
expenditures, (iv) any loan or advance to, or investment in, any
other person or entity (including the Shareholders or affiliates
of Kingsley) or any agreement relating thereto, (v) any line of
credit (whether drawn upon or not), loan agreement, guarantee or
other form of indebtedness to any other person or entity,
including the Shareholders or affiliates of Kingsley ("Debt
Instruments"), (vi) any oral or written lease or sublease,
whether it is lessor or lessee, (vii) any agreement or commitment
obligating it to sell or otherwise dispose of any substantial
part of its assets to, or to enter into a business combination or
share exchange with, any other person or entity, (viii) any oral
or written agreement, commitment, understanding or other
arrangement to deliver severance payments, bonuses or commissions
to any current or former director, officer, Shareholder,
employee, agent or representative, (ix) any agreement, contract
or commitment not entered into in the ordinary course of business
consistent with past practices that involves a payment or
payments of $25,000 or more and is not cancelable without penalty
within 30 days, or (x) any agreement, contract or commitment,
whether or not entered into in the ordinary course of business,
that might have a material adverse effect on the business,
financial condition, results of operation, cash flow or prospects
of Kingsley.
(b) Each of the agreements, contracts or commitments
listed on Schedule 2.13 ("Material Agreements") is in full force
and effect and enforceable by Kingsley. Kingsley has not, in any
material respect, breached, nor is there any pending or
threatened claim that it has breached, any of the terms or
conditions of any of its Material Agreements or the Partnership
Agreement. None of the Debt Instruments listed on Schedule 2.13
prohibit or restrict Kingsley from prepaying the indebtedness
evidenced thereby, or obligate Kingsley to pay any penalties or
premiums in connection therewith.
(c) Neither Kingsley nor its Shareholders are a party
to any shareholder agreement or similar arrangement restricting
or governing the Shareholders' rights to dispose of their
Kingsley Common Stock.
2.14 Insurance. Schedule 2.14 contains a list of all
policies of insurance owned or held by Kingsley or relating to
its business, properties, directors or employees, specifying the
amount of the coverage, the type of the coverage and any pending
claims thereunder. These policies are valid and in full force
and effect, are sufficient to satisfy all requirements of
Applicable Law and any agreements to which Kingsley is a party,
and provide insurance coverage that is customary and adequate for
corporations of similar size engaged in similar lines of
business.
2.15 Tax Matters. (a) Kingsley has (i) duly and timely
prepared and filed with the appropriate Governmental Bodies all
required Tax Returns (as defined below), which Tax Returns are
true, correct and complete in all material respects and (ii)
timely paid all Taxes (as defined below) or made adequate
provision in the Financial Statements and Interim Financial
Statements for the payment of all Taxes shown to be due on such
Tax Returns. No extension of time within which to either file
any Tax Return or to pay any Tax of Kingsley has been filed or
requested.
(b) There are no Liens for Taxes (other than for
current Taxes not yet due and payable) upon the assets of
Kingsley. No audit, examination or investigation is presently
being conducted by any Governmental Body, no unpaid Tax
deficiencies or additional liabilities have been proposed by any
Governmental Body.
(c) For both accounting and ratemaking purposes,
Kingsley has been using, and will continue to use up to the
Closing Date, (i) a normalization method of accounting as
described in Sections 167(i) (as in effect at the time the
related assets were placed in service) and 168(i) of the Code for
the federal income tax effect of the use of accelerated
depreciation and (ii) a method of accounting for investment
credits that conforms with the requirements of Section 46(f) of
the Code, as in effect at the time the related assets were placed
in service.
(d) Kingsley has neither been a member of an
affiliated group filing a consolidated federal income Tax Return
nor has any liability for the Taxes of any person other than
Kingsley under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local, or foreign law) as a
transferee or successor, by contract, or otherwise.
(e) Kingsley has not made any payments, is not
obligated to make any payments, nor is it a party to any
agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Section 280G
of the Code.
(f) For purposes of this subsection, (i) "Tax Return"
shall mean any return, report, information return or other
document (including any related or supporting information) filed
or required to be filed with any Governmental Body with respect
to Taxes and (ii) "Taxes" shall mean all taxes, charges, fees,
levies, penalties or other assessments imposed by any
Governmental Body, including, without limitation, income, excise,
property, sales, transfer, franchise, payroll, withholding,
social security or other taxes, including any interest or
penalties attributable thereto.
2.16 Employee Benefit Plans. (a) Schedule 2.16 sets forth
a list of all deferred compensation plans, all death, disability,
and retirement plans, all medical reimbursement plans, all
employee welfare benefit plans (within the meaning of Section
3(1) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), all pension plans (within the meaning of
Section 3(2) of ERISA), all severance plans, all bonus plans and
all other employee benefit plans of any kind or character,
whether written or oral, that Kingsley maintains or ever has
maintained or to which it contributes, ever has contributed, or
ever has been required to contribute ("Employee Benefit Plans").
(b) For each Employee Benefit Plan, Kingsley has delivered
to Century correct and complete copies of the plan documents and
summary plan descriptions, all Form 5500 Annual Reports (if any)
filed for plan years after 1987 and all related trust agreements,
insurance contracts and other funding agreements and all reports
permitted by Labor Department Regulation Section 2520.104-23 with
respect to plan years after 1987.
(c) None of the Employee Benefit Plans (i) is a
multiemployer plan as defined in Section 3(37) of ERISA, (ii) is
an employee welfare benefit plan (within the meaning of Section
3(1) of ERISA) or (iii) has been completely or partially
terminated or been the subject of a reportable event (as defined
in Section 4043 of ERISA) as to which notices would be required
to be filed with the Pension Benefit Guaranty Corporation
("PBGC").
(d) Each Employee Benefit Plan complies in form and in
operation in all respects with the applicable requirements of
ERISA, the Code, and other Applicable Laws and all required
reports have been filed or distributed appropriately with respect
thereto.
(e) Each Employee Benefit Plan that is designated on
Schedule 2.16 as being intended to be qualified under Section
401(a) of the Code is so qualified and Kingsley has received,
within the last two years, a favorable determination letter from
the Internal Revenue Service with respect to each such Employee
Benefit Plan, true and complete copies of which have been
furnished to Century.
(f) With respect to each Employee Benefit Plan that is a
pension plan within the meaning of Section 3(2) of ERISA, (i) all
costs of such plans have been provided for on the basis of
consistent methods in accordance with sound actuarial assumptions
and practices, (ii) Schedule 2.16 sets forth for each such plan,
as of the last valuation date, the amount by which such plan's
assets and "benefit liabilities" (within the meaning of Section
4001 of ERISA) computed on a plan termination basis and since
such valuation date for each such plan, there neither been any
amendment or change to any such plan that would increase the
amount of benefits thereunder nor any event or occurrence that
would cause the excess of the assets over the benefit liabilities
to be reduced, (iii) all contributions (including all employer
contributions and employee salary reduction contributions) that
are due have been paid to each such plan and all contributions
for any period ending on or before the Effective Date that are
not yet due have been paid to each such plan or accrued in
accordance with the past practice of Kingsley, (iv) no
accumulated funding deficiency within the meaning of Section 302
of ERISA or Section 412 of the Code, whether or not waived, has
been incurred with respect to any such plan, (v) no prohibited
transactions (as defined in Section 406 of ERISA and Section 4975
of the Code) have occurred and (vi) Kingsley has not incurred and
has no reason to expect that it will incur any liability to the
PBGC or otherwise under Title IV of ERISA or under the Code with
respect to any such plan.
2.17 Environmental Matters. (a) Kingsley possesses all
necessary licenses, permits and other approvals and
authorizations that are required under Applicable Laws relating
to pollution or the protection of the environment ("Applicable
Environmental Laws"), including all such laws governing the use,
storage, transportation, discharge or disposal of all hazardous
substances or wastes, and Kingsley is in compliance with all
Applicable Environmental Laws, including all such laws obligating
Kingsley to keep records and to file reports or notifications
with Governmental Bodies.
(b) Kingsley has not been subject to any
administrative or judicial proceedings pursuant to, nor has
Kingsley received any notice of any violations of, any Applicable
Environmental Laws.
(c) There are no underground storage tanks of any type
(including tanks storing gasoline, diesel fuel, oil or other
petroleum products) or disposal sites for hazardous substances,
hazardous wastes or any other wastes located on or under the real
estate currently owned, leased or used by Kingsley and there were
no such disposal sites located on or under the real estate
previously owned, leased or used by Kingsley on the date of sale
thereof by Kingsley or during the period of lease or use by
Kingsley.
(d) Kingsley has not engaged any person or entity to
handle, transport or dispose of hazardous substances or wastes on
its behalf and Kingsley's disposal of its hazardous substances
and wastes has been in compliance with all Applicable
Environmental Laws.
(e) For purposes of this subsection, "hazardous
substances" and "hazardous wastes" shall have the meanings
generally ascribed to the terms "hazardous substances",
"hazardous wastes", or "hazardous constituents" under the
Applicable Environmental Laws.
2.18 Customers and Suppliers. Neither Kingsley nor any of
its officers, directors, Shareholders or affiliates possess any
direct or indirect financial interest in, or is a director,
officer or employee of, any person or entity who is a supplier,
vendor, agent, representative, consultant, lessor, lessee, lender
or licensor of Kingsley. There exists no actual or threatened
termination or any modification in, the business relationship of
Kingsley with any customer or group of customers whose payments
to Kingsley individually or in the aggregate are material to its
operations, or with any supplier, vendor, agent, representative
or consultant, or group thereof, whose sales or services to
Kingsley individually or in the aggregate are material to its
operations.
2.19 Absence of Certain Changes. Since June 30, 1993, there
has been no event or condition of any character (whether actual,
threatened or contemplated) that has had, or can reasonably be
expected to have, a material adverse effect on the business,
financial condition, results of operation, cash flow or prospects
of Kingsley. Except as specifically disclosed in its Interim
Financial Statements, Kingsley has not, since June 30, 1993: (a)
other than in the ordinary course of business consistent with
past practices, borrowed any money, lent any money, guaranteed or
assumed any obligation, pledged any assets, permitted any of its
assets to be subject to any material Lien, incurred any material
liability, engaged in any material transaction or entered into
any material agreement; (b) sold, assigned or transferred any of
its assets with a value in excess of $50,000 in the aggregate;
(c) suffered any damage, destruction or loss, whether or not
covered by insurance; (d) failed to operate its business in the
ordinary course of business consistent with past practices so as
to preserve its business organization intact or to preserve to
the best of its ability the goodwill of its customers, suppliers
and others with whom it has business relations; (e) declared, set
aside or paid any dividend or declared or made any distribution
on any shares of its capital stock, or redeemed, reclassified,
purchased or otherwise acquired any shares of its capital stock;
(f) increased the rate of wages, salaries or other compensation
or benefits of any its employees, amended any Employee Benefit
Plan, or authorized or paid any bonuses, severance payments or
similar payments to any of its current or former employees; (g)
cancelled any debt owed to it, waived any material right, paid
any of its noncurrent obligations or liabilities or otherwise
paid to any person or entity any amount not required to be paid
thereto; (h) made any capital expenditures in excess of $50,000;
(i) changed any accounting practice followed or employed in
preparing the Financial Statements or Interim Financial
Statements; (j) amended its articles of incorporation or by-laws;
or (k) entered into any agreement, contract or commitment to do
any of the foregoing.
2.20 Information Statement. None of the information
furnished or to be furnished to Century by Kingsley, the
Principal Shareholders, or any affiliate or representative
thereof for use in the Information Statement (as defined Section
4) will contain, at any time between the date of the Information
Statement and the Special Meeting (as defined in Section 4), any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to made
the statements contained therein, in light of the circumstances
under which they were made, not misleading.
2.21 Shareholder Approval. The shareholder votes required
for the approval of this Agreement and the Merger shall be a
majority of the outstanding shares of Kingsley Common Stock.
2.22 Continuity of Investment. The Principal Shareholders
do not have a present plan, intention, or arrangement to dispose
of, or cause the disposition of, any beneficial interest in any
of the shares of Century Stock to be delivered in accordance with
subsection 1.5 in a manner that would cause the Merger to violate
the continuity of shareholder interest requirement set forth in
Treas. Reg. 1.368-1.
2.23 Broker's Fees. No person acting, or claiming to act,
on behalf of Kingsley or the Principal Shareholders is entitled
to a commission, fee or compensation of any type by virtue of the
execution, delivery or performance of this Agreement.
2.24 Full Disclosure. No representation or warranty
contained in this Agreement, nor any schedule, exhibit,
certificate or other statement furnished to Century by or on
behalf of Kingsley or the Principal Shareholders in connection
with the negotiation of the Merger, contains as of the date
hereof any untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein
or herein not misleading.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF CENTURY
Century hereby makes the following representations and
warranties to Kingsley and the Principal Shareholders:
3.1 Existence and Good Standing. Century is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Louisiana, with all requisite corporate
power and authority to own its property and to carry on its
business as it is now being conducted.
3.2 Organization of Sub. Sub is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Michigan. Sub has not engaged in any business
since it was incorporated, except as contemplated by this
Agreement.
3.3 Authorization. Each of Century and Sub has full
corporate power and authority to execute and deliver this
Agreement and all Closing Instruments to be delivered by them
hereunder and, subject to the adoption and filing of articles of
amendment fixing the preferences, limitations and relative rights
of the Century Preferred Stock (the "Articles of Amendment"), to
consummate the transactions contemplated hereby. Each of Century
and Sub has taken all requisite corporate action to execute,
deliver and, subject to the adoption and filing of the Articles
of Amendment, perform this Agreement.
3.4 Enforceable Agreement. This Agreement and each Closing
Instrument to be delivered under subsection 5.3 is, or upon
execution by each party thereto will be, a legal, valid and
binding obligation of each of Century and Sub, enforceable
against each of them in accordance with its terms. Neither the
execution, delivery nor performance of this Agreement or the
Closing Instruments will (a) (i) violate, conflict with, or
result in a breach of any provisions of, (ii) constitute a
default (or an event which, with notice or lapse of time or both,
would constitute a default) under, (iii) result in the
termination of or accelerate the performance required by, or (iv)
result in the creation of any adverse claim against any of their
properties or assets under, any of the provisions of the articles
of incorporation or by-laws of Century or Sub or any note, lease,
license, agreement or other instrument or obligation to which
Century or Sub is a party, or by which any of them or their
assets are bound; (b) violate any Applicable Law of any
Governmental Body to which Century or Sub is subject or by which
either is bound; or (c) require the approval, consent or
authorization of, or the making of the any declaration, filing or
registration with, any Governmental Body or any third party that
transacts business with Century.
3.5 Century Stock. The Century Preferred Stock to be
issued in connection with the Merger, when issued and delivered
in accordance with the terms hereof, will be duly authorized,
validly issued, fully paid and nonassessable. The Century Common
Stock to be issued in connection with the Merger, when issued and
delivered in accordance with the terms hereof, will be (i) duly
authorized, validly issued, fully paid and nonassessable and (ii)
listed for trading on the New York Stock Exchange.
3.6 Registration Statement. The Registration Statement (as
defined in Section 4), at the time the Amendment (as defined in
Section 4) becomes effective, will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements contained therein, in light of the circumstances in
which they are made, not misleading. The representations and
warranties contained in this subsection 3.6 shall not apply to
statements or omissions in the Registration Statement or
Amendment based upon information furnished to Century by
Kingsley, the Principal Shareholders or any representative or
affiliate thereof for use in the Registration Statement or
Amendment.
3.7 Broker's Fees. No person acting, or claiming to act,
on behalf of Century is entitled to a fee, commission or other
compensation of any type, by virtue of the execution delivery or
performance of this Agreement.
SECTION 4. PRE-CLOSING COVENANTS
The parties covenant to take the following actions prior to
the Effective Time:
4.1 Cooperation and Best Efforts. Each party will use its
reasonable best efforts to (i) procure all necessary consents and
approvals, (ii) complete and file all necessary applications,
notifications or filings, (iii) satisfy all requirements
prescribed by law for, and all conditions set forth in this
Agreement to, the consummation of the Merger, and (iv) effect the
Merger at the earliest practicable date.
4.2 Press Releases. Century, the Principal Shareholders
and Kingsley will cooperate with one another in the preparation
of any press releases announcing the execution of this Agreement
or the consummation of the Merger. No party, without the prior
consent of the others, will issue any press release or other
written or oral statement for general circulation relating to the
transactions contemplated hereby, except as otherwise required by
law.
4.3 Amendment to Registration Statement. (a) As promptly
as practicable after the date hereof, Century shall prepare and
file with the Securities and Exchange Commission (the "SEC") a
post-effective amendment (the "Amendment") to its registration
statement on Form S-4 (Registration No. 33-48956) (the
"Registration Statement"). The Amendment shall include the
Information Statement (to be prepared by Kingsley in accordance
with subsection 4.4) any such other information as may be
required under the rules of the SEC. Each of Century, Kingsley
and the Principal Shareholders shall use its reasonable best
efforts to obtain and furnish the information required to be
included in the Amendment.
(b) Century and Kingsley each agrees promptly to
correct or supplement any information provided by it for use in
the Amendment if and to the extent that such information shall
have become false or misleading in any material respect, and
Century further agrees to take all steps necessary to cause such
information to be filed with the SEC and disseminated to the
Shareholders to the extent required by applicable federal
securities laws.
4.4 Approval of Shareholders; Information Statement. (a)
Subject to paragraph (c) below, Kingsley shall take all action
necessary in accordance with the MBCA and its Articles of
Incorporation and By-laws to duly call, give notice of, convene,
and hold a special meeting of the Shareholders (the "Special
Meeting") as promptly as practicable after the date hereof to
consider and vote upon the approval of this Agreement and the
Merger. At the Special Meeting, the Principal Shareholders agree
to vote to approve this Agreement and the Merger. Kingsley and
the Principal Shareholders agree that no proxies will be
solicited from the Shareholders in connection with the Special
Meeting.
(b) As promptly as practicable after the date hereof,
Kingsley shall prepare an information statement with respect to
the Special Meeting (the "Information Statement"), which shall
contain all information with respect to the Merger and Kingsley
as may be required under parts I(A), (C) and (D) of Form S-4
promulgated by the SEC under the Securities Act of 1933, as
amended (the "Securities Act"), and which shall form a part of
the Amendment. Each of Kingsley, the Principal Shareholders and
Century shall use its reasonable best efforts to obtain and
furnish the information required to be included in the
Information Statement.
(c) After the Amendment is declared effective by the
SEC and at least 20 business days prior to the Special Meeting,
Kingsley shall send to the Shareholders the Information Statement
and a copy of the Prospectus dated July 15, 1992 (the
"Prospectus") that forms part of the Registration Statement.
4.5 Rule 145. Prior to the date upon which the Information
Statement and Prospectus is mailed to the Shareholders, Kingsley
shall deliver to Century a letter identifying all persons who
were, at the time of the record date for the Special Meeting,
affiliates of Kingsley for purposes of Rule 145 promulgated under
the Securities Act. Kingsley shall provide Century with such
information and documents as Century shall reasonably request for
purposes of reviewing such letter. Kingsley shall use its
reasonable best efforts to cause each person who is identified in
such letter as an affiliate of Kingsley to deliver to Century on
or prior to the Effective Date a written agreement in the form of
Exhibit D. The Principal Shareholders shall execute and deliver
to Century such a written agreement. Kingsley and the Principal
Shareholders acknowledge that the stock certificates representing
the Century Stock issued hereunder to the Principal Shareholders
and all other affiliates of Kingsley shall include an appropriate
legend summarizing the restrictions under Rule 145.
4.6 Conduct of Business of Kingsley. Kingsley shall
conduct its operations in the ordinary course of business
consistent with past practices and preserve intact its business
organizations, keep available the services of its officers and
employees and maintain good relationships with its customers,
partners, suppliers, distributors, vendors, agents,
representatives, consultants, lenders, lessors and others having
business relationships with it. Without the prior written
consent of Glen F. Post, III, Vice Chairman, President and Chief
Executive Officer of Century, or his duly authorized designee,
neither Kingsley nor the Principal Shareholders shall not commit
or omit to do any act that (i) would cause it to breach of any of
its agreements, commitments or covenants contained in this
Agreement or (ii) would cause any of the representations or
warranties contained in this Agreement to become untrue, as if
each such representation or warranty were continuously made from
and after the date hereof.
4.7 Notification of Changes. Kingsley or the Principal
Shareholders shall promptly notify Century of (i) any event that
could adversely affect the ability of Kingsley or the Principal
Shareholders to perform any of their agreements, commitments or
covenants contained herein, (ii) any event that causes any
representation or warranty of Kingsley or the Principal
Shareholders contained in this Agreement to become untrue, as is
if each such representation and warranty were continuously made
from and after the date hereof, or (iii) any event or condition
that could have a material adverse change in the business,
financial condition, results of operation, cash flow or prospects
of Kingsley.
4.8 Prohibited Negotiations. Prior to the Effective Date,
Kingsley and each Principal Shareholder shall not, and shall
cause each of the officers, directors, employees, affiliates and
agents of Kingsley not to, directly or indirectly, solicit or
encourage inquiries or proposals with respect to, furnish any
information relating to, participate in any negotiations or
discussions concerning, or consummate, any acquisition or
purchase of all or a substantial portion of the assets of, or of
a substantial equity interest in, or any business combination or
share exchange with, Kingsley, other than as contemplated by this
Agreement, and Kingsley shall notify Century immediately if any
such inquiries or proposals are received by, any such information
is requested from, or any such negotiations or discussions are
sought to be initiated with, Kingsley, the Principal Shareholders
or any of the officers, directors, employees, agents or
affiliates of Kingsley.
4.9 Due Diligence Review. Prior to the Effective Date,
Century and its representatives shall be permitted to have full
access to Kingsley's premises, books and records, employees,
officers, directors, auditors and agents to whatever extent
Century deems necessary or advisable to familiarize itself with
the business, financial and legal condition of Kingsley. If this
Agreement shall be terminated prior to the Effective Date,
Century shall return to Kingsley all copies of any schedules,
statements, documents or other written information obtained in
connection with its review of Kingsley.
4.10 Century Preferred Stock. Century shall take all action
necessary to authorize the issuance of the Century Preferred
Stock with the preferences, limitations and relative rights set
forth on Exhibit A, including the adoption and filing of the
Articles of Amendment.
4.11 Litigation. The Principal Shareholders shall (a)
promptly deliver to Century any filings made in connection with
the Appeal, (b) take all other action necessary to keep Century
apprised of any material developments in connection therewith and
(c) vigorously defend their rights under the Trust to execute,
deliver and perform this Agreement.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to All Parties. The obligations of each of
the parties hereto to consummate the Merger are subject to the
satisfaction (or the due waiver by Kingsley and Century) of the
following conditions:
(a) Restraining Action. No action or proceeding shall
have been threatened or instituted before any Governmental Body
to restrain, prohibit or otherwise challenge the transactions
contemplated hereby, and no Governmental Body shall have given
notice to any party hereto to the effect that consummation of the
Merger would constitute a violation of any Applicable Law.
(b) Statutory Requirements and Regulatory Approval.
All statutory requirements for the valid consummation of the
transactions contemplated hereby shall have been fulfilled; all
appropriate orders, consents and approvals from all Governmental
Bodies whose order, consent or approval is required by Applicable
Law for the consummation of the transactions contemplated hereby
("Governmental Approvals") shall have been received; and the
terms of all Governmental Approvals shall then permit the Merger
without imposing any material conditions with respect thereto.
(c) Shareholder Approval. This Agreement and the
Merger shall have been approved by the requisite vote of the
Shareholders as specified in subsection 2.21.
(d) Listing of Century Common Stock. The Century
Common Stock to be issued in connection with the Merger shall
have been approved for listing, upon notice of issuance, by the
New York Stock Exchange.
(e) Effectiveness of Amendment. The Amendment shall
be effective and no stop order suspending its effectiveness shall
have been entered by the SEC, and no proceedings for such purpose
shall have been instituted or threatened.
(f) Tax-Free Reorganization. All conditions required
for treating the Merger for federal tax purposes as a
reorganization within the meaning of Section 368(a) of the Code
shall have been met.
5.2 Additional Conditions to Century's Obligations. The
obligations of Century and Sub to consummate the Merger are also
subject to the satisfaction (or the due waiver by Century) of the
following conditions:
(a) Representations, Warranties and Covenants. The
representations and warranties of Kingsley and the Principal
Shareholders contained in this Agreement shall be true and
correct on the Effective Date and each of Kingsley and the
Principal Shareholders shall have performed all covenants and
agreements required by this Agreement to be performed by them at
or prior to the Effective Date. Century shall have received a
certificate, dated the Effective Date and jointly executed by
Kingsley's President and the Principal Shareholders, to the
effect that there has been no breach of any representation or
warranty or a failure to perform any covenant made by Kingsley or
the Principal Shareholders in this Agreement and that all
conditions set forth in this subsection 5.2 have been fulfilled.
(b) Corporate Action. Kingsley shall have duly taken
all corporate action necessary to approve the transactions
contemplated by this Agreement, and there shall have been
furnished to Century certified copies of resolutions adopted by
Kingsley's Board of Directors and Shareholders, in form and
substance satisfactory to counsel for Century, evidencing such
approvals.
(c) No Material Adverse Change. There shall not have
occurred a material adverse change from the date of the Interim
Financial Statements to the Effective Date in the business,
financial condition, results of operation, cash flow or prospects
of Kingsley.
(d) Dissenting Shares. As of the Effective Date, the
number of Dissenting Shares shall not exceed 30.
(e) Opinion of Counsel to Principal Shareholders. The
Principal Shareholders shall have furnished Century with a
favorable opinion, dated the Effective Date, of Murchie, Calcutt
& Boynton, in form and substance satisfactory to Century and its
counsel, to the effects set forth in Exhibit E hereto.
(f) Opinion of Counsel to Kingsley. Kingsley shall
have furnished Century with a favorable opinion, dated the
Effective Date, of Murchie, Calcutt & Boynton, in form and
substance satisfactory to Century and its counsel, to the effects
set forth in Exhibit F hereto.
(g) Resignations. Century shall have received letters
from each director and officer of Kingsley, pursuant to which
each such person shall (i) resign from all positions held with
Kingsley effective as of or prior to the Effective Date and (ii)
release Kingsley from all claims against it or its assets,
whether arising under contract, tort law or otherwise, and
whether arising out of such person's association with Kingsley as
an officer, director, shareholder, employee or otherwise.
(h) Consents and Approvals. Kingsley shall have
received consents, in form and substance reasonably satisfactory
to Century, to the transactions contemplated hereby from all
parties to all contracts, leases, notes and other agreements or
instruments to which Kingsley is a party or by which it is
affected and which require such consent prior to the Effective
Time or are necessary to prevent a material adverse change in the
business, financial condition, results of operation, cash flow or
prospects of Kingsley. In addition, no Governmental Approval
obtained in connection herewith shall impose any material
conditions with respect to the operations of Kingsley.
(i) Kingsley Minute Books and Miscellaneous Documents.
Century shall have received all minute books and stock record
books relating to Kingsley, and copies of any good standing
certificates, instruments and other documents that Century may
reasonably request.
5.3 Additional Condition to Kingsley's and the Principal
Shareholders' Obligations. Kingsley's and the Principal
Shareholders' obligations to consummate the Merger are also
subject to the satisfaction (or the due waiver by Kingsley and
the Principal Shareholders) of the following conditions:
(a) Representations, Warranties and Covenants. The
representations and warranties of Century contained in this
Agreement shall be true and correct in all material respects on
the Effective Date and Century shall have performed in all
material respects all covenants required by this Agreement to be
performed by it at or prior to the Effective Date. Century shall
have delivered to the Principal Shareholders on the Effective
Date a certificate, dated the Effective Date, signed on behalf of
Century by its President or any Senior Vice President, to the
effect that there has been no breach of any representation or
warranty or a failure to perform any covenant made by Century or
Sub in this Agreement and that all conditions set forth in this
subsection 5.3 have been fulfilled.
(b) Corporate Action. Century and Sub shall also have
taken all corporate action necessary to approve the transactions
contemplated by this Agreement (including the issuance of the
Century Stock), and there shall have been furnished to the
Principal Shareholders certified copies of resolutions adopted by
the Board of Directors of each of Century and Sub, and by
Century, in its capacity as the sole shareholder of Sub, in form
and substance satisfactory to counsel for the Principal
Shareholders evidencing such approvals.
SECTION 6. POST CLOSING COVENANTS
The parties covenant to take the following actions after the
Effective Time:
6.1 Dispositions of Century Stock. (a) Until the second
anniversary of the Effective Date, the Principal Shareholders
shall not sell, transfer, donate or otherwise dispose of any
beneficial interest in (i) any of the shares of Century Preferred
Stock issued pursuant to subsection 1.5(b) hereunder, including
shares of Century Common Stock that may be issued upon conversion
of such Century Preferred Stock, and (ii) more than such number
of shares of Century Common Stock as may be required so that the
value as of the Effective Date of such shares plus the value as
of the Effective Date of the shares of Century Preferred Stock
issued to the Principal Shareholders hereunder equals 50.1% of
the aggregate value as of the Effective Date of all consideration
received by all Shareholders pursuant to subsection 1.5(b). The
Principal Shareholders acknowledge that Century will be entitled
to assume that the value of each share of Century Common Stock is
the Average Price and to make all such other reasonable
determinations to ensure that the Merger is treated for federal
tax purposes as a reorganization within the meaning of Section
368(a) of the Code, including applying the standards set forth in
Rev. Rul. 77-37, 1977-2 C.B. 568 and Rev. Rul. 86-42, 1986-2 C.B.
722.
(b) The stock certificates representing the Century
Preferred Stock issued to the Principal Shareholders (including
any stock certificates representing shares of Century Common
Stock that may be issued upon conversion of such Century
Preferred Stock within two years of the Effective Date) and the
stock certificates representing the number of shares of Century
Common Stock issued to the Principal Shareholders as referenced
in paragraph (a)(ii) above shall have endorsed thereon
appropriate legends summarizing the restrictions set forth in
paragraph (a) (in addition to the legends referred to in
subsection 4.5).
6.2 Further Assurances. The parties hereto agree (i) to
furnish upon request to each other such further information, (ii)
to execute and deliver to each other such other documents and
(iii) to do such other acts and things, all as the other party
hereto may at any time reasonably request for the purpose of
carrying out the intent of this Agreement and the Closing
Instruments.
6.3 Notification of Regulatory Authorities. Promptly after
the Effective Time, the parties shall cooperate in completing any
necessary or appropriate notifications of Governmental Bodies
regarding consummation of the Merger.
6.4 Releases. Each Principal Shareholder hereby
irrevocably and perpetually discharges Kingsley from all claims
against it or its assets, whether arising under contract, tort
law, or otherwise, and whether arising out of his or its
association with Kingsley as a shareholder, officer, director or
employee, or otherwise.
SECTION 7. INDEMNIFICATION
7.1 Indemnification Rights.Except as otherwise provide in
subsection 7.2, the Principal Shareholders jointly and severally
shall defend and indemnify and hold harmless Century and each of
Century's officers, directors, employees, agents, affiliates,
successors and assigns (collectively, "Century's Indemnified
Persons"), and shall reimburse Century's Indemnified Persons,
for, from and against each and every demand, claim, action, loss
(which shall include any diminution in value of Kingsley or any
of its assets), liability, judgment, damage, cost and expense
(including, without limitation, interest, penalties, costs of
preparation and investigation, and the reasonable fees,
disbursements and expenses of attorneys, accountants and other
professional advisors) imposed on or incurred by Century's
Indemnified Persons, directly or indirectly, relating to,
resulting from or arising out of (a) any inaccuracy of any nature
in any representation or warranty made by Kingsley or the
Principal Shareholders in this Agreement (including all schedules
and exhibits hereto), any Closing Instrument or any other
document delivered to Century pursuant to this Agreement, whether
or not Century's Indemnified Persons relied thereon or had
knowledge thereof, or (b) any breach or nonperformance of any
covenant, agreement or other obligation of Kingsley or the
Principal Shareholders under this Agreement.
7.2 Limitations; Certain Expenses. (a) The Principal
Shareholders shall have no liability with respect to any
indemnity claim pursuant to this Section 7 in excess of the value
of the Trust's assets as of the date of such claim.
(b) If any beneficiary of the Trust is awarded monetary
damages or injunctive relief enjoining or rescinding the Merger
in connection with the Appeal or any other proceeding challenging
the Principal Shareholders' power under the Trust to execute,
deliver or perform this Agreement, all expenses, including
accounting, investment banking and advisory expenses and
attorneys' fees, incurred in connection with this Agreement and
the transactions contemplated hereby (collectively, the
"Expenses") shall be borne by the party incurring them, and each
party shall hold harmless each other party and each other party's
respective officers, directors, employees, agents, affiliates,
successors and assigns with respect to any damages suffered in
such action or in connection therewith.
SECTION 8. TERMINATION AND ABANDONMENT
8.1 Termination. This Agreement may, by notice given at or
prior to the Effective Time, be terminated:
(a) Mutual Consent. By the mutual written consent of
Kingsley, the Principal Shareholders and Century.
(b) Material Breach by Century. By Kingsley and the
Principal Shareholders if there has been a material breach by
Century or Sub of any of its representations, warranties or
covenants contained in this Agreement, which is not or cannot be
cured within 15 days after written notice of such breach is given
to Century, provided that the right to effect such cure shall not
extend beyond the date set forth in subparagraph (e) below.
(c) Material Breach by Kingsley or the Principal
Shareholders. By Century if there has been a material breach by
Kingsley or the Principal Shareholders of any of their
representations, warranties or covenants contained in this
Agreement, which is not or cannot be cured within 15 days after
written notice of such breach is given to Kingsley, provided that
the right to effect such cure shall not extend beyond the date
set forth in subparagraph (e) below.
(d) Material Adverse Change in Kingsley's Business.
By Century if there shall have been a material adverse change in
the business, financial condition, results of operation, cash
flow or prospects of Kingsley.
(e) Abandonment. By Century or Kingsley and the
Principal Shareholders if (i) any condition to consummating the
Merger specified in Section 5 has not been met or waived by the
appropriate party by December 31, 1993, (ii) any such condition
cannot be met by such date and has not been waived or (iii) the
Merger has not occurred by such date.
8.2 Effect of Termination; Survival. Upon termination of
this Agreement pursuant to this Section 8, this Agreement shall
be void and there shall be no liability by reason of this
Agreement, or the termination thereof, on the part of any party
or their respective directors, officers, employees, agents,
affiliates or shareholders except for any liability of a party
hereto arising out of a material breach of its representations
and warranties contained herein or arising out of a breach of any
covenant in this Agreement prior to the date of termination or
any covenant that survives pursuant to the following sentence.
The following provisions shall survive any termination of this
Agreement: Section 7; subsection 8.2; and Section 9.
SECTION 9. MISCELLANEOUS
9.1 Notices. All notices, requests, claims, demands or
other communications hereunder shall be in writing and shall be
given by hand delivery, by overnight mail delivery service, or by
telex or telecopier to the respective addresses as set forth
opposite each party's name on the signature page hereof or such
substituted addresses as any party may, from time to time,
designate in a written notice given in like manner. Notices
shall be deemed given upon receipt by the addressee.
9.2 Knowledge. Whenever any statement in this Agreement is
qualified by the phrase "to the best knowledge," or a phrase of
similar import, such phrase means the knowledge of or receipt of
notice (oral or written) by, with respect to an individual, such
individual and, with respect to a corporation, any executive
officer of such corporation, regarding such facts or other
information that have been obtained or could reasonably be
expected to have been obtained as a result of undertaking an
investigation of such a scope and extent as a reasonable prudent
person would undertake concerning the particular subject matter.
9.3 Waiver. The failure by any party to enforce any of its
rights hereunder shall not be deemed to be a waiver of such
rights, unless such waiver is an express written waiver signed by
the waiving party. Waiver of any one breach shall not be deemed
to be a waiver of any other breach of the same or any other
provision hereof.
9.4 Expenses. Except as otherwise provided in subsection
7.2(b), all Expenses shall be borne by the party incurring them,
provided, however, that Kingsley may bear up to $50,000 of
attorneys' fees incurred by the Principal Shareholders in
connection with the transactions contemplated by this Agreement.
9.5 Integrated Agreement. This Agreement and the exhibits
and schedules hereto constitute the entire understanding and
agreement among the parties hereto with respect to the subject
matter hereof, and there are no agreements, understandings or
restrictions, among the parties other than those set forth herein
or therein or herein or therein provided for, all prior
agreements and understandings being superseded hereby.
9.6 Choice of Law. The validity of this Agreement, the
construction of its terms and the determination of the rights and
duties of the parties hereto hereunder shall be governed by and
construed in accordance with the laws of the State of Louisiana.
9.7 Parties in Interest. This Agreement shall bind and
inure to the benefit of the parties hereto and their respective
successors, executors, administrators, personal representatives
and heirs, and no party hereto may assign its rights or
obligations hereunder without the prior written consent of the
other parties hereto, except for any assignments by Century to
any of its affiliates. Nothing in this Agreement is intended or
shall be construed to confer upon or to give any person other
than the parties hereto any rights or remedies under or by reason
of this Agreement, except as expressly provided for herein.
9.8 Amendment. This Agreement may be amended only by an
agreement in writing signed by each party hereto.
9.9 Remedies. The rights and remedies of the parties to
this Agreement are cumulative, and are not exclusive of any other
remedies provided herein or by law.
9.10 Survival. Except for the representations and
warranties contained in subsections 2.2, 2.3, 2.4, 2.15 and 2.16,
which shall have no expiration date, the representations and
warranties made by the parties in this Agreement, the Closing
Instruments or any other documents delivered hereunder shall
survive until the third anniversary of the Effective Date and
shall remain in full force and effect notwithstanding any review
or investigation made by any party, including any review or
investigation of Kingsley by Century or its representatives
contemplated by subsection 4.9.
9.11 Headings. The headings in this Agreement have been
included solely for reference and shall not be considered in the
interpretation or construction of this Agreement.
9.12 Gender. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular
or plural as the identity of the person or persons may require.
9.13 Counterparts. This Agreement may be executed by the
parties in one or more counterparts, all of which shall be deemed
an original, but all of which taken together shall constitute one
and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the day and year first above written.
Century's address is: CENTURY TELEPHONE ENTERPRISES, INC.
100 Century Park Drive
Monroe, Louisiana 71203
By: /s/ Glen F. Post, III
Glen F. Post, III
Vice Chairman, President and
Chief Executive Officer
Sub's address is: KTC ACQUISITION CORPORATION
100 Century Park Drive
Monroe, Louisiana 71203
By: /s/ Glen F. Post, III
Glen F. Post, III
Chief Executive Officer
Kingsley's address is: KINGSLEY TELEPHONE COMPANY
110 W. Main Street
Kingsley, Michigan 49649
By: /s/ Jack C. Boynton
Name: Jack C. Boynton
Title: Secretary
Northwestern's address is: NORTHWESTERN SAVINGS BANK & TRUST, as
Trustee under the Sterling M. Nickerson
Trust
P.O. Box 809
Traverse City, Michigan 49685
By: /s/ David A. Eckenrode
Name: David A. Eckenrode
Title: Vice President and
Trust Officer
Mr. Calcutt's address is:
109 E. Front Street, Suite 300
Traverse City, Michigan 49684 /s/ Harry Calcutt
Harry Calcutt, as Trustee under the
Sterling M. Nickerson Trust
Signature page to Merger Agreement dated September 13, 1993
among Century Telephone Enterprises, Inc.,
KTC Acquisition Corporation,
Kingsley Telephone Company and the Principal Shareholders thereof
<PAGE>
JOINDER
The undersigned, in their individual capacities as well as
in their capacities as sole trustees of the Trust, hereby agree
to be bound by the provisions of Section 6.4.
NORTHWESTERN SAVINGS BANK & TRUST
By: /s/ David A. Eckenrode
Name: David A. Eckenrode
Title: Vice President and
Trust Officer
/s/ Harry Calcutt
Harry Calcutt
Joinder to Merger Agreement dated
September 13, 1993 among
Century Telephone Enterprises, Inc.,
KTC Acquisition Corporation,
Kingsley Telephone Company and the Principal Shareholders thereof
Exhibit A to
Merger Agreement
PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS
of
CENTURY PREFERRED STOCK
The Corporation's 5% Cumulative Convertible Series K
Preferred Stock ("Series K Shares") shall consist of 75,000
shares of Preferred Stock having the preferences, limitations and
relative rights set forth below.
(1) Voting Rights. Holders of the Series K Shares shall be
entitled to cast one vote per share, voting with holders of
shares of Common Stock and with holders of other series of voting
preferred stock as a single class on any matter to come before a
meeting of the shareholders, except with respect to the casting
of ballots on those matters as to which holders of Preferred
Stock or a particular series thereof are required by law to vote
separately.
(2) Rank. The Series K Shares shall, with respect to
dividend rights and rights upon liquidation, dissolution and
winding up, rank prior to the Common Stock and pari passu with
respect to the Series A Shares and Series H Shares. All equity
securities of the Corporation to which the Series K Shares rank
prior, whether with respect to dividends or upon liquidation,
dissolution or winding-up or otherwise, including the Common
Stock, are collectively referred to herein as the "Junior
Securities"; all equity securities of the Corporation with which
the Series K Shares rank pari passu, including the Series A
Shares and Series H Shares, are collectively referred to herein
as the "Parity Securities"; and all other equity securities of
the Corporation (other than convertible debt securities) to which
the Series K Shares ranks junior are collectively referred to
herein as the "Senior Securities." The preferences, limitations
and relative rights of the Series K Shares shall be subject to
the preferences, limitations and relative rights of the Junior
Securities, Parity Securities and Senior Securities issued after
the Series K Shares are issued.
(3) Dividends. (a) The holders of record of the Series K
Shares shall be entitled to receive, when, as and if declared by
the Board of Directors out of funds of the Corporation legally
available therefor, an annual cash dividend of $1.25 on each
Series K Share, payable quarterly on each March 31, June 30,
September 30 and December 31 on which any Series K Shares shall
be outstanding (each a "Dividend Due Date"), commencing on
[September] 30, 1993. Dividends on each Series K Share shall
accrue and be cumulative from and after the date of issuance of
such Series K Share and dividends payable for any partial
quarterly period shall be calculated on the basis of a year of
360 days consisting of twelve 30-day months. Dividends shall be
payable to the holders of record as they appear on the
Corporation's stock transfer books at the close of business on
the record date for such payment, which the Board of Directors
shall fix not more than 60 days or less than 10 days preceding a
Dividend Due Date. Holders of the Series K Shares shall not be
entitled to any dividends, whether paid in cash, property or
stock, in excess of the cumulative dividends as provided in this
paragraph (a) and shall not be entitled to any interest thereon.
(b) Unless all cumulative dividends accrued on the
Series K Shares have been or contemporaneously are declared and
paid or declared and a sum set apart sufficient for such payment
through the most recent Dividend Payment Date, then (i) except as
provided below, no dividend or other distribution shall be
declared or paid or set apart for payment on any Parity
Securities, (ii) no dividend or other distribution shall be
declared or paid or set aside for payment upon the Junior
Securities (other than a dividend or distribution paid in shares
of, or warrants, rights or options exercisable for or convertible
into, Junior Securities) and (iii) no Junior Securities shall be
redeemed, purchased or otherwise acquired for any consideration,
nor shall any monies be paid to or made available for a sinking
fund for the redemption of any Junior Securities, except by
conversion of Junior Securities into, or by exchange of Junior
Securities for, other Junior Securities. If any accrued
dividends are not paid or set apart with respect to the Series K
Shares and any Parity Securities, all dividends declared with
respect to the Series K Shares and any Parity Securities shall be
declared pro rata on a share-by-share basis among all Series K
Shares and Parity Securities outstanding at the time.
(4) Conversion. (a) Subject to the rights of the
Corporation specified in paragraph (b) below, each Series K Share
shall be convertible, at any time, at the option of the holder
thereof into that number of fully paid and nonassessable shares
of the Common Stock obtained by dividing $25.00 by the Conversion
Price then in effect under the terms of this subsection (4).
Unless and until changed in accordance with the terms of this
subsection (4), the Conversion Price shall initially be $25.33.
In order for a holder of the Series K Shares to effect such
conversion, the holder shall deliver to Society Shareholder
Services, Inc., Dallas Texas, or such other agent as may be
designated by the Board of Directors as the transfer agent for
the Series K Shares (the "Transfer Agent"), the certificates
representing such shares in accordance with paragraph (c) below
accompanied by written notice to the Corporation that the holder
thereof elects to convert such shares or a specified portion
thereof. Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which
the certificates representing the Series K Shares being converted
shall have been delivered to the Transfer Agent in accordance
with paragraph (c) below, accompanied by the written notice to
the Corporation of such conversion (the "Optional Conversion
Date"), and the person or persons in whose names any certificate
or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder or
holders of record of the Common Stock represented thereby at such
time. The conversion shall be effected at the Conversion Price
in effect on the Optional Conversion Date. As of the close of
business on the Optional Conversion Date, the Series K Shares
shall be deemed to cease to be outstanding and all rights of any
holder thereof shall be extinguished except for the right to
receive the Common Stock in exchange therefor and the right to
receive accrued and unpaid dividends on such Series K Shares
through the Optional Conversion Date.
(b) At any time after July 1, 1997, the Corporation,
at its option, shall be entitled to require the conversion, in
whole but not in part, of each outstanding Series K Share into
that number of fully paid and nonassessable shares of Common
Stock obtained by dividing $25.00 by the Conversion Price then in
effect. In order to effect such conversion, the Corporation
shall mail notice to each record holder of the Series K Shares at
least 30 but not more than 60 days prior to the date fixed for
such conversion (the "Mandatory Conversion Date" and together
with the Optional Conversion Date, the "Conversion Date"). Each
notice shall specify the Mandatory Conversion Date and the
Conversion Price then in effect. Any notice mailed in such
manner shall be conclusively deemed to have been duly given
regardless of whether such notice is in fact received. In order
to facilitate the conversion of the Series K Shares, the Board of
Directors may fix a record date for the determination of the
holders of the Series K Shares, which shall not be more than 60
days prior to the Mandatory Conversion Date. As of the close of
business on the Mandatory Conversion Date, the Series K Shares
shall be deemed to cease to be outstanding and all rights of any
holder thereof shall be extinguished except for the right to
receive the Common Stock in exchange therefore and the right to
receive accrued and unpaid dividends on such Series K Shares
through the Mandatory Conversion Date.
(c) Upon conversion, the holder of Series K Shares
shall surrender to the Transfer Agent the certificates
representing such shares, accompanied by transfer instruments
satisfactory to the Corporation and sufficient to transfer the
Series K Shares being converted to the Corporation free of any
adverse interest. As promptly as practicable after the surrender
of the Series K Shares, the Corporation shall issue and deliver
to such holder certificates for the number of whole shares of
Common Stock issuable upon the conversion of such shares in
accordance with the provisions hereof and any fractional interest
in respect of a share of Common Stock arising upon such
conversion shall be settled as provided for in paragraph (e)
below. Certificates will be issued for the balance of any
remaining Series K Shares in any case in which fewer than all of
the Series K Shares are converted.
(d) If the Conversion Date with respect to any Series
K Share occurs after any record date with respect to the payment
of a dividend on the Series K Shares (the "Dividend Record Date")
and on or prior to the Dividend Due Date, then (i) the dividend
due on such Dividend Due Date shall be payable to the holder of
record of such share as of the Dividend Record Date and (ii) the
dividend that accrues from the close of business on the Dividend
Record Date through the Conversion Date shall be payable to the
holder of record of such share as of the Conversion Date. Except
as provided in this subsection (4), no payment or adjustment
shall be made upon any conversion on account of any dividends
accrued on Series K Shares surrendered for conversion or on
account of any dividends on the Common Stock issued upon
conversion.
(e) No fractional interest in a share of Common Stock
shall be issued by the Corporation upon the conversion of any
Series K Share. Any fractional interest in a share of Common
Stock resulting from conversion of any Series K Share shall be
paid in cash (computed to the nearest cent) based on the last
reported sale price on the New York Stock Exchange ("NYSE") (or,
if the Common Stock is not then traded on the NYSE, then the last
reported sale price on such other national securities exchange on
which the Common Stock is listed or admitted to trading or, if
not then listed or admitted to trading on any national securities
exchange, then the last quoted bid price in the over-the-counter
market as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ"), or any
similar system of automated dissemination of securities prices)
on the last Trading Day (as defined below) prior to the
Conversion Date. As used in this subsection (4), the term
"Trading Day" means (i) if the Common Stock is listed or admitted
for trading on any national securities exchange, days on which
such national securities exchange is open for business; or (ii)
if the Common Stock is not so listed or admitted for trading but
is quoted by NASDAQ or any similar system of automated
dissemination of quotations of securities prices, days on which
trades may be made on such system.
(f) The Conversion Price shall be adjusted from time
to time as follows:
(i) If the Corporation shall pay or make a
dividend or other distribution on any class of capital stock of
the Company in the form of Common Stock, then the Conversion
Price in effect at the opening of business on the day following
the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution shall be reduced by
multiplying such Conversion Price by a fraction the numerator of
which shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination
and the denominator of which shall be the aggregate number of
shares of Common Stock that would be outstanding if such dividend
or other distribution were effected as of such date, such
reduction to become effective immediately after the opening of
business on the day following the date fixed for such
determination. For the purposes of this subparagraph (i), the
number of shares of Common Stock at any time outstanding shall
not include shares held in the treasury of the Corporation.
(ii) If the Corporation shall issue rights,
warrants or other securities convertible into Common Stock to all
holders of its Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than
the current market price per share (determined as provided in
subparagraph (vi) below) of the Common Stock on the date fixed
for the determination of shareholders entitled to receive such
rights, warrants or convertible securities, then the Conversion
Price in effect at the opening of business on the day following
the date fixed for such determination shall be reduced by
multiplying such Conversion Price by a fraction the numerator of
which shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination
plus the number of shares of Common Stock that the aggregate of
the offering price of the total number of shares of Common Stock
so offered for subscription or purchase would purchase at such
current market price and the denominator of which shall be the
number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the number
of shares of Common Stock so offered for subscription or
purchase, such reduction to become effective immediately after
the opening of business on the day following the date fixed for
such determination. For the purposes of this subparagraph (ii),
the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Corporation.
(iii)If the outstanding shares of Common Stock
shall be subdivided into a greater number of shares of Common
Stock, then the Conversion Price in effect at the opening of
business on the day following the day upon which such subdivision
becomes effective shall be reduced proportionately in a manner
substantially similar to that provided in subparagraph (i) above,
and, conversely, if the outstanding shares of Common Stock shall
each be combined into a smaller number of shares of Common Stock,
then the Conversion Price in effect at the opening of business on
the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately
after the opening of business on the day following the day upon
which such subdivision or combination becomes effective.
(iv) If the Corporation shall, by dividend or
otherwise, distribute to all holders of its Common Stock
evidences of its indebtedness or cash or other assets (excluding
any rights, warrants or convertible securities referred to in
subparagraph (ii) above, any dividend payable solely in cash from
the earnings of the Corporation and any dividend or distribution
referred to in subparagraph (i) above), then in each case the
Conversion Price shall be adjusted so that the Conversion Price
shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the close of business on the
record date for the determination of holders of Common Stock
entitled to receive such distribution by a fraction the numerator
of which shall be the current market price per share (determined
as provided in subparagraph (vi) below) of the Common Stock on
such record date less the then fair market value (determined
solely by the Board of Directors and described in a statement
filed with the Transfer Agent) of the portion of the cash or
other assets or evidences of indebtedness so distributed (and for
which an adjustment to the Conversion Price has not previously
been made pursuant to the terms of this paragraph (f)) applicable
to one share of Common Stock and the denominator shall be such
current market price per share of the Common Stock, such
adjustment to become effective immediately prior to the opening
of business on the day following such record date.
(v) The reclassification of Common Stock into
securities including securities other than Common Stock (other
than any reclassification upon a consolidation, merger or
statutory share exchange to which subparagraph (ix) below
applies) shall be deemed to involve (A) a distribution of such
securities other than Common Stock to all holders of Common Stock
and the effective date of such reclassification shall be deemed
to be "the date fixed for the determination of shareholders
entitled to receive such distribution" and "the date fixed for
such determination" within the meaning of subparagraph (ii)
above, and (B) a subdivision or combination, as the case may be,
of the number of shares of Common Stock outstanding immediately
prior to such reclassification into the number of shares of
Common Stock outstanding immediately thereafter and the effective
date of such reclassification shall be deemed to be "the day upon
which such subdivision becomes effective" or "the day upon which
such combination becomes effective," as the case may be, and "the
day upon which such subdivision or combination becomes effective"
within the meaning of paragraph (iii) above.
(vi) For the purpose of any computation under
subparagraphs (ii) and (iv) above, the current market price per
share of Common Stock on any day shall be deemed to be the
average of the last reported sale price for the 20 consecutive
Trading Days selected by the Board of Directors commencing no
more than 30 Trading Days before and ending no later than the day
before the day in question on the NYSE (or, if the Common Stock
is not then traded on the NYSE, then the last reported sale price
on such other national securities exchange on which the Common
Stock is listed or admitted to trading or, if not then listed or
admitted to trading on any national securities exchange then the
last quoted bid price in the over-the-counter market as reported
by NASDAQ or any similar system of automated dissemination of
securities prices).
(vii)No adjustment in the Conversion Price shall
be required unless such adjustment would require an increase or
decrease of at least 1% of such price; provided, however, that
any adjustments which by reason of this subparagraph (vii) are
not required to be made shall be carried forward and taken into
account in any subsequent adjustment and provided, further, that
any adjustment shall be required and made in accordance with the
provisions of this paragraph (f) (other than this subparagraph
(vii)) not later than such time as may be required in order to
preserve the tax-free nature of a distribution to the holders of
shares of Common Stock. Anything in this subparagraph (vii) to
the contrary notwithstanding, the Corporation shall be entitled
to make such reductions in the Conversion Price, in addition to
those required by this paragraph (f), as it in its discretion
shall determine to be advisable in order that any stock dividend,
subdivision or combination of shares, distribution of capital
stock or rights or warrants to purchase stock or securities, or
distribution of evidences of indebtedness or assets (other than
cash dividends or distributions paid from retained earnings)
hereafter made by the Corporation to its shareholders be a tax-
free distribution for federal income tax purposes. All
calculations shall be made to the nearest cent.
(viii)Whenever the Conversion Price is adjusted as
herein provided, the Corporation shall promptly deliver to the
Transfer Agent an officer's certificate setting forth the
Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment, which
certificate shall constitute conclusive evidence, absent manifest
error, of the correctness of such adjustment. Promptly after
delivery of such certificate, the Corporation shall prepare and
mail a notice to each holder of Series K Shares at each such
holder's last address as the same appears on the books of the
Corporation, which notice shall set forth the Conversion Price
and a brief statement of the facts requiring the adjustment.
(ix) If the Corporation shall be a party to any
transaction, including, without limitation, a merger,
consolidation or share exchange but excluding a reincorporation
merger and any transaction as to which subparagraphs (i) through
(v) apply, in each case as a result of which shares of Common
Stock shall be converted into the right to receive securities,
cash or other property (or any combination thereof) (each of the
foregoing being referred to herein as a "Transaction"), then each
holder of Series K Shares outstanding shall have the right
thereafter to convert such shares only into the kind and amount
of securities, cash and other property receivable upon such
Transaction by a holder of the number of shares of Common Stock
into which such Series K Shares might have been converted
immediately prior to such Transaction, assuming such holder of
Common Stock (A) is not an entity with which the Corporation
consolidated, into which the Corporation merged, that merged into
the Corporation, that engaged in a share exchange, or to which
such sale or transfer was made, as the case may be (a
"constituent entity"), or an affiliate of a constituent entity
and (B) failed to exercise his rights of election, if any, as to
the kind or amount of securities, cash or other property
receivable upon such Transaction (provided that if the kind or
amount of securities, cash and other property receivable upon
such Transaction is not the same for each share of Common Stock
held immediately prior to such Transaction by holders other than
a constituent entity or an affiliate thereof and in respect of
which such rights of election shall not have been exercised
("non-electing share"), then for the purpose of this subparagraph
(ix) the kind and amount of securities, cash and other property
receivable upon such Transaction by each non-electing share shall
be deemed to be the kind and amount so receivable per share by
all or a plurality of the non-electing shares). If necessary,
appropriate adjustment shall be made in the application of the
provisions set forth herein with respect to the rights and
interests thereafter of the holders of Series K Shares so that
the provisions set forth herein shall thereafter correspondingly
be made applicable, as nearly as may reasonably be, in relation
to any shares of stock or other securities or property thereafter
deliverable on the conversion of the shares. Any such adjustment
shall be evidenced by a certificate of independent public
accountants and a notice of such adjustment filed and mailed in
the manner set forth in subparagraph (viii) above, and each
containing the information set forth in such subparagraph (viii);
and any adjustment so certified shall for all purposes hereof
conclusively be deemed to be an appropriate adjustment. The
above provisions shall similarly apply to successive
Transactions.
(x) For purposes of this paragraph (f), "Common
Stock" includes any stock of any class of the Corporation that
has no preference in respect of dividends or of amounts payable
in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation and that is not
subject to redemption by the Corporation. However, subject to
the provisions of subparagraph (ix) above, shares issuable on
conversion of Series K Shares shall include only shares of the
class designated as Common Stock of the Corporation on the date
of the initial issuance of Series K Shares by the Corporation, or
shares of any class or classes resulting from any
reclassification thereof that have no preference in respect of
dividends or amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation and that are not subject to redemption by the
Corporation; provided that if at any time there shall be more
than one such resulting class, the shares of each such class then
so issuable shall be substantially in the proportion that the
total number of shares of such class resulting from all such
reclassifications bears to the total number of shares of all such
classes resulting from all such reclassifications.
(g) If the Corporation (i) takes any action that would
result in an adjustment to the Conversion Price, (ii) becomes a
party to any consolidation, merger or share exchange for which
approval of any shareholders of the Corporation is required, or a
party to any sale or transfer of all or substantially all of the
assets of the Corporation, or (iii) voluntarily or involuntarily
dissolves, liquidates, or winds up, then the Corporation shall
cause to be filed with the Transfer Agent, and shall cause to be
mailed to all holders of Series K Shares at each such holder's
last address as the same appears on the books of the Corporation,
at least 15 days prior to the applicable record or effective date
hereinafter specified, a notice stating (A) the record date
established for the purpose of such actions, or, if no record
date has been established, the date as of which the holders of
Common Stock of record are to be determined, or (B) the date on
which such consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders
of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities, cash or other property
deliverable thereupon. Neither the failure to give such notice
nor any defect therein shall affect the legality or validity of
the proceedings described in clauses (i) through (iii) of this
paragraph (g).
(h) The Corporation shall pay any and all documentary
stamp or similar issue or transfer taxes payable in respect of
the issue or delivery of shares of Common Stock on conversions of
Series K Shares pursuant hereto; provided, however, that the
Corporation shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issue or
delivery of shares of Common Stock in a name other than that of
the record holder of the Series K Shares to be converted and no
such issue or delivery shall be made unless and until the person
requesting such issue or delivery has paid to the Corporation the
amount of any such tax or has established, to the satisfaction of
the Corporation, that such tax has been paid.
(i) The Corporation covenants that (A) all shares of
Common Stock that may be issued upon conversions of Series K
Shares will upon issue be duly and validly issued, fully paid and
nonassessable, free of all liens and charges and not subject to
any preemptive rights, and (B) it will at all times reserve and
keep available, free from preemptive rights out of the aggregate
of its authorized but unissued shares of Common Stock or its
issued shares of Common stock held in its treasury, or both, for
the purpose of effecting conversions of Series K Shares, the
whole number of shares of Common Stock deliverable upon the
conversion of all outstanding Series K Shares not theretofore
converted.
(5) Liquidation Preference. (a) Upon any voluntary or
involuntary dissolution, liquidation, or winding up of the
Corporation (for the purposes of this subsection (5), a
"Liquidation"), the holder of each Series K Share then
outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its shareholders, an
amount equal to $25.00 per share plus all dividends (whether or
not declared or due) accrued and unpaid on such share on the date
fixed for the distribution of assets of the Corporation to the
holders of Series K Shares. With respect to the distribution of
the Corporation's assets upon a Liquidation, the Series K Shares
shall rank prior to Junior Securities, pari passu with the Parity
Securities and junior to the Senior Securities.
(b) If upon any Liquidation of the Corporation, the
assets available for distribution to the holders of Series K
Shares and any Parity Securities then outstanding shall be
insufficient to pay in full the liquidation distributions to the
holders of outstanding Series K Shares and Parity Securities in
accordance with the terms of these Articles of Incorporation,
then the holders of such shares shall share ratably in such
distribution of assets in accordance with the amount that would
be payable on such distribution if the amounts to which the
holders of the Series K Shares and Parity Securities are entitled
were paid in full.
(c) Neither the voluntary sale, conveyance, lease,
pledge, exchange or transfer of all or substantially all the
property or assets of the Corporation, the merger or
consolidation of the Corporation into or with any other
corporation, the merger of any other corporation into the
Corporation, a share exchange with any other corporation, nor any
purchase or redemption of some or all of the shares of any class
or series of stock of the Corporation, shall be deemed to be a
Liquidation of the Corporation for the purposes of this
subsection (5) (unless in connection therewith the Liquidation of
the Corporation is specifically approved).
(d) The holder of any Series K Shares shall not be
entitled to receive any payment owed for such shares under this
subsection (5) until such holder shall cause to be delivered to
the Corporation the certificate representing such Series K Shares
and transfer instrument satisfactory to the Corporation and
sufficient to transfer such Series K Shares to the Corporation
free of any adverse interest. No interest shall accrue on any
payment upon Liquidation after the due date thereof.
(e) After payment of the full amount of the
liquidating distribution to which they are entitled, the holders
of Series K Shares will not be entitled to any further
participation in any distribution of assets by the Corporation.
(6) Preemptive Rights. The Series K Shares is not entitled
to any preemptive or subscription rights in respect of any
securities of the Corporation.
<PAGE>
EXHIBITS B, C, D, E AND F AND ALL SCHEDULES
TO THIS MERGER AGREEMENT HAVE BEEN
INTENTIONALLY OMITTED
<PAGE>
AMENDMENT NO. 1
to
MERGER AGREEMENT
Dated as of October 27, 1993
By and Among
Century Telephone Enterprises, Inc.,
KTC Acquisition Corporation,
Kingsley Telephone Company
and
The Principal Shareholders of Kingsley Telephone Company
AMENDMENT NO. 1
to
MERGER AGREEMENT
AMENDMENT NO. 1 TO MERGER AGREEMENT (the "Amendment"), dated
as of October 27, 1993, by and among Century Telephone
Enterprises, Inc., a Louisiana corporation ("Century"), KTC
Acquisition Corporation, a Michigan corporation and wholly-owned
subsidiary of Century ("Sub"), Kingsley Telephone Company, a
Michigan corporation ("Kingsley"), and Harry Calcutt and
Northwestern Savings Bank & Trust (formerly Northwestern Savings
& Loan), a banking association organized under the laws of
Michigan ("Northwestern"), both appearing herein in their
capacities as the sole trustees of the Sterling M. Nickerson
Trust created pursuant to Article IV of the Last Will and
Testament of Sterling M. Nickerson (the "Trust"). Mr. Calcutt
and Northwestern are collectively referred to herein as the
"Principal Shareholders."
WHEREAS, Century, Sub, Kingsley and the Principal
Shareholders have entered into a Merger Agreement dated as of
September 13, 1993 (the "Merger Agreement"); and
WHEREAS, Century, Sub, Kingsley and the Principal
Shareholders desire to amend the terms and conditions of the
Merger Agreement in accordance with Section 9.8 thereof;
NOW, THEREFORE, in consideration of the covenants and
agreements contained herein, the parties agree as follows:
1. Paragraph (b) of Section 5.1 of the Merger Agreement is
hereby amended to read in its entirety as follows:
(b) Statutory Requirements and
Regulatory Approval. (i) All statutory
requirements for the valid consummation of
the transactions contemplated hereby shall
have been fulfilled; (ii) the parties shall
have received (A) a final order from the PSC
approving all aspects of the Merger,
including, without limitation, the conversion
of all of the issued and outstanding shares
of capital stock of Sub into 100 fully paid
and non-assessable shares of common stock of
the Surviving Corporation in accordance with
Section 1.5(c), and (B) all other appropriate
orders, consents and approvals from all
Governmental Bodies whose order, consent or
approval is required by Applicable Law for
the consummation of the transactions
contemplated hereby (together with the
approval of the PSC, the "Governmental
Approvals"); and (iii) the terms of all
Governmental Approvals shall then permit the
Merger without imposing any material
conditions with respect thereto.
2. Paragraph (e) of Section 8.1 of the Merger Agreement is
hereby amended to read in its entirety as follows:
(e) Abandonment. By Century or
Kingsley and the Principal Shareholders if
(i) any condition to consummating the Merger
specified in Section 5 has not been met or
waived by the appropriate party by April 30,
1994, (ii) any such condition cannot be met
by such date and has not been waived or (iii)
the Merger has not occurred by such date.
3. Except as specifically amended by this Amendment, the
Merger Agreement shall remain in full force and effect.
4. All capitalized terms used herein but not defined
herein shall have the meanings ascribed to them in the Merger
Agreement.
5. The validity of this Amendment, the construction of its
terms and the determination of the rights and duties of the
parties hereto hereunder shall be governed by and construed in
accordance with the laws of the State of Louisiana.
6. This Amendment may be executed by the parties in one or
more counterparts, all of which shall be deemed an original, but
all of which taken together shall constitute one and the same
instrument.
<PAGE>
*******
IN WITNESS WHEREOF, the parties hereto have duly executed
this Amendment as of the day and year first above written.
Century's address is: CENTURY TELEPHONE ENTERPRISES, INC.
100 Century Park Drive
Monroe, Louisiana 71203
By: /s/ Glen F. Post, III
Glen F. Post, III
Vice Chairman, President and
Chief Executive Officer
Sub's address is: KTC ACQUISITION CORPORATION
100 Century Park Drive
Monroe, Louisiana 71203
By: /s/ Glen F. Post, III
Glen F. Post, III
Chief Executive Officer
Kingsley's address is: KINGSLEY TELEPHONE COMPANY
110 W. Main Street
Kingsley, Michigan 49649 By: /s/ Harry Calcutt
Harry Calcutt
President
Northwestern's address is: NORTHWESTERN SAVINGS BANK & TRUST, as
Trustee under the Sterling M. Nickerson
Trust
P.O. Box 809
Traverse City, Michigan 49685 By: /s/ David A. Eckenrode
David A. Eckenrode
Vice President and Trust
Officer
Mr. Calcutt's address is:
109 E. Front Street, Suite 300
Traverse City, Michigan 49684 /s/ Harry Calcutt
Harry Calcutt, as Trustee under the
Sterling M. Nickerson Trust
Signature page to Amendment No. 1 to Merger Agreement dated
October 27, 1993
among Century Telephone Enterprises, Inc.,
KTC Acquisition Corporation,
Kingsley Telephone Company and the Principal Shareholders thereof
JOINDER
The undersigned, in their individual capacities as well as
in their capacities as sole trustees of the Trust, hereby
acknowledge the execution of this Amendment and hereby reaffirm
their agreement to be bound by the provisions of Section 6.4 of
the Merger Agreement.
NORTHWESTERN SAVINGS BANK & TRUST
By: /s/ David A. Eckenrode
David A. Eckenrode
Vice President and Trust
Officer
/s/ Harry Calcutt
Harry Calcutt
Joinder to Amendment No. 1 to Merger Agreement dated
October 27, 1993 among
Century Telephone Enterprises, Inc.,
KTC Acquisition Corporation,
Kingsley Telephone Company and the Principal Shareholders thereof
<PAGE>
APPENDIX II
SECTIONS 761 THROUGH 774 OF THE
MICHIGAN BUSINESS CORPORATION ACT
Section 761 DEFINITIONS. As used in section 762 to 774:
(a) "Beneficial shareholder" means the person who is a
beneficial owner of shares held by a nominee as the record
shareholder.
(b) "Corporation" means the issuer of the shares held by a
dissenter before the corporate action, or the surviving
corporation by merger of that issuer.
(c) "Dissenter" means a shareholder who is entitled to
dissent from corporate action under section 762 and who exercises
that right when and in the manner required by sections 764
through 772.
(d) "Fair value", with respect to a dissenter's shares,
means the value of the shares immediately before the effectuation
of the corporate action to which the dissenter objects, excluding
any appreciation or depreciation in anticipation of the corporate
action unless exclusion would be inequitable.
(e) "Interest" means interest from the effective date of
the corporate action until the date of payment, at the average
rate currently paid by the corporation on its principal bank
loans or, if none, at a rate that is fair and equitable under all
the circumstances.
(f) "Record shareholder" means the person in whose name
shares are registered in the records of a corporation or the
beneficial owner of shares to the extent of the rights granted by
a nominee certificate on file with a corporation.
(g) "Shareholder" means the record or beneficial
shareholder.
Section 762 DISSENTERS' RIGHTS. (1) A shareholder is
entitled to dissent from, and obtain payment of the fair value of
his or her shares in the event of, any of the following corporate
actions:
(a) Consummation of a plan of merger to which the
corporation is a party if shareholder approval is required for
the merger by section 703a or the articles of incorporation and
the shareholder is entitled to vote on the merger, or the
corporation is a subsidiary that is merged with its parent under
section 711.
(b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan.
(c) Consummation of a sale or exchange of all, or
substantially all, of the property of the corporation other than
in the usual and regular course of business, if the shareholder
is entitled to vote on the sale or exchange, including a sale in
dissolution but not including a sale pursuant to court order.
(d) An amendment of the articles giving rise to a right to
dissent pursuant to section 621.
(e) A transaction giving rise to a right to dissent
pursuant to section 754.
(f) Any corporate action taken pursuant to a shareholder
vote to the extent the articles, bylaws, or a resolution of the
board provides that voting or nonvoting shareholders are entitled
to dissent and obtain payment for their shares.
(g) The approval of a control share acquisition giving rise
to a right to dissent pursuant to section 799.
(2) Unless otherwise provided in the articles, bylaws, or a
resolution of the board, a shareholder may not dissent from any
of the following:
(a) Any corporate action set forth in subsection (2)(a) to
(e) as to shares which are listed on a national securities
exchange or held of record by not less than 2,000 persons on the
record date fixed to determine the shareholders entitled to
receive notice of and to vote at the meeting of shareholders at
which the corporate action is to be acted upon.
(b) A transaction described in subsection (1)(a) in which
shareholders receive cash or shares that satisfy the requirements
of subdivision (a) or any combination thereof.
(c) A transaction described in subsection (1)(b) in which
shareholders receive cash or shares that satisfy the requirements
of subdivision (a) or any combination thereof.
(d) A transaction described in subsection (1)(c) which is
conducted pursuant to a plan of dissolution providing for
distribution of substantially all of the corporation's net assets
to shareholders in accordance with their respective interests
within 1 year after the date of the transaction, where the
transaction is for cash or shares that satisfy the requirements
of subdivision (a) or any combination thereof.
(3) A shareholder entitled to dissent and obtain payment
for his or her shares pursuant to subsection (1)(a) to (e) may
not challenge the corporate action creating his or her
entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(4) A shareholder who exercises his or her right to dissent
and seek payment for his or her shares pursuant to subsection
(1)(f) may not challenge the corporate action creating his or her
entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
Section 763 ASSERTION OF RIGHTS AS TO FEWER THAN ALL
SHARES; BY BENEFICIAL OWNER; CONDITIONS. (1) A record
shareholder may assert dissenters' rights as to fewer than all
the shares registered in his or her name only if he or she
dissents with respect to all shares beneficially owned by any 1
person and notifies the corporation in writing of the name and
address of each person on whose behalf he or she asserts
dissenters' rights. The rights of a partial dissenter under this
subsection are determined as if the shares as to which he or she
dissents and his or her other shares were registered in the names
of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights
as to shares held on his or her behalf only if all of the
following apply:
(a) He or she submits to the corporation the record
shareholder's written consent to the dissent not later than the
time the beneficial shareholder asserts dissenters' rights.
(b) He or she does so with respect to all shares of which
he or she is the beneficial shareholder or over which he or she
has power to direct the vote.
Section 764 NOTICE TO SHAREHOLDERS -- CONTENTS. (1) If
proposed corporate action creating dissenters' rights under
section 762 is submitted to a vote at a shareholders' meeting,
the meeting notice must state that shareholders are or may be
entitled to assert dissenters' rights under this act and shall be
accompanied by a copy of sections 761 to 774.
(2) If corporate action creating dissenters' rights under
section 762 is taken without a vote of shareholders, the
corporation shall notify in writing all shareholders entitled to
assert dissenters' rights that the action was taken and send them
the dissenters' notice described in section 766. A shareholder
who consents to the corporate action is not entitled to assert
dissenters' rights.
Section 765 WRITTEN NOTICE OF INTENT TO DEMAND PAYMENT;
REQUIREMENTS. (1) If proposed corporate action creating
dissenters' rights under section 762 is submitted to a vote at a
shareholders' meeting, a shareholder who wishes to assert
dissenters' rights must deliver to the corporation before the
vote is taken written notice of his or her intent to demand
payment for his or her shares if the proposed action is
effectuated and must not vote his or her shares in favor of the
proposed action.
(2) A shareholder who does not satisfy the requirements of
subsection (1) is not entitled to payment for his or her shares
under this act.
Section 766 NOTICE TO DISSENTING SHAREHOLDERS; OFFER TO PAY
FOR SHARES; CONSENTS. (1) If proposed corporate action creating
dissenters' rights under section 762 is authorized at a
shareholders' meeting, the corporation shall deliver a written
dissenters' notice to all shareholders who satisfied the
requirements of section 765.
(2) The dissenters' notice must be sent no later than 10
days after the corporate action was taken, and must provide all
of the following:
(a) State where the payment demand must be sent and where
and when certificates for shares represented by certificates must
be deposited.
(b) Inform holders of shares without certificates to what
extent transfer of the shares will be restricted after the
payment demand is received.
(c) Supply a form for the payment demand that includes the
date of the first announcement to news media or to shareholders
of the terms of the proposed corporate action and requires that
the person asserting dissenters' rights certify whether he or she
acquired beneficial ownership of the shares before the date.
(d) Set a date by which the corporation must receive the
payment demand, which date may not be fewer than 30 nor more than
60 days after the date the subsection (1) notice is delivered.
Section 767 DEMAND FOR PAYMENT; DEPOSIT OF SHARES;
RETENTION OF OTHER RIGHTS. (1) A shareholder sent a dissenter's
notice described in section 766 must demand payment, certify
whether he or she acquired beneficial ownership of the shares
before the date required to be set forth in the dissenters'
notice pursuant to section 766(2)(c), and deposit his or her
certificates in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits his or
her share certificates under subsection (1) retains all other
rights of a shareholder until these rights are canceled or
modified by the taking of the proposed corporate action.
(3) A shareholder who does not demand payment or deposit
his or her share certificates where required, each by the date
set in the dissenters' notice, is not entitled to payment for his
or her shares under this act.
Section 768 RESTRICTIONS ON TRANSFER OF UNCERTIFICATED
SHARES; RETENTION OF ALL OTHER RIGHTS. (1) The corporation may
restrict the transfer of shares without certificates from the
date the demand for their payment is received until the proposed
corporate action is taken or the restrictions released under
section 770.
(2) The person for whom dissenters' rights are asserted as
to shares without certificates retains all other rights of a
shareholder until these rights are canceled or modified by the
taking of the proposed corporation action.
Section 768a APPOINTMENT OF REFEREE; REFEREE'S POWERS.
(Repealed by Act 121, L. '89, eff. 10-1-89.)
Section 769 PAYMENT OF FAIR VALUE AND INTEREST -- WHEN;
ACCOMPANYING DOCUMENTS. (1) Except as provided in section 771,
within 7 days after the proposed corporate action is taken or a
payment demand is received, whichever occurs later, the
corporation shall pay each dissenter who complied with section
767 the amount the corporation estimates to be the fair value of
his or her shares, plus accrued interest.
(2) The payment must be accompanied by all of the
following:
(a) The corporation's balance sheet as of the end of a
fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of
changes in shareholders' equity for that year, and if available
the latest interim financial statements.
(b) A statement of the corporation's estimate of the fair
value of the shares.
(c) An explanation of how the interest was calculated.
(d) A statement of the dissenter's right to demand payment
under section 772.
Section 770 FAILURE OF CORPORATION TO TAKE ACTION DISSENTED
FROM; RETURN OF DEPOSITED CERTIFICATES; RELEASE OF RESTRICTIONS
ON UNCERTIFICATED SHARES; EFFECT OF NEW ACTION. (1) If the
corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on
shares without certificates.
(2) If after returning deposited certificates and releasing
transfer restrictions, the corporation takes the proposed action,
it must send a new dissenters' notice under section 766 and
repeat the payment demand procedure.
Section 771 WITHHOLDING PAYMENT; CONDITIONS; REQUIREMENTS
IF PAYMENT WITHHELD. (1) A corporation may elect to withhold
payment required by section 769 from a dissenter unless he or she
was the beneficial owner of the shares before the date set forth
in the dissenter's notice pursuant to section 766(2)(c).
(2) To the extent the corporation elects to withhold
payment under subsection (1), after taking the proposed corporate
action, it shall estimate the fair value of the shares, plus
accrued interest, and shall offer to pay this amount to each
dissenter who shall agree to accept it in full satisfaction of
his or her demand. The corporation shall send with its offer a
statement of its estimate of the fair value of the shares, an
explanation of how the interest was calculated, and a statement
of the dissenter's right to demand payment under section 772.
Section 772 CIRCUMSTANCES UNDER WHICH DISSENTER MAY
ESTIMATE FAIR VALUE; WAIVER. (1) A dissenter may notify the
corporation in writing of his or her own estimate of the fair
value of his or her shares and amount of interest due, and demand
payment of his or her estimate, less any payment under section
769, or reject the corporation's offer under section 771 and
demand payment of the fair value of his or her shares and
interest due, if any 1 of the following applies:
(a) The dissenter believes that the amount paid under
section 769 or offered under section 771 is less than the fair
value of his or her shares or that the interest due is
incorrectly calculated.
(b) The corporation fails to make payment under section 769
within 60 days after the date set for demanding payment.
(c) The corporation, having failed to take the proposed
action, does not return the deposited certificates or release the
transfer restrictions imposed on shares without certificates
within 60 days after the date set for demanding payment.
(2) A dissenter waives his or her right to demand payment
under this section unless he or she notifies the corporation of
his or her demand in writing under subsection (1) within 30 days
after the corporation made or offered payment for his or her
shares.
Section 773 COURT DETERMINATION OF FAIR VALUE; SERVICE OF
PROCESS; JURISDICTION; MEASURE OF JUDGMENT. (1) If a demand for
payment under section 772 remains unsettled, the corporation
shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value
of the shares and accrued interest. If the corporation does not
commence the proceeding within the 60-day period, it shall pay
each dissenter whose demand remains unsettled the amount
demanded.
(2) The corporation shall commence the proceeding in the
circuit court of the county in which the corporation's principal
place of business or registered office is located. If the
corporation is a foreign corporation without a registered office
or principal place of business in this state, it shall commence
the proceeding in the county in this state where the principal
place of business or registered office of the domestic
corporation whose shares are to be valued was located.
(3) The corporation shall make all dissenters, whether or
not residents of this state, whose demands remain unsettled
parties to the proceeding as in an action against their shares
and all parties shall be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(4) The jurisdiction of the court in which the proceeding
is commenced under subsection (2) is plenary and exclusive. The
court may appoint 1 or more persons as appraisers to receive
evidence and recommend decision on the question of fair value.
The appraisers have the powers described in the order appointing
them, or in any amendment to it. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding is
entitled to judgment for the amount, if any, by which the court
finds the fair value of his or her shares, plus interest, exceeds
the amount paid by the corporation or for the fair value, plus
accrued interest, of his or her after-acquired shares for which
the corporation elected to withhold payment under section 771.
Section 773a APPOINTMENT OF REFEREE; POWERS; COMPENSATION;
REPORT; OBJECTIONS TO REPORT. (1) In a proceeding brought
pursuant to section 773, the court may, pursuant to the agreement
of the parties, appoint a referee selected by the parties and
subject to the approval of the court. The referee may conduct
proceedings within the state, or outside the state by stipulation
of the parties with the referee's consent, and pursuant to the
Michigan court rules. The referee shall have powers that
include, but are not limited to, the following:
(a) To hear all pretrial motions and submit proposed orders
to the court. In ruling on the pretrial motion and proposed
orders, the court shall consider only those documents, pleadings,
and arguments that were presented to the referee.
(b) To require the production of evidence, including the
production of all books, papers, documents, and writings
applicable to the proceeding, and to permit entry upon designated
land or other property in the possession or control of the
corporation.
(c) To rule upon the admissibility of evidence pursuant to
the Michigan rules of evidence.
(d) To place witnesses under oath and to examine witnesses.
(e) To provide for the taking of testimony by deposition.
(f) To regulate the course of the proceeding.
(g) To issue subpoenas, when a written request is made by
any of the parties, requiring the attendance and testimony of any
witness and the production of evidence including books, records,
correspondence, and documents in the possession of the witness or
under his or her control, at a hearing before the referee or at a
deposition convened pursuant to subdivision (e). In case of a
refusal to comply with a subpoena, the party on whose behalf the
subpoena was issued may file a petition in the court for an order
requiring compliance.
(2) The amount and manner of payment of the referee's
compensation shall be determined by agreement between the referee
and the parties, subject to the court's allocation of
compensation between the parties at the end of the proceeding
pursuant to equitable principles, notwithstanding section 774.
(3) The referee shall do all of the following:
(a) Make a record and reporter's transcript of the
proceeding.
(b) Prepare a report, including proposed findings of fact
and conclusions of law, and a recommended judgment.
(c) File the report with the court, together with all
original exhibits and the reporter's transcript of the
proceeding.
(4) Unless the court provides for a longer period, not more
than 45 days after being served with notice of the filing of the
report described in subsection (3), any party may serve written
objections to the report upon the other party. Application to
the court for action upon the report and objections to the report
shall be made by motion upon notice. The court, after hearing,
may adopt the report, may receive further evidence, may modify
the report, or may recommit the report to the referee with
instructions. Upon adoption of the report, judgment shall be
entered in the same manner as if the action had been tried by the
court and shall be subject to review in the same manner as any
other judgment of the court.
Section 774 COURT TO DETERMINE FEES AND COSTS; BY WHOM
PAYABLE. (1) The court in an appraisal proceeding commenced
under section 773 shall determine all costs of the proceeding,
including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against
the corporation, except that the court may assess costs against
all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds the dissenters acted
arbitrarily, vexatiously, or not in good faith in demanding
payment under section 772.
(2) The court may also assess the fees and expenses of
counsel and experts for the respective parties, in amounts the
court finds equitable in the following manner:
(a) Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not
substantially comply with the requirements of sections 764
through 772.
(b) Against either the corporation or a dissenter, in favor
of any other party, if the court finds that the party against
whom the fees and expenses are assessed acted arbitrarily,
vexatiously, or not in good faith with respect to the rights
provided by this act.
(3) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters
similarly situated, and that the fees for those services should
not be assessed against the corporation, the court may award to
those counsel reasonable fees paid out of the amounts awarded the
dissenters who were benefited.
<PAGE>II-1
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 83 of the Louisiana Business Corporation Law
provides in part that a corporation may indemnify any director,
officer, employee or agent of the corporation against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection
with any action, suit or proceeding to which he is or was a party
or is threatened to be made a party (including any action by or
in the right of the corporation) if such action arises out of his
acts on behalf of the corporation and he acted in good faith not
opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful.
The indemnification provisions of the Louisiana Business
Corporation Law are not exclusive; however, no corporation may
indemnify any person for willful or intentional misconduct. A
corporation has the power to obtain and maintain insurance or to
create a form of self-insurance on behalf of any person who is or
was acting for the corporation, regardless of whether the
corporation has the legal authority to indemnify the insured
person against such liability.
Article II, Section 9 of Century's bylaws (the "Indem-
nification Bylaw") provides for mandatory indemnification for
current and former directors and officers of Century to the full
extent permitted by Louisiana law.
Century's Articles of Incorporation authorize it to enter
into contracts with directors and officers providing for
indemnification to the full extent permitted by law. Century has
entered into indemnification contracts providing contracting
directors or officers the procedural and substantive rights to
indemnification currently set forth in the Indemnification Bylaw
("Indemnification Contracts"). The right to indemnification
provided by each Indemnification Contract applies to all covered
claims, whether such claims arose before or after the effective
date of the contract.
Century maintains an insurance policy covering the liability
of its directors and officers for actions taken in their
corporate capacities. The Indemnification Contracts provide
that, to the extent insurance is reasonably available, Century
will maintain comparable insurance coverage for each contracting
party as long as he or she serves as an officer or director and
thereafter for so long as he or she is subject to possible
personal liability for actions taken in such capacities. The
Indemnification Contracts also provide that if Century does not
maintain comparable insurance, it will hold harmless and
indemnify a contracting party to the full extent of the coverage
that would otherwise have been provided for thereunder.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of Century pursuant to the foregoing
provisions, or otherwise, Century has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
Exhibit No.
2 Merger Agreement dated as of September 13, 1993, as
amended, by and among Century, KTC Acquisition
Corporation, Kingsley Telephone Company ("Kingsley")
and the Principal Shareholders of Kingsley (included in
Appendix I to the Information Statement and Prospectus
forming a part of this Registration Statement).
A list of the exhibits and schedules to this agreement
is included in the table of contents to the agreement.
Certain of these exhibits and schedules have been
omitted pursuant to Regulation S-K, Item 601. Century
hereby agrees to furnish copies of these exhibits and
schedules to the Commission upon request. Exhibit D to
this agreement has been included in Appendix IV to the
Information Statement and Prospectus forming a part of
this Registration Statement.
4.1 Amended and Restated Articles of Incorporation of
Century dated December 15, 1988 (incorporated by
reference to Exhibit 3.1 of Century's Report on
Form 10-K dated December 31, 1988), as amended by the
Articles of Amendment dated May 2, 1989 (incorporated
by reference to Exhibit 4.1 of Century's Current Report
on Form 8-K dated May 5, 1989), by the Articles of
Amendment dated May 17, 1990 (incorporated by reference
to Exhibit 4.1 of Century's Post-Effective Amendment
No. 2 on Form S-8 dated December 21, 1990, Registration
No. 33-17114), and by the Articles of Amendment dated
May 30, 1991 (incorporated by reference to Exhibit 3.1
of Century's Current Report on Form 8-K dated June 12,
1991).
4.2 Bylaws of Century as of May 25, 1993 (incorporated by
reference to Exhibit 3.1 of Century's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1993).
4.3 Amended and Restated Rights Agreement dated as of
November 17, 1986 between Century and MTrust Corp,
National Association, as Rights Agent (incorporated by
reference to Exhibit 4.1 to Century's Current Report on
Form 8-K dated December 20, 1988), the Amendment
thereto dated March 26, 1990 (incorporated by reference
to Exhibit 4.1 to Century's Quarterly Report on Form
10-Q for the quarter ended March 31, 1990) and the
Second Amendment thereto dated February 23, 1993
(incorporated by reference to Exhibit 4.12 to Century's
Annual Report on Form 10-K for the year ended December
31, 1992).
4.4 Indenture, dated February 1, 1992, between Century and
First American Bank and Trust of Louisiana
(incorporated by reference to Exhibit 4.23 to Century's
Annual Report on Form 10-K for the year ended December
31, 1991).
Certain instruments with respect to Century's long-term
debt have been omitted pursuant to Regulation S-K, Item
601. Century hereby agrees to furnish copies of such
instruments to the Commission upon request.
5 Opinion of Jones, Walker, Waechter, Poitevent, Carrere
& Denegre.*
12 Statement Regarding the Computation of Ratio of
Earnings to Combined Fixed Charges and Preferred Stock
Dividends.*
23.1 Consent of KPMG Peat Marwick.*
23.2 Consent of McCartney and McIntyre, P.C.*
23.3 Consent of Jones, Walker, Waechter, Poitevent, Carrere
& Denegre.*
23.4 Consent of Coopers & Lybrand.*
24 Power of Attorney.*
______________________________
____________________
*Previously filed.
(b) Financial Statement Schedules
Century's Financial Statement Schedules included in
Century's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992 are incorporated herein by
reference.
Item 22 Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of this regis-
tration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggre-
gate, represent a fundamental change in the information
set forth in this registration statement;
(iii)To include any material information with
respect to the plan of distribution not previously
disclosed in this registration statement or any
material change to such information in this
registration statement;
Provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) immediately preceding do not apply if the
registration statement is on Form S-3 or Form S-8, and
if the information required to be included in a post-
effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in this
registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 that is incorporated by reference in this registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) The undersigned registrant hereby undertakes that prior
to any public reoffering of the securities registered hereunder
through use of a prospectus that is a part of this registration
statement, by any person or party that is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other items of
the applicable form.
(d) The registrant undertakes that any prospectus (i) that
is filed pursuant to paragraph (c) immediately preceding, or (ii)
that purports to meet the requirements of Section 10(a)(iii) of
the Securities Act of 1933 and is used in connection with an
offering of securities subject to Rule 415, will be filed as part
of an amendment to the registration statement and will not be
used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bonafide offering thereof.
(e) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer,
or controlling person of the registrant in the successful defense
of any action, suit, or proceeding) is asserted by such director,
officer, or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by
the final adjudication of such issue.
(f) The undersigned registrant hereby undertakes to respond
to requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this
Form S-4 within one business day of receipt of such request, and
to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in
documents filed subsequent to the effective date of this
registration statement through the date of responding to the
request.
(g) The undersigned registrant hereby undertakes to supply
by means of a post-effective amendment all information concerning
a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration
statement when it became effective, except where the transaction
in which the securities being offered pursuant to this
registration statement would itself qualify for an exemption from
Section 5 of the Securities Act of 1933, absence the existence of
other similar (prior or subsequent) transactions.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant has duly caused this Post Effective Amendment No.
3 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Monroe,
State of Louisiana, on February 25, 1994.
CENTURY TELEPHONE ENTERPRISES, INC.
By: /s/ Harvey P. Perry
Harvey P. Perry
Senior Vice President, Secretary
and General Counsel
Pursuant to the requirements of the Securities Act of 1933,
this Post Effective Amendment No. 3 to the Registration Statement
has been signed by the following persons in the capacities and on
the dates indicated.
Signature Title Date
* Chairman of the Board February 25, 1994
Clarke M. Williams of Directors
* President, Chief February 25, 1994
Glen F. Post, III Executive Officer and
Vice Chairman of the
Board of Directors
* Senior Vice President and February 25, 1994
R. Stewart Ewing, Jr. Chief Financial Officer
(Principal Financial Officer)
* Controller February 25, 1994
Murray H. Greer (Principal Accounting Officer)
/s/ W. Bruce Hanks President-Telecommunications February 25, 1994
W. Bruce Hanks Services and Director
/s/ Harvey P. Perry Senior Vice President, February 25, 1994
Harvey P. Perry Secretary, General Counsel
and Director
* President-Telephone Group February 25, 1994
Jim D. Reppond and Director
/s/ William R. Boles, Jr. Director February 25, 1994
William R. Boles, Jr.
* Director February 25, 1994
Ernest Butler, Jr.
* Director February 25, 1994
Calvin Czeschin
* Director February 25, 1994
James B. Gardner
* Director February 25, 1994
R. L. Hargrove, Jr.
* Director February 25, 1994
Johnny Hebert
* Director February 25, 1994
F. Earl Hogan
* Director February 25, 1994
Tom S. Lovett
* Director February 25, 1994
C. G. Melville
*By: /s/ Harvey P. Perry February 25, 1994
Harvey P. Perry
Attorney-in-Fact
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Exhibit
2 Merger Agreement dated as of September 13, 1993 by and
among Century, KTC Acquisition Corp., Kingsley Telephone
Company ("Kingsley") and the Principal Shareholders of
Kingsley (included in Appendix I to the Information
Statement and Prospectus forming a part of this
Registration Statement).
A list of the exhibits and schedules to this agreement
is included in the table of contents to the agreement.
Certain of these exhibits and schedules have been
omitted pursuant to Regulation S-K, Item 601. Century
hereby agrees to furnish copies of these exhibits and
schedules to the Commission upon request. Exhibit D to
this agreement has been included in Appendix IV to the
Information Statement and Prospectus forming a part of
this Registration Statement.
4.1 Amended and Restated Articles of Incorporation of
Century dated December 15, 1988 (incorporated by
reference to Exhibit 3.1 of Century's Report on Form 10-
K dated December 31, 1988), as amended by the Articles
of Amendment dated May 2, 1989 (incorporated by
reference to Exhibit 4.1 of Century's Current Report on
Form 8-K dated May 5, 1989), by the Articles of
Amendment dated May 17, 1990 (incorporated by reference
to Exhibit 4.1 of Century's Post-Effective Amendment
No. 2 on Form S-8 dated December 21, 1990, Registration
No. 33-17114), and by the Articles of Amendment dated
May 30, 1991 (incorporated by reference to Exhibit 3.1
of Century's Current Report on Form 8-K dated June 12,
1991).
4.2 Bylaws of Century as of May 25, 1993 (incorporated by
reference to Exhibit 3.1 of Century's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1993).
4.3 Amended and Restated Rights Agreement dated as of
November 17, 1986 between Century and MTrust Corp,
National Association, as Rights Agent (incorporated by
reference to Exhibit 4.1 to Century's Current Report on
Form 8-K dated December 20, 1988), the Amendment thereto
dated March 26, 1990 (incorporated by reference to
Exhibit 4.1 to Century's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1990), and the Second
Amendment thereto dated February 23, 1993 (incorporated
by reference to Exhibit 4.12 to Century's Annual Report
on Form 10-K for the year ended December 31, 1992).
4.4 Indenture, dated February 1, 1992, between Century and
First American Bank and Trust of Louisiana (incorporated
by reference to Exhibit 4.23 to Century's Annual Report
on Form 10-K for the year ended December 31, 1991).
Certain instruments with respect to Century's long-term
debt have been omitted pursuant to Regulation S-K, Item
601. Century hereby agrees to furnish copies of such
instruments to the Commission upon request.
5 Opinion of Jones, Walker, Waechter, Poitevent,
Carrere & Denegre.*
12 Statement Regarding the Computation of Ratio of Earnings
to Combined Fixed Charges and Preferred Stock
Dividends.*
23.1 Consent of KPMG Peat Marwick.*
23.2 Consent of McCartney and McIntyre, P.C.*
23.3 Consent of Jones, Walker, Waechter, Poitevent, Carrere &
Denegre.*
23.4 Consent of Coopers & Lybrand.*
24 Power of Attorney.*
____________________
*Previously filed.
