AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 6, 1994
REGISTRATION NO. 33-50791
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
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>
<S> <C> <C>
LOUISIANA 4813 72-0651161
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</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>
<S> <C> <C>
COPY TO: HARVEY P. PERRY, ESQ. COPY TO:
KENNETH J. NAJDER, ESQ. SENIOR VICE PRESIDENT, GENERAL COUNSEL AND WILLIAM S. CLARKE, ESQ.
JONES, WALKER, WAECHTER, SECRETARY WILLIAM CLARKE, P.A.
POITEVENT, CARRERE & DENEGRE CENTURY TELEPHONE ENTERPRISES, INC. 5 INDEPENDENCE WAY
201 ST. CHARLES AVENUE, 51ST FLOOR 100 CENTURY PARK DRIVE PRINCETON, NEW JERSEY 08540
NEW ORLEANS, LOUISIANA 70170-5100 MONROE, LOUISIANA 71203 (609) 520-0111
(504) 582-8000 (318) 388-9500
</TABLE>
(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.
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<PAGE>
CENTURY TELEPHONE ENTERPRISES, INC.
CROSS REFERENCE SHEET
BETWEEN
ITEMS OF FORM S-4 AND LOCATION IN PROXY STATEMENT AND PROSPECTUS
<TABLE> <CAPTION>
ITEM IN FORM S-4 LOCATION IN PROSPECTUS
----------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus....................... Facing Page; Cross Reference Sheet; Outside Front
Cover Page
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; Background and
Other General Information Relating to the Merger;
Agreement and Plan of Merger; Rights of Dissenting
Stockholders of Celutel; Comparative Rights of
Century and Celutel Stockholders
5. Pro Forma Financial Information...................... Unaudited Pro Forma Consolidated Condensed Financial
Information
6. Material Contracts with the Company Being Acquired... Background and Other General Information Relating to
the Merger; Agreement and Plan of Merger
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters........ Resales of Century Stock by Selling Stockholders
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; Selected Financial Information;
Unaudited Pro Forma Consolidated Condensed
Financial Information; Information About Century;
Comparative Rights of Century and Celutel
Stockholders
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.... *
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..... Available Information; Incorporation of Certain
Documents by Reference; Summary; Selected Financial
Information; Information About Celutel; Comparative
Rights of Century and Celutel Stockholders;
Election of Directors
17. Information with Respect to Companies Other Than S-3
or S-2 Companies..................................... *
18. Information if Proxies, Consents or Authorizations
are to be Solicited.................................. Summary; Introduction; Agreement and Plan of Merger;
Rights of Dissenting Stockholders of Celutel;
Information About Celutel; Election of Directors
19. Information if Proxies, Consents or Authorizations
are not to be Solicited in an Exchange Offer......... *
</TABLE>
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* Not applicable.
<PAGE>
CELUTEL, INC.
900 Bestgate Road
Suite 400
Annapolis, Maryland 21401
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------
To the Common and Preferred Stockholders of
CELUTEL, INC.:
Notice is hereby given that an annual meeting of stockholders of Celutel,
Inc. ("CELUTEL") will be held on February 10, 1994 at 9:00 a.m. C.S.T. at Pan
American Life Conference Center, Eleventh Floor, 601 Poydres Street, New
Orleans, Louisiana 70130, for the following purposes:
1. To consider and vote upon a proposal (the "MERGER PROPOSAL") to
adopt an Agreement and Plan of Merger dated as of October 8, 1993, as
amended (the "MERGER AGREEMENT"), between, among others, Celutel and
Century Telephone Enterprises, Inc. ("CENTURY") (and the accompanying LC
Escrow and Reimbursement Agreement referred to below), pursuant to which,
among other things, (i) Celutel will be merged with a subsidiary of Century
(the "MERGER"), (ii) each outstanding share of capital stock of Celutel,
other than shares held by dissenting stockholders, and certain outstanding
warrants of Celutel will be converted into an amount of cash and number of
shares of Century common stock (the "MERGER CONSIDERATION") determinable at
Closing as described in the attached Proxy Statement and Prospectus (the
"PROXY STATEMENT"), and (iii) the Celutel stockholders will appoint
Continental Illinois Venture Corporation ("CIVC") as their sole
representative in connection with the Merger Agreement and in connection
with the LC Escrow and Reimbursement Agreement to be entered into for the
purpose of authorizing CIVC to, among other things, manage and disburse
that portion of the cash consideration to be placed in escrow in the manner
and for the purposes described in the attached Proxy Statement;
2. To elect five directors to hold office until the earlier of (i) the
consummation date of the Merger (the "CLOSING DATE") or (ii) Celutel's next
annual meeting of stockholders and until their respective successors are
duly elected and qualified; and
3. To transact such other business as may properly come before the
annual meeting or any adjournment thereof.
Only Celutel common and preferred stockholders of record at the close of
business on January 3, 1994 (the "RECORD DATE") are entitled to notice of and to
vote at the annual meeting. Such record holders of Celutel common and preferred
stock will vote as a single class, with holders of common stock being entitled
to cast one vote per share and holders of preferred stock being entitled to cast
2,000 votes per share.
As described further in the attached Proxy Statement, the minimum aggregate
consideration payable under the Merger Agreement will be $50,167,000 cash (after
deducting a cash holdback estimated at $530,800 for possible post-closing
liabilities) and between 1,536,000 and 1,878,000 shares of Century common stock
("CENTURY STOCK"). On a per share basis, this consideration will equal $3.65
cash (after deducting a cash holdback estimated at $.32 per share) and between
.120 and .147 shares of Century Stock.
The actual number of shares of Century Stock issuable in connection with
the Merger will be determined by dividing (1) 50% of the amount used in
calculating the aggregate merger consideration by (2) the Average Century Price
(which is defined as the average trading price of Century Stock for a ten-day
trading period preceding the Closing Date), subject to a $27 floor price (which
fixes the maximum aggregate number of Century shares at 1,878,000, or .147 per
Celutel share) and a $33 ceiling price (which fixes the minimum aggregate number
of Century shares at 1,536,000, or .120 per Celutel share). IF THE MERGER IS
CONSUMMATED WHEN THE AVERAGE CENTURY PRICE
<PAGE>
IS LESS THAN THE $27 FLOOR PRICE, THEN THE VALUE OF THE MERGER CONSIDERATION AT
SUCH TIME (DETERMINED SOLELY BY REFERENCE TO SUCH PRICE) WOULD BE LESS THAN IT
WOULD BE IF SUCH PRICE WERE $27 OR MORE AND WOULD CONTINUE TO DECREASE AS THE
TRADING PRICE OF CENTURY STOCK DECREASES. THE CENTURY STOCK HAS NOT TRADED AT A
PRICE ABOVE $27 SINCE NOVEMBER 4, 1993. THERE CAN BE NO ASSURANCE AS TO THE
TRADING PRICE OF THE CENTURY STOCK ON OR AFTER THE CLOSING DATE.
If on the Closing Date the Average Century Price (as defined below) is
$ (which was the closing per share sale price on January , 1994, the
last trading date preceding the date of this Proxy Statement), the value of the
minimum aggregate consideration on such date would be $ , which equals
$ on a per share basis. CELUTEL STOCKHOLDERS SHOULD BE AWARE THAT CHANGES
IN THE TRADING PRICE OF CENTURY STOCK WILL AFFECT THE VALUE OF THEIR MERGER
CONSIDERATION, AND ARE ACCORDINGLY URGED TO OBTAIN CURRENT MARKET QUOTATIONS.
As described further in the attached Proxy Statement, the Merger
Consideration payable at Closing cannot be definitively calculated until
immediately prior to the Closing Date and the minimum amounts of Merger
Consideration presented above are based on various adverse assumptions that
Celutel considers unlikely, including that Celutel will incur the maximum amount
of long-term indebtedness permitted under its current line of credit as a result
of either of two events that are neither occurring nor expected to occur: (i)
Celutel's operating revenues decreasing at an unprecedented rate or (ii) Celutel
experiencing a higher percentage of uncollectible receivables compared with
historical amounts. Celutel therefore anticipates that the actual Merger
Consideration will be slightly higher than the minimum Merger Consideration
described above. For further information concerning the Merger Consideration,
see "Agreement and Plan of Merger--Determination of Aggregate Merger
Consideration" in the attached Proxy Statement. IN CONSIDERING WHETHER TO VOTE
IN FAVOR OF THE MERGER PROPOSAL OR TO EXERCISE YOUR RIGHT TO DISSENT THEREFROM
UNDER DELAWARE LAW, YOU ARE URGED TO CONSIDER, AMONG OTHER THINGS, THAT YOU MAY
RECEIVE NO MORE THAN THE MINIMUM AMOUNT OF CASH AND NUMBER OF SHARES OF CENTURY
STOCK DESCRIBED ABOVE. IF FOR ANY REASON THE MERGER CONSIDERATION AT CLOSING
WILL BE LESS THAN THE MINIMUM AMOUNT OF CASH AND NUMBER OF SHARES DESCRIBED
ABOVE, CELUTEL WILL SUPPLY YOU WITH SUPPLEMENTAL MATERIALS THAT WILL RESOLICIT
YOUR PROXY AND WILL ADJOURN THE ANNUAL MEETING UNTIL AT LEAST 20 BUSINESS DAYS
AFTER THE MAILING OF SUCH MATERIALS.
CERTAIN STOCKHOLDERS OF CELUTEL WHO, AS OF THE RECORD DATE, BENEFICIALLY
OWNED SHARES OF CELUTEL STOCK ENTITLING THEM TO CAST APPROXIMATELY 58% OF
CELUTEL'S TOTAL VOTING POWER HAVE AGREED TO VOTE ALL THEIR SHARES IN FAVOR OF
THE MERGER PROPOSAL (WHICH VOTES IN AND OF THEMSELVES WILL BE SUFFICIENT TO
ADOPT THE MERGER PROPOSAL) UNLESS (I) BETWEEN OCTOBER 8, 1993 AND THE DATE OF
THE ANNUAL MEETING THERE HAS BEEN A MATERIAL ADVERSE CHANGE IN CENTURY, WHICH IS
DEFINED IN THE MERGER AGREEMENT TO EXCLUDE, AMONG OTHER THINGS, DECREASES IN THE
TRADING PRICE OF CENTURY STOCK THAT DO NOT RELATE TO EVENTS OR CONDITIONS
AFFECTING CENTURY, OR (II) THE MERGER AGREEMENT HAS BEEN TERMINATED. IN THE
ABSENCE OF EITHER OF THESE CIRCUMSTANCES, THESE STOCKHOLDERS WILL BE REQUIRED TO
VOTE IN FAVOR OF THE MERGER PROPOSAL EVEN IF THE CENTURY STOCK CONTINUES TO
TRADE BELOW THE $27 FLOOR PRICE USED IN CALCULATING THE NUMBER OF SHARES OF
CENTURY STOCK ISSUABLE IN CONNECTION WITH THE MERGER, AND NOTWITHSTANDING ANY
RESULTING ADVERSE EFFECT ON THE VALUE OF THE MERGER CONSIDERATION, ALL AS
DESCRIBED FURTHER IN THE ATTACHED PROXY STATEMENT.
CELUTEL STOCKHOLDERS WHO OBJECT TO THE MERGER PROPOSAL 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, CELUTEL STOCKHOLDERS MUST REFRAIN FROM
VOTING IN FAVOR OF THE MERGER PROPOSAL AND MUST OTHERWISE FOLLOW THE PROCEDURES
SET FORTH IN SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
AS MORE FULLY SET FORTH IN THE ATTACHED PROXY STATEMENT. ANY CELUTEL STOCKHOLDER
WHO DELIVERS AN EXECUTED PROXY AND WHO DESIRES TO PERFECT DISSENTERS' RIGHTS
MUST MARK THE PROXY "AGAINST" THE MERGER PROPOSAL BECAUSE AN EXECUTED AND
DELIVERED PROXY THAT DOES NOT SPECIFY A VOTE WILL BE VOTED IN FAVOR THEREOF.
2
<PAGE>
Based on certain assumptions described in the attached Proxy Statement, the
Century Stock to be issued in connection with the Merger is expected to
represent approximately 3.5% of Century's total outstanding common stock.
Celutel's directors and officers and certain persons who may be deemed to be
affiliates of Celutel beneficially owned as of the Record Date approximately 74%
of the fully-diluted equity of Celutel and are expected to receive approximately
72% of the Aggregate Merger Consideration after giving effect to the Allocation
Agreement described in the attached Proxy Statement. For information regarding
certain interests in the Merger of Celutel's executive officers and certain of
Celutel's directors, see "Investment Considerations-Considerations Relating to
the Merger--Interests of Certain Persons in the Merger" in the attached Proxy
Statement.
The Board of Directors encourages your participation in the annual meeting.
Accordingly, we urge you to mark the enclosed Celutel proxy, sign it, and return
it promptly in the enclosed stamped envelope addressed to Celutel, whether or
not you plan to attend the annual meeting. Your proxy may be revoked at any time
prior to its exercise by voting in person at the annual meeting or by delivering
a written revocation or later-dated proxy to the Secretary of Celutel prior to
the commencement of the annual meeting.
By Order of the Board of Directors
VALERIE S. HART, Secretary
Annapolis, Maryland
January , 1994
3
<PAGE>
PROXY STATEMENT
AND
PROSPECTUS
------------------------
Century Telephone Enterprises, Inc. ("CENTURY") has filed a registration
statement on Form S-4 (the "REGISTRATION STATEMENT") pursuant to the Securities
Act of 1933, as amended (the "SECURITIES ACT"), covering 1,950,000 shares of
Century common stock, par value $1.00 per share, and accompanying preferred
stock purchase rights ("CENTURY STOCK"), which are the maximum number of such
shares and rights reasonably expected to be issued in connection with a proposed
merger (the "MERGER") of a wholly-owned subsidiary of Century into Celutel, Inc.
("CELUTEL"). This document, which forms a part of the Registration Statement,
constitutes a Proxy Statement of Celutel in connection with the solicitation of
proxies to consider and vote upon the Merger Proposal (as defined below) and the
other matters discussed herein, and a Prospectus of Century with respect to the
Century Stock to be issued upon consummation of the Merger. The information
contained herein with respect to Century and its subsidiaries has been supplied
by Century and the information contained herein with respect to Celutel and its
subsidiaries has been supplied by Celutel.
Subject to certain exceptions, each outstanding share of Century 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 Stock, including those issuable hereunder.
Century Stock is traded on the New York Stock Exchange under the symbol "CTL."
See "Information About Century" and "Comparative Rights of Century and Celutel
Shareholders."
This Proxy Statement and Prospectus, as it may be amended or supplemented
from time to time, has also been prepared for use by certain stockholders of
Celutel named herein ("SELLING STOCKHOLDERS") for purposes of offering and
selling shares of Century Stock to be issued to the Selling Stockholders in
connection with the Merger in certain transactions in which such stockholders
might otherwise be deemed to be underwriters within the meaning of the
Securities Act. No such resale of Century Stock may be effected pursuant to this
Proxy Statement and Prospectus unless the Selling Stockholder has provided prior
written notification thereof to Century in the manner described elsewhere
herein. See "Resales of Century Stock by Selling Stockholders."
Unless the context otherwise requires, all references to Celutel herein
will include Celutel and its subsidiaries, and all references to Century will
include Century and its subsidiaries.
FOR A DISCUSSION OF CERTAIN INVESTMENT CONSIDERATIONS THAT THE CELUTEL
STOCKHOLDERS SHOULD CONSIDER IN EVALUATING CENTURY, THE CENTURY STOCK AND THE
TRANSACTIONS DESCRIBED HEREIN, SEE "INVESTMENT CONSIDERATIONS."
------------------------
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 PROXY 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 PROXY STATEMENT AND PROSPECTUS, AND IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT AND PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES
OFFERED HEREBY, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION IN WHICH, OR
TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OF AN
OFFER OR PROXY SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY 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 CELUTEL SINCE THE DATE HEREOF.
------------------------
THE DATE OF THIS PROXY STATEMENT AND PROSPECTUS IS JANUARY , 1994
<PAGE>
AVAILABLE INFORMATION
Century and Celutel are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and, in
accordance therewith, file reports, proxy statements and other information with
the Securities and Exchange Commission (the "COMMISSION"). Reports, proxy
statements and other information filed by Century and Celutel 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 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. The Common Stock of Celutel is listed on the
American Stock Exchange and its reports, proxy statements and other information
may also be inspected at the offices of the American Stock Exchange, 86 Trinity
Place, New York, New York 10006.
In addition to the information contained in this Proxy Statement and
Prospectus (the "PROXY STATEMENT"), 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. at the address and in the manner indicated
above.
For information on certain documents provided to the Celutel stockholders
concurrently herewith, see "Other Information."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT INCORPORATES BY REFERENCE DOCUMENTS THAT ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON
REQUEST FROM, IN THE CASE OF CENTURY, HARVEY P. PERRY, CENTURY TELEPHONE
ENTERPRISES, INC., 100 CENTURY PARK DRIVE, MONROE, LOUISIANA 71203, TELEPHONE
(318) 388-9500, AND, IN THE CASE OF CELUTEL, RICHARD J. DONNELLY, CELUTEL, INC.,
900 BESTGATE ROAD, SUITE 400, ANNAPOLIS, MARYLAND 21401, TELEPHONE (410)
573-5200. IN ORDER TO INSURE TIMELY DELIVERY OF THESE DOCUMENTS PRIOR TO THE
ANNUAL STOCKHOLDERS MEETING TO WHICH THIS PROXY STATEMENT RELATES, ANY REQUEST
SHOULD BE RECEIVED BY FEBRUARY 3, 1994.
Celutel and Century hereby undertake to provide without charge to each
recipient of this Proxy Statement, including any beneficial owner of Celutel
capital stock to whom a copy of this Proxy Statement has been delivered, upon
the written or oral request of such recipient, a copy of any and all of the
documents referred to below that have been or may be incorporated herein by
reference, other than exhibits to such documents. Requests for such documents
should be directed to the persons indicated in the immediately preceding
paragraph.
The following documents, which have been 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, 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 and October 8, 1993.
ii
<PAGE>
(d) The description of Century 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.
(e) Celutel's Annual Report on Form 10-KSB for the fiscal year ended
April 30, 1993, as amended October 29, 1993 and December 20, 1993 (a copy
of which has been furnished herewith to each Celutel stockholder).
(f) Celutel's Quarterly Reports on Form 10-QSB for the quarters ended
July 31, 1993 and October 31, 1993 (a copy of which October 31, 1993 Form
10-QSB has been furnished herewith to each Celutel stockholder).
(g) Celutel's Current Report on Form 8-K dated October 8, 1993.
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 Proxy
Statement and prior to the termination of the reoffering of Century Stock to be
acquired hereunder shall 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
Proxy Statement.
iii
<PAGE>
TABLE OF CONTENTS
<TABLE> <CAPTION>
DESCRIPTION PAGE
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<S> <C>
PROXY STATEMENT AND PROSPECTUS COVER PAGE................................................................. i
AVAILABLE INFORMATION..................................................................................... ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................................................... ii
SUMMARY................................................................................................... vi
INVESTMENT CONSIDERATIONS................................................................................. 1
Considerations Relating to Century Stock................................................................ 1
Considerations Relating to the Merger................................................................... 2
INTRODUCTION.............................................................................................. 5
Purpose of Meeting...................................................................................... 5
Voting and Revocation of Proxies........................................................................ 5
Record Date; Quorum; Vote Required...................................................................... 6
BACKGROUND AND OTHER GENERAL INFORMATION
RELATING TO THE MERGER.................................................................................. 8
Background of Merger.................................................................................... 8
Recommendation of the Celutel Board of Directors and Reasons for the Merger............................. 14
Opinion of Financial Advisor............................................................................ 17
Accounting Treatment.................................................................................... 21
AGREEMENT AND PLAN OF MERGER.............................................................................. 22
Structure and Effects of Merger......................................................................... 22
Effective Time of Merger................................................................................ 22
Determination of Aggregate Merger Consideration......................................................... 22
Allocation of Aggregate Merger Consideration Among Celutel Stockholders................................. 28
Certain Federal Income Tax Consequences................................................................. 31
Regulatory Approvals.................................................................................... 32
Other Closing Conditions................................................................................ 32
Indemnification......................................................................................... 33
Holdback of Funds Under LC Escrow Agreement............................................................. 35
Stockholders' Representative............................................................................ 37
Expenses................................................................................................ 39
Executive Officer Benefits.............................................................................. 39
Indemnification of CIVC and Celutel's Officers and Directors............................................ 40
Representations and Warranties.......................................................................... 40
Non-Solicitation; Termination Fee....................................................................... 41
Amendment, Waiver and Termination....................................................................... 41
Conduct of Business Pending the Mergers; Certain Covenants.............................................. 42
Resales of Century Stock................................................................................ 42
Procedures for Receiving Merger Consideration........................................................... 43
RIGHTS OF DISSENTING STOCKHOLDERS OF CELUTEL.............................................................. 44
Procedures to Perfect Rights............................................................................ 44
Court Appraisals........................................................................................ 45
Other Considerations.................................................................................... 46
RESALES OF CENTURY STOCK BY SELLING STOCKHOLDERS.......................................................... 47
General................................................................................................. 47
Plan of Distribution.................................................................................... 48
SELECTED FINANCIAL INFORMATION............................................................................ 49
Celutel Selected Financial Data......................................................................... 49
Century Selected Consolidated Operating and Financial Data.............................................. 50
</TABLE>
iv
<PAGE>
<TABLE> <CAPTION>
DESCRIPTION PAGE
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<S> <C>
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL
INFORMATION............................................................................................. 52
Pro Forma Balance Sheet as of September 30, 1993........................................................ 53
Pro Forma Income Statement for the Nine-Month Period Ended September 30, 1993........................... 54
Pro Forma Income Statement for the Year Ended December 31, 1992......................................... 55
Notes to Unaudited Pro Forma Consolidated Condensed Financial Information............................... 56
INFORMATION ABOUT CELUTEL................................................................................. 59
General................................................................................................. 59
Executive Officers...................................................................................... 59
Compensation of Executive Officers...................................................................... 60
Certain Transactions.................................................................................... 61
Committees and Meetings of the Board of Directors....................................................... 62
Security Ownership of Certain Beneficial Owners and Management.......................................... 62
Market Prices for Celutel Common Stock.................................................................. 65
INFORMATION ABOUT CENTURY................................................................................. 65
General................................................................................................. 65
Market Prices for Century Stock......................................................................... 66
COMPARATIVE RIGHTS OF CENTURY AND CELUTEL STOCKHOLDERS.................................................... 67
Voting Rights........................................................................................... 67
Preferred Stock......................................................................................... 67
Preferred Stock Purchase Rights......................................................................... 68
Dividends, Redemption and Stock Repurchases............................................................. 70
Approval of Extraordinary Transactions.................................................................. 70
Liability of Directors and Officers..................................................................... 71
Dissenters' Rights...................................................................................... 71
Inspection Rights....................................................................................... 72
Laws and Organizational Document Provisions with Possible Antitakeover Effects.......................... 72
Bylaws.................................................................................................. 75
Vacancies............................................................................................... 76
ELECTION OF DIRECTORS OF CELUTEL.......................................................................... 77
General................................................................................................. 77
Independent Accountants................................................................................. 78
LEGAL MATTERS............................................................................................. 78
EXPERTS................................................................................................... 78
SUBMISSION OF STOCKHOLDER PROPOSALS FOR 1994 ANNUAL MEETING............................................... 79
OTHER INFORMATION......................................................................................... 79
APPENDIX I--AGREEMENT AND PLAN OF MERGER, AS AMENDED...................................................... A-1
APPENDIX II--TERM CROSS-REFERENCE GLOSSARY................................................................ A-68
APPENDIX III--FAIRNESS OPINION OF LAZARD, FRERES & CO. ................................................... A-71
APPENDIX IV--LC ESCROW AND REIMBURSEMENT AGREEMENT........................................................ A-73
APPENDIX V--SECTION 262 OF THE DELAWARE CORPORATION LAW................................................... A-87
</TABLE>
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SUMMARY
The following summary is qualified in its entirety by reference to the
Agreement and Plan of Merger, as amended (the "MERGER AGREEMENT"), that appears
as Appendix I to this Proxy 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 Stock contained in this Proxy Statement has been adjusted for three
separate stock splits effected as 50% stock dividends distributed in June 1988,
February 1989 and December 1992. All references to the Celutel Preferred Stock
(as defined below) appearing herein shall be deemed to refer to the issued and
outstanding shares of such stock plus all accrued and unpaid stock dividends
payable with respect thereto, which dividends entitle the holder thereof to
voting and conversion rights to the same extent as if such stock dividends had
been fully paid, all as described further herein. 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. Attached hereto as Appendix II is a
glossary indicating the page on which each defined term used herein is first
defined.
GENERAL
MEETING. The annual meeting of Celutel's stockholders will be held on
February 10, 1994 at 9:00 a.m. C.S.T. at Pan American Life Conference Center,
Eleventh Floor, 601 Poydres Street, New Orleans, Louisiana 70130 (the
"MEETING"). Only holders of record of Celutel's Class A Common Stock, $.20 par
value per share (the "CELUTEL COMMON STOCK"), or Celutel's 18% Senior
Convertible Preferred Stock, $.20 par value per share (the "CELUTEL PREFERRED
STOCK" and, together with the Celutel Common Stock, the "CELUTEL STOCK"), at the
close of business on January 3, 1994 are entitled to notice of and to vote at
the Meeting. See "Introduction."
PURPOSE OF MEETING. The purpose of the Meeting is (i) to consider and vote
upon a proposal (the "MERGER PROPOSAL") to adopt the Merger Agreement (and the
accompanying LC Escrow and Reimbursement Agreement referred to below), pursuant
to which, among other things, (a) Celutel will merge with a wholly-owned
subsidiary of Century (the "MERGER"), (b) each outstanding share of Celutel
Stock (other than shares held by dissenting stockholders, as defined below) and
each Celutel Warrant (as defined below) will be converted into an amount of cash
and number of shares of Century Stock determined as described under "Agreement
and Plan of Merger-Determination of Aggregate Merger Consideration" and
"-Allocation of Aggregate Merger Consideration Among Celutel Stockholders," and
(c) the Celutel stockholders will appoint Continental Illinois Venture
Corporation ("CIVC") as their sole representative (the "STOCKHOLDERS'
REPRESENTATIVE") in connection with the Merger Agreement and in connection with
the LC Escrow and Reimbursement Agreement to be entered into for the purpose of
authorizing the Stockholders' Representative to, among other things, manage and
disburse that portion of the cash consideration to be placed in escrow pursuant
to the Merger Agreement, and (ii) to elect five directors to hold office until
the earlier of (a) the consummation of the Merger or (b) Celutel's next annual
meeting of stockholders and until their respective successors are duly elected
and qualified. See "Introduction-Purpose of Meeting."
VOTE REQUIRED; AGREEMENT BY PRINCIPAL STOCKHOLDERS. Adoption of the Merger
Proposal requires the affirmative vote of the holders of a majority of the total
voting power of the Celutel Stock. Directors will be elected by a plurality of
the votes of the holders of Celutel Stock present in person or by proxy at the
Meeting. With respect to each such matter, record holders of Celutel Common
Stock and Celutel Preferred Stock will vote as a single class, with holders of
Celutel Common Stock being entitled to cast one vote per share and holders of
Celutel Preferred Stock being entitled to cast 2,000 votes per share. Celutel's
directors and officers and certain persons who may be deemed to be affiliates of
Celutel are
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entitled to cast approximately 71% of Celutel's total voting power with respect
to each of these matters. Pursuant to the Merger Agreement, CIVC and Frank S.
Scarpa, Chairman of the Board and President of Celutel ("MR. SCARPA"), who as of
the Record Date beneficially owned shares of Celutel Stock entitling them to
cast approximately 58% of Celutel's total voting power (which votes are in and
of themselves sufficient to adopt the Merger Proposal without the vote of any
other Celutel stockholder), have agreed to vote all their shares of Celutel
Stock in favor of the Merger Proposal, unless (i) between October 8, 1993 and
the date of the Meeting there has been a material adverse change in Century,
which is defined in the Merger Agreement to exclude, among other things,
decreases in the trading price of Century Stock that do not relate to events or
conditions affecting Century, or (ii) the Merger Agreement has been terminated
in accordance with its terms. In the absence of either of these circumstances,
CIVC and Mr. Scarpa (the "PRINCIPAL STOCKHOLDERS") will be required to vote in
favor of the Merger Proposal even if Century Stock continues to trade below the
$27 floor price used in calculating the number of shares of Century Stock
issuable in connection with the Merger, and notwithstanding any resulting
adverse effect on the value of the Aggregate Merger Consideration (as defined
below), as described further herein.
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 Proposal or the issuance of Century Stock pursuant thereto be approved by
the Century stockholders. See "Introduction-Record Date; Quorum; Vote Required."
THE MERGER PROPOSAL
BACKGROUND OF THE MERGER
The Merger Agreement and the transactions contemplated thereunder were
unanimously approved on October 7, 1993 by Celutel's Board of Directors. For a
more complete discussion of the background of the Merger, see "Background and
Other General Information Relating to the Merger."
RECOMMENDATION OF THE BOARD OF DIRECTORS
For the reasons specified under "Background and Other General Information
Relating to the Merger-Recommendation of the Celutel Board of Directors and
Reasons for the Merger," as of the date hereof, Celutel's Board recommends that
the Celutel stockholders vote in favor of the Merger Proposal.
OPINION OF FINANCIAL ADVISOR
Lazard, Freres & Co. ("LAZARD"), the financial advisor to Celutel's Board
of Directors, has delivered to the Board its written opinion, dated the date of
this Proxy Statement, to the effect that, as of the date of such opinion, and
based upon the assumptions made, the factors considered and the review
undertaken, and subject to certain limitations and qualifications, all as
described in such opinion, the Merger Consideration to be received by the Public
Stockholders (as defined below) pursuant to the Merger Agreement is fair to such
stockholders from a financial point of view. A copy of such opinion is attached
hereto as Appendix III and should be read in its entirety. See "Background and
Other General Information Relating to the Merger-Opinion of Financial Advisor."
AGREEMENT AND PLAN OF MERGER
EFFECTIVE TIME OF MERGER. The Merger will become effective at 7:00 p.m.
(Delaware time) on the date the parties file a certificate of merger with the
Secretary of State of Delaware (such time being herein referred to as the
"EFFECTIVE TIME"). The parties currently intend to schedule a closing (the
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"CLOSING") and file a certificate of merger on the day the Merger Proposal is
adopted at the Meeting. See "Agreement and Plan of Merger-Effective Time of
Merger," "-Regulatory Approvals" and "-Other Closing Conditions."
AGGREGATE AND PER SHARE MERGER CONSIDERATION. As described further herein,
the minimum Aggregate Merger Consideration (as defined below) payable under the
Merger Agreement will be $50,167,000 cash (after deducting the Public
Stockholder Holdback Amount (as defined below) estimated at $530,800 for
possible post-closing liabilities) and between 1,536,000 and 1,878,000 shares of
Century Stock. On a per share basis, this consideration will equal $3.65 cash
(after deducting the Public Stockholder Holdback Amount estimated at $.32 per
share) and between .120 and .147 shares of Century Stock payable to the Public
Stockholders (as defined below).
Under the Merger Agreement, 50% of the amount used in calculating the
Aggregate Merger Consideration will be payable in cash, with the remainder of
the consideration payable in the form of Century Stock. The Century Stock to be
issued in the Merger will be freely transferable under the Securities Act,
except for shares held by certain Celutel stockholders who may be deemed to be
"affiliates" of Celutel. The actual number of shares of Century Stock issuable
in connection with the Merger will be determined by dividing (1) 50% of the
amount used in calculating the aggregate merger consideration by (2) the Average
Century Price (as defined below) subject to a $27 floor price (which fixes the
maximum aggregate number of Century shares at 1,878,000, or .147 per Celutel
share) and a $33 ceiling price (which fixes the minimum aggregate number of
Century shares at 1,536,000 or .120 per Celutel share). IF THE MERGER IS
CONSUMMATED WHEN THE AVERAGE CENTURY PRICE IS LESS THAN THE $27 FLOOR PRICE,
THEN THE VALUE OF THE MERGER CONSIDERATION AT SUCH TIME (DETERMINED SOLELY BY
REFERENCE TO SUCH PRICE) WOULD BE LESS THAN IT WOULD BE IF SUCH PRICE WERE $27
OR MORE AND WOULD CONTINUE TO DECREASE AS THE TRADING PRICE OF CENTURY STOCK
DECREASES. THE CENTURY STOCK HAS NOT TRADED AT A PRICE ABOVE $27 SINCE NOVEMBER
4, 1993. ON AUGUST 18, 1993 (THE TRADING DATE PRECEDING THE INITIAL PUBLIC
ANNOUNCEMENT OF THE TRANSACTION) AND ON JANUARY , 1994 (THE TRADING DATE
PRECEDING THE DATE OF THIS PROXY STATEMENT), THE CLOSING PER SHARE SALE PRICES
OF CENTURY STOCK WERE $29 7/8 AND $ , RESPECTIVELY. SEE "INFORMATION
ABOUT CENTURY-MARKET PRICES FOR CENTURY STOCK." THERE CAN BE NO ASSURANCE AS TO
THE TRADING PRICE OF THE CENTURY STOCK ON OR AFTER THE CLOSING DATE.
If on the Closing Date the Average Century Price (as defined below) is
$ (which was the closing per share sale price on January , 1994,
the last trading date preceding the date of this Proxy Statement), the value of
the minimum aggregate consideration on such date would be $ , which
equals $ on a per share basis. CELUTEL STOCKHOLDERS SHOULD BE AWARE
THAT CHANGES IN THE TRADING PRICE OF CENTURY STOCK WILL AFFECT THE VALUE OF
THEIR MERGER CONSIDERATION, AND ARE ACCORDINGLY URGED TO OBTAIN CURRENT MARKET
QUOTATIONS.
After the Closing, the Aggregate Merger Consideration will be adjusted to
reflect the parties' final calculation of the price adjustments estimated at
Closing. If the Aggregate Merger Consideration calculated at the Effective Time
exceeds the final calculation of the Aggregate Merger Consideration the Celutel
stockholders will be required to refund such excess to Century, and if the
Aggregate Merger Consideration calculated at the Effective Time is less than the
final calculation of the Aggregate Merger Consideration the Celutel stockholders
will be compensated for such deficit, all in the manner described herein. As
described further herein, the minimum amounts of Merger Consideration described
above are based on various adverse assumptions that Celutel considers unlikely,
including that Celutel will incur the maximum amount of long-term indebtedness
permitted under its current line of credit as a result of either of two events
that are neither occurring nor expected to occur: (i) Celutel's
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operating revenues decreasing at an unprecedented rate or (ii) Celutel
experiencing a higher percentage of uncollectible receivables compared with
historical amounts. Celutel therefore anticipates that the actual Merger
Consideration will be slightly higher than the minimum Merger Consideration
described above.
IN CONSIDERING WHETHER TO VOTE IN FAVOR OF THE MERGER PROPOSAL OR TO
EXERCISE YOUR RIGHT TO DISSENT THEREFROM UNDER DELAWARE LAW AND RECEIVE CASH
EQUAL TO THE "FAIR VALUE" OF YOUR SHARES (AS DETERMINED BY JUDICIAL APPRAISAL)
IN LIEU OF THE MERGER CONSIDERATION, YOU ARE URGED TO CONSIDER, AMONG OTHER
THINGS, THAT YOU MAY RECEIVE NO MORE THAN THE MINIMUM AMOUNT OF CASH AND NUMBER
OF SHARES OF CENTURY STOCK DESCRIBED ABOVE. IF FOR ANY REASON THE MERGER
CONSIDERATION AT CLOSING WILL BE LESS THAN THE MINIMUM AMOUNT OF CASH AND NUMBER
OF SHARES DESCRIBED ABOVE, CELUTEL WILL SUPPLY YOU WITH SUPPLEMENTAL MATERIALS
THAT WILL RESOLICIT YOUR PROXY AND WILL ADJOURN THE MEETING UNTIL AT LEAST 20
BUSINESS DAYS AFTER THE MAILING OF SUCH MATERIALS.
Based on certain assumptions described herein, the Century Stock to be
issued in connection with the Merger is expected to represent approximately 3.5%
of the total outstanding Century Stock. Celutel's directors and officers and
certain persons who may be deemed to be affiliates of Celutel beneficially owned
as of the Record Date approximately 74% of the fully diluted equity of Celutel
and are expected to receive approximately 72% of the Aggregate Merger
Consideration after giving effect to the Allocation Agreement (as defined
below). For information regarding certain interests in the Merger of Celutel's
executive officers and certain of Celutel's directors, see "Investment
Considerations-Considerations Relating to the Merger--Interests of Certain
Persons in the Merger."
As more fully described under "Agreement and Plan of Merger-Determination
of Aggregate Merger Consideration--Estimates of Aggregate Merger Consideration,"
the per pop value of Celutel implied by the minimum Merger Consideration is
approximately $132 (if the Average Century Price is between $27 and $33) and
$ (if the Average Century Price is $ , the closing per share price of
Century Stock on the last trading date preceding the date of this Proxy
Statement).
For more information, see "Agreement and Plan of Merger-Determination of
Aggregate Merger Consideration."
ALLOCATION OF AGGREGATE MERGER CONSIDERATION AMONG CELUTEL
STOCKHOLDERS. Under the Merger Agreement, the Aggregate Merger Consideration
will be allocated among the holders of Celutel Common Stock, Celutel Preferred
Stock and Celutel Warrants in accordance with their proportionate ownership of
"CELUTEL SHARE EQUIVALENTS," which are defined in the Merger Agreement in such
manner as to allocate such consideration among all holders of Celutel Common
Stock, as if all shares of Celutel Preferred Stock were converted into Celutel
Common Stock and all Celutel Warrants were purchased by Celutel in exchange for
Celutel Common Stock in the manner described further herein. At the Effective
Time, each outstanding share of Celutel Stock (other than shares held by
dissenting stockholders) and each Celutel Warrant will be automatically
converted into an amount of cash and number of shares of Century Stock
determined on the basis of the holder's proportionate share of all Celutel Share
Equivalents outstanding (or deemed outstanding) as of immediately prior to the
Effective Time (before giving effect to the Allocation Agreement). In lieu of
receiving fractional shares of Century Stock, holders of Celutel securities will
receive a cash payment based on the Average Century Price. Under the Merger
Agreement, each share of Celutel Common Stock outstanding or deemed to be
outstanding is deemed to equal one Celutel Share Equivalent. For further
information on the Merger Consideration expected to be payable to the Public
Stockholders, see "Agreement and Plan of Merger-Determination of Aggregate
Merger Consideration--Minimum and Anticipated Aggregate and Per Share Merger
Consideration."
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As used herein, "MERGER CONSIDERATION" means the amount of cash and number
of shares of Century Stock to be received by a holder of Celutel securities for
each Celutel Share Equivalent, after giving effect to all terms and conditions
of the Merger Agreement (and, in the case of the Non-Public Stockholders, the
Allocation Agreement described and defined below). All estimates of the Merger
Consideration included herein relate solely to the amounts to be received by the
Public Stockholders. As used herein, "AGGREGATE MERGER CONSIDERATION" means the
amount of cash and number of shares of Century Stock to be received by all
holders of Celutel securities, after giving effect to all terms and conditions
of the Merger Agreement.
For more information, see "Agreement and Plan of Merger-Allocation of
Aggregate Merger Consideration Among Celutel Stockholders."
PUBLIC STOCKHOLDER HOLDBACK; LC ESCROW AGREEMENT. Under the Merger
Agreement, each Celutel stockholder is required to pay its pro rata share of any
liabilities that may arise after the Closing (collectively, "POST-CLOSING
LIABILITIES") in connection with (i) any indemnity claims made by Century or its
affiliates pursuant to the Merger Agreement, (ii) any post-Closing adjustments
that decrease the Aggregate Merger Consideration or (iii) the incurrence of
certain fees and expenses. Due to the administrative impracticability of
collecting from each Public Stockholder its pro rata share of any Post-Closing
Liabilities, the cash portion of the Aggregate Merger Consideration payable to
the Public Stockholders will be reduced by an amount (the "PUBLIC STOCKHOLDER
HOLDBACK AMOUNT") to be determined at Closing (which is estimated to be
approximately $530,800 in the aggregate or approximately $.32 per share of
Celutel Common Stock held by the Public Stockholders). The Non-Public
Stockholders are not subject to a holdback under the Merger Agreement because
(i) Century was willing to assume the risk of collecting from such stockholders
their pro rata share of any post-Closing adjustments to the Aggregate Merger
Consideration and (ii) it was anticipated that the issuer of the Letter of
Credit (as defined below) would also assume such risk in seeking reimbursement
for indemnity claims paid to Century. As more fully described in the following
"Agreement and Plan of Merger-Holdback of Funds Under LC Escrow Agreement," the
Issuer has subsequently required the Non-Public Stockholders to provide cash
collateral or establish credit to secure and fund reimbursement of their pro
rata share of any indemnity claims paid to Century.
For more information on these Post-Closing Liabilities and the reasons for
the Public Stockholder Holdback Amount, see "Agreement and Plan of
Merger-Indemnification," "-Determination of Aggregate Merger
Consideration--Post-Closing Adjustments," "--Public Stockholder Holdback" and
"-Holdback of Funds Under LC Escrow Agreement--Withdrawal of Funds from Escrow
Account."
At Closing, Century will deliver the Public Stockholder Holdback Amount to
PNC Bank, N.A., in its capacity as escrow agent (the "LC ESCROW AGENT"), which
will hold such funds in accordance with an LC Escrow and Reimbursement Agreement
(the "LC ESCROW AGREEMENT") to be entered into at Closing by, among others, PNC
Bank, N.A., in its capacity as LC Escrow Agent and in its capacity as issuer of
the Letter of Credit (the "ISSUER"), and the Stockholders' Representative. Any
Post-Closing Liabilities payable by the Public Stockholders will be paid solely
out of the Public Stockholder Holdback Amount, which payments will release the
Public Stockholders from all further obligations with respect thereto. The
Public Stockholder Holdback Amount will be disbursed to the Public Stockholders
one year after the Closing (unless such term is extended by the Stockholders'
Representative and the Issuer under the circumstances described herein) only to
the extent that any amounts remain after payment of all Post-Closing Liabilities
that may arise, provided that if at such time there is an unresolved
indemnification claim of Century, the disputed amount will be drawn under the
Letter of Credit and transferred to a separate escrow account and held pursuant
to the terms of the Escrow Agreement (as defined below). No assurance can be
given that any such amounts will remain following such payments.
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As used herein, "PUBLIC STOCKHOLDERS" refers to the holders of Celutel
Common Stock immediately prior to the Effective Time other than (i) Messrs.
Frank S. Scarpa (and his related family trust), David A. Warren, Richard J.
Donnelly, Mrs. Valerie S. Hart, CIVC, Messrs. Avy H. Stein and John R. Willis
and (ii) all other holders of Celutel Preferred Stock.
BY VIRTUE OF THE CELUTEL STOCKHOLDERS' ADOPTION OF THE MERGER PROPOSAL AT
THE MEETING, EACH NON-DISSENTING CELUTEL STOCKHOLDER (AS DEFINED BELOW) WILL BE
DEEMED TO HAVE AGREED TO ALL OF THE TERMS AND CONDITIONS OF THE LC ESCROW
AGREEMENT.
For more information, see "Agreement and Plan of Merger-Determination of
Aggregate Merger Consideration," "-Indemnification," "-Holdback of Funds Under
LC Escrow Agreement" and "-Stockholders' Representative."
INDEMNIFICATION BY STOCKHOLDERS. Subject to certain limitations,
deductibles, conditions and procedures described herein, the Merger Agreement
provides that the Celutel stockholders will, on a pro rata basis, indemnify the
Century Indemnitees (as defined below) for post-Closing losses resulting from
any breach of the representations, warranties or covenants of Celutel in the
Merger Agreement, any claims made by former Celutel stockholders or stockholders
or partners of Celutel's cellular operating subsidiaries, certain claims
relating to an employee automobile accident and in certain other specified
circumstances. Subject to certain exceptions applicable only to the Principal
Stockholders, the Celutel stockholders will have no indemnification liability in
excess of an aggregate of $3.5 million or for claims asserted more than one year
after the Effective Date, and the Public Stockholders will have no liability in
excess of the Public Stockholder Holdback Amount. The Principal Stockholders
have agreed to indemnify Century against certain losses on account of
representations, warranties and covenants made by them as well as certain losses
in excess of $3.5 million or asserted more than one year after the Effective
Date. See "Agreement and Plan of Merger-Indemnification."
As a condition to Closing, Celutel will obtain a one-year letter of credit
(the "LETTER OF CREDIT") in the amount of $3.5 million from the Issuer in favor
of Century which, subject to certain conditions and procedures, may be drawn
upon by Century in the event of any loss which gives rise to a right of
indemnification. On November 30, 1993, the Issuer executed a commitment letter
with respect to the Letter of Credit. The issuance of the Letter of Credit at
Closing is conditioned upon, among other things, execution of the LC Escrow
Agreement and certain other reimbursement documents by the Stockholders'
Representative, CIVC and Mr. Scarpa, setting forth the terms of certain
stockholders' reimbursement obligations to the Issuer. In the event that there
exists at the expiration of the Letter of Credit an unresolved claim for
indemnification, unless the Letter of Credit is extended by the Stockholders'
Representative and the Issuer, a sum equal to the disputed amount will be paid
into an escrow account with First American Bank & Trust of Louisiana, Monroe,
Louisiana (the "ESCROW AGENT"), which will hold such sum pursuant to the Escrow
Agreement until the dispute is resolved. For further information, see "Agreement
and Plan of Merger-Indemnification--Letter of Credit" and "-Holdback of Funds
Under LC Escrow Agreement--Escrow Agreement."
STOCKHOLDERS' REPRESENTATIVE. BY VIRTUE OF THE CELUTEL STOCKHOLDERS'
ADOPTION OF THE MERGER PROPOSAL AT THE MEETING, EACH NON-DISSENTING CELUTEL
STOCKHOLDER WILL BE DEEMED TO HAVE APPOINTED CIVC AS THE STOCKHOLDERS'
REPRESENTATIVE TO ACT ON BEHALF OF ALL CELUTEL STOCKHOLDERS IN CONNECTION WITH
THE MERGER AGREEMENT AND THE LC ESCROW AGREEMENT, INCLUDING PURSUING, DEFENDING,
COLLECTING AND SETTLING ADJUSTMENTS TO THE AGGREGATE MERGER CONSIDERATION AND
INDEMNIFICATION CLAIMS. For further information on CIVC and its rights and
duties under the Merger Agreement and the LC Escrow Agreement, see "Agreement
and Plan of Merger-Stockholders' Representative."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. For federal income tax purposes,
the Merger will be treated as a taxable purchase of the Celutel Stock by
Century. Accordingly, each holder will recognize
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gain or loss in an amount equal to the difference between (a) the sum of the
cash and the fair market value of the Century Stock received and (b) his or her
basis in the Celutel Stock surrendered in the Merger. Although current tax law
is unclear, Celutel believes that the cash deposited in escrow which constitutes
the Public Stockholder Holdback Amount and the other amounts required to be
deposited in escrow should be included for purposes of calculating the amount of
cash received by holders of Celutel Stock. Each holder's recognized gain or loss
will be capital gain or loss (provided that such securities are capital assets
in the hands of the holder) and will be long-term capital gain or loss if such
securities have been held for more than one year. The basis of the Century Stock
received by each Celutel stockholder in the Merger will be the fair market value
of the Century Stock at the Effective Time and the holding period for such
shares will begin on the day after the Closing Date. A Celutel stockholder who
exercises dissenters' rights with respect to his shares (see "Rights of
Dissenting Stockholders of Celutel") will be subject to tax on the receipt of
the payments pursuant to the stock redemption rules of Section 302 of the
Internal Revenue Code of 1986, as amended (the "CODE") (taking into account the
stock attribution rules of Section 318 of the Code). In general, if the Celutel
stockholder holds his or her shares of Celutel Stock as a capital asset at the
Effective Time, such stockholder will recognize capital gain or loss measured by
the difference between the amount of cash received by such stockholder and the
basis for his or her shares.
IT IS RECOMMENDED THAT EACH STOCKHOLDER CONSULT HIS OWN TAX ADVISOR
CONCERNING THE APPLICABLE FEDERAL, STATE AND LOCAL INCOME TAX CONSEQUENCES OF
THE MERGER. SEE "AGREEMENT AND PLAN OF MERGER-CERTAIN FEDERAL INCOME TAX
CONSEQUENCES."
REGULATORY APPROVALS AND OTHER CLOSING CONDITIONS. The Federal
Communications Commission ("FCC") has granted several orders approving the
transactions contemplated by the Merger, the last of which was granted on
November 9, 1993 and became final and nonappealable on December 20, 1993.
Celutel and Century have received all other regulatory approvals they believe
are required to consummate the Merger. In addition to receipt of regulatory and
stockholder approvals, Century's obligation to consummate the Merger is subject
to, among other things, (i) the number of Celutel Share Equivalents held by
dissenting stockholders not exceeding 5% of the aggregate Celutel Share
Equivalents, and (ii) the absence of a material adverse change in any of
Celutel's cellular system operating subsidiaries. No assurance can be given that
the conditions to either party's obligation to consummate the Merger can or will
be satisfied or waived. For further information concerning the foregoing, see
"Agreement and Plan of Merger-Regulatory Approvals" and "-Other Closing
Conditions."
EXPENSES. All fees and expenses incurred in connection with the Merger
Agreement and related transactions shall be paid by the party incurring them,
regardless of whether the Merger is consummated. See "Agreement and Plan of
Merger-Expenses."
NON-SOLICITATION; TERMINATION FEE. Celutel and the Principal Stockholders
have agreed, unless the Board of Directors of Celutel makes a Fiduciary
Determination (as defined below), to refrain from soliciting or encouraging any
acquisition proposal relating to Celutel or engaging in discussions or
negotiations with, or furnishing any information to, any person that is
considering making an acquisition proposal. Celutel has agreed to pay Century a
termination fee of 2% of the amount used in calculating the Aggregate Merger
Consideration if, following the receipt of an unsolicited bona fide acquisition
proposal, the Merger Agreement is terminated by Celutel as a result of a
Fiduciary Determination by the Board of Directors of Celutel. The termination
fee could have the effect of discouraging a third party from pursuing an
acquisition proposal involving Celutel. See "Agreement and Plan of
Merger-Non-Solicitation; Termination Fee."
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AMENDMENT, WAIVER AND TERMINATION. The Merger Agreement may be amended by
Century and Celutel at any time before or after adoption of the Merger Agreement
by Celutel's stockholders, except that after such stockholder adoption no
amendment may decrease or change the form of the Merger Consideration or
adversely affect Celutel's stockholders without the further approval of the
affected stockholders. The Merger Agreement may be terminated prior to the
Effective Time by the mutual consent of the parties or by Century or Celutel
upon the occurrence or non-occurrence of certain specified events, including the
failure to obtain stockholder approval of the Merger Agreement at the Meeting
or, subject to certain exceptions, the failure to consummate the Merger by March
6, 1994, or any material breach of the representations, warranties and covenants
of the other party. See "Agreement and Plan of Merger-Amendment, Waiver and
Termination" and "-Non-Solicitation; Termination Fee."
PROCEDURES FOR RECEIVING MERGER CONSIDERATION. In connection with the
mailing of this Proxy Statement, each Celutel stockholder has been furnished
with a Letter of Transmittal for use in submitting certificates representing
Celutel Stock. Immediately following the Effective Time, Society Shareholder
Services, Inc., Dallas, Texas (the "EXCHANGE AGENT"), will deliver to each
Celutel stockholder, upon such stockholder's delivery to the Exchange Agent of a
duly completed Letter of Transmittal, together with all stock certificates held
by such stockholder, the Merger Consideration payable to such stockholder under
the terms and conditions of the Merger Agreement (and, in the case of the
Non-Public Stockholders, the Allocation Agreement). EACH CELUTEL STOCKHOLDER IS
ENCOURAGED PROMPTLY TO COMPLETE AND RETURN THE ENCLOSED LETTER OF TRANSMITTAL,
TOGETHER WITH ALL CERTIFICATES REPRESENTING CELUTEL STOCK, IN ORDER THAT SUCH
CONSIDERATION MAY BE DISTRIBUTED AS SOON AS PRACTICABLE AFTER THE EFFECTIVE
TIME. See "Agreement and Plan of Merger-Procedures for Receiving Merger
Consideration."
SEVERANCE PAYMENTS AND INTERESTS OF CERTAIN PERSONS IN THE MERGER
Celutel's executive officers and certain of Celutel's directors have
certain interests that present them with actual or potential conflicts of
interest in connection with the Merger. Century has agreed to cause Celutel to
pay, within 30 days after the Closing, (i) $650,000 to Mr. Scarpa in connection
with his agreement to terminate all of his rights under his 1988 employment
agreement, as amended, and to continue to abide by certain noncompetition
obligations and (ii) the amounts provided for in the Management Stay Bonus Plan
adopted by the Celutel Board of Directors in March 1992 (which are equal to 1%
of the amount used to calculate the Aggregate Merger Consideration, calculated
exclusive of Celutel's transaction costs related to the Merger (but in no event
in excess of $1.1 million)), to be divided equally among three of Celutel's
executive officers (excluding Mr. Scarpa). Pursuant to its agreement with
Celltech Cellular Information Systems, Inc. ("CELLTECH"), Century has agreed to
cause Celutel after the Closing to pay $525,000 to Celltech as consideration for
the execution of certain amendments to the agreements under which Celltech
provides billing and other services to Celutel. These amendments, among other
things, shorten the term of these agreements. Mr. Scarpa beneficially owns 85%
of the capital stock of Celltech and the remainder is beneficially owned in
equal amounts by Celutel's three other executive officers. In addition, the
Merger Agreement provides that Century will, after the Closing, maintain and
abide by certain indemnification agreements in favor of, among others, certain
current and former directors and officers of Celutel and the indemnification
obligations of Celutel set forth in its Bylaws. See "Agreement and Plan of
Merger-Executive Officer Benefits", "-Other Closing Conditions--Amendment of
Celltech Agreements" and "-Indemnification of CIVC and Celutel's Officers and
Directors."
xiii
<PAGE>
DISSENTERS' RIGHTS
BY REFRAINING FROM VOTING IN FAVOR OF THE MERGER PROPOSAL AND COMPLYING
WITH VARIOUS OTHER PRE-AND POST-CLOSING PROCEDURES THAT ARE REQUIRED BY SECTION
262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE (THE "DELAWARE GCL")
AND DESCRIBED UNDER "RIGHTS OF DISSENTING STOCKHOLDERS OF CELUTEL," STOCKHOLDERS
OF CELUTEL 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 CELUTEL STOCK, AS DETERMINED BY JUDICIAL
APPRAISAL, IN LIEU OF THE MERGER CONSIDERATION THAT SUCH STOCKHOLDERS WOULD
OTHERWISE BE ENTITLED TO RECEIVE PURSUANT TO THE MERGER AGREEMENT. ANY CELUTEL
STOCKHOLDER WHO DELIVERS AN EXECUTED PROXY AND WHO DESIRES TO PERFECT
DISSENTER'S RIGHTS MUST MARK THE PROXY "AGAINST" THE MERGER PROPOSAL BECAUSE AN
EXECUTED AND DELIVERED PROXY THAT DOES NOT SPECIFY A VOTE WILL BE VOTED IN FAVOR
OF THE MERGER PROPOSAL. THE EXERCISE OF THESE RIGHTS MAY RESULT IN A JUDICIAL
DETERMINATION THAT THE FAIR VALUE OF A DISSENTING STOCKHOLDER'S SHARES OF
CELUTEL STOCK IS HIGHER OR LOWER THAN THE VALUE OF THE MERGER CONSIDERATION
PAYABLE TO THE NON-DISSENTING STOCKHOLDERS PURSUANT TO THE MERGER AGREEMENT.
STOCKHOLDERS WHO OPPOSE THE MERGER ARE URGED TO READ "RIGHTS OF DISSENTING
STOCKHOLDERS OF CELUTEL" IN ITS ENTIRETY.
CENTURY AND CELUTEL
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."
CELUTEL. Celutel is engaged in the construction, development and operation
of cellular telephone systems servicing two metropolitan statistical areas
("MSAS") in Texas and three MSAs in Mississippi. Celutel's principal executive
offices are located at 900 Bestgate Road, Suite 400, Annapolis, Maryland 21401,
and its telephone number is (410) 573-5200. See "Information About Celutel."
MARKET PRICES
On August 18, 1993 (the trading day preceding public announcement of the
execution of the Century Letter of Intent, as defined below), on October 8, 1993
(the trading day preceding public announcement of the execution of the Merger
Agreement) and on January , 1994 (the trading day preceding the date of this
Proxy Statement), the closing per share sale prices of Century Stock, as
reported on the New York Stock Exchange Composite Tape, were $29 7/8, $27 1/8
and $ , respectively. NO ASSURANCE CAN BE GIVEN AS TO THE MARKET
PRICE OF CENTURY STOCK AT OR AFTER THE CLOSING DATE. SEE "INFORMATION ABOUT
CENTURY-MARKET PRICES FOR CENTURY STOCK." IN ADDITION, SEE "AGREEMENT AND PLAN
OF MERGER-DETERMINATION OF AGGREGATE MERGER CONSIDERATION" FOR INFORMATION
REGARDING THE POSSIBLE IMPACT ON THE VALUE AS OF THE CLOSING DATE OF THE
AGGREGATE MERGER CONSIDERATION CAUSED BY THE PER SHARE MARKET PRICES OF THE
CENTURY STOCK BEING ABOVE $33 OR BELOW $27.
On August 18, 1993 (the trading day preceding public announcement of the
execution of the Century Letter of Intent), on October 8, 1993 (the trading day
preceding public announcement of the execution of the Merger Agreement) and on
January , 1994 (the trading day preceding the date of this Proxy Statement) ,
the closing per share sale prices of Celutel Common Stock, as reported on the
American Stock Exchange Composite Tape, were $4 1/2, $6 7/8, and $ ,
respectively. See "Information About Celutel-Market Prices for Celutel Common
Stock."
xiv
<PAGE>
For each of the dates listed above, the following table sets forth the
closing per share sale prices of the Century Stock (on a historical basis) and
the Celutel Common Stock (on a historical and equivalent basis).
<TABLE> <CAPTION>
CELUTEL EQUIVALENT
CELUTEL BASED ON
CENTURY STOCK COMMON STOCK MINIMUM
(HISTORICAL) (HISTORICAL) CONSIDERATION(1)
-------------- --------------- -------------------
<S> <C> <C> <C>
August 18, 1993............................................. $ 29.88 $ 4.50 $ 7.61
October 8, 1993............................................. 27.13 6.88 7.61
January , 1994............................................
</TABLE>
- ---------------
(1) The amounts presented under the heading "Celutel Equivalent Based on Minimum
Consideration" equal the sum of (i) the amount of cash payable under the
Merger Agreement assuming a minimum Calculation Amount (as defined below) of
$101.4 million, and after deducting the Public Stockholder Holdback Amount
estimated at $.32 per share, plus (ii) the product derived by multiplying
the closing per share sale prices of Century Stock on August 18 and October
8, 1993 and January , 1994 by common stock equivalent exchange factor of
.133, .146 and , respectively. For each such historical stock price
presented above, the associated exchange factor was calculated by dividing
(i) the number of shares of Century Stock that would be issuable under the
Merger Agreement at such price (assuming the Calculation Amount described
above) by (ii) the number of Celutel Share Equivalents expected to be
outstanding at the Effective Time (determined as if all outstanding Celutel
Preferred Stock had been converted into Celutel Common Stock as described
under "Agreement and Plan of Merger-Allocation of Aggregate Merger
Consideration" and all outstanding Celutel Warrants had been settled in the
manner indicated under "Agreement and Plan of Merger-Allocation of Aggregate
Merger Consideration Among Celutel Stockholders--Allocation to Warrant
Holders"). For more detailed information on the Merger Consideration, see
"Agreement and Plan of Merger-Determination of Aggregate Merger
Consideration--Effect of Century Price on Value of Aggregate and Per Share
Merger Consideration."
xv
<PAGE>
SELECTED PRO FORMA FINANCIAL INFORMATION
The following selected unaudited pro forma consolidated condensed financial
information of Century gives effect to the Merger under the purchase accounting
method as if it had occurred on January 1, 1992 with respect to the selected
income statement data, and on September 30, 1993 with respect to the selected
balance sheet data, and after certain adjustments necessary to conform the basis
of presentation of the Century and Celutel information. The pro forma
information also gives effect to certain other acquisitions that Century
consummated in 1992 and 1993 and expects to consummate in early 1994. For
further information on the manner in which the following selected information
was derived, see "Unaudited Pro Forma Consolidated Condensed Financial
Information."
<TABLE> <CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1992 SEPTEMBER 30, 1993
------------------ -------------------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
SELECTED PRO FORMA INCOME STATEMENT DATA:
Total revenues........................................................... $ 415,495 $ 344,492
Operating income......................................................... $ 109,662 $ 94,158
Income before cumulative effect of changes in accounting principles...... $ 48,522 $ 45,627
Fully diluted earnings per share before cumulative effect of changes in
accounting principles...................................................... $ .91 $ .84
Dividends per share of common stock...................................... $ .293 $ .233
Fully diluted weighted average common shares outstanding................. 53,496 58,487
</TABLE>
<TABLE> <CAPTION>
SEPTEMBER 30, 1993
-------------------
(IN THOUSANDS)
<S> <C>
SELECTED PRO FORMA BALANCE SHEET DATA:
Net property, plant and equipment.......................................................... $ 812,222
Excess cost of net assets acquired, net.................................................... $ 432,392
Total assets............................................................................... $ 1,462,957
Long-term debt............................................................................. $ 560,100
Stockholders' equity....................................................................... $ 549,343
</TABLE>
xvi
<PAGE>
PER SHARE DATA
Set forth below with respect to the Century Stock and the Celutel Common
Stock is certain unaudited per fully-diluted common share data presented on a
historical, pro forma consolidated and pro forma equivalent basis. The
information set forth below should be read in conjunction with the financial
statements of Century and Celutel incorporated herein by reference and the
unaudited pro forma consolidated condensed financial information included
elsewhere herein.
<TABLE> <CAPTION>
AS OF OR FOR AS OF OR FOR
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1992 1993
---------------- -----------------
<S> <C> <C>
CENTURY STOCK
Book value
Historical............................................................... $ 7.87 $ 9.70
Pro forma consolidated(1)................................................ -- $ 10.27
Cash dividends
Historical............................................................... $ .29 $ .23
Pro forma consolidated(1)................................................ $ .29 $ .23
Income before cumulative effect of changes in accounting principles
Historical............................................................... $ 1.22 $ .96
Pro forma consolidated(1)................................................ $ .91 $ .84
CELUTEL COMMON STOCK(2)
Book value
Historical............................................................... $ (10.75) $ (12.81)
Pro forma equivalent..................................................... -- $ 3.18
Cash dividends
Historical............................................................... -- --
Pro forma equivalent..................................................... $ .10 $ .07
Income (loss) before cumulative effect of changes in accounting principles
Historical............................................................... $ (3.52) $ (2.04)
Pro forma equivalent..................................................... $ .30 $ .26
</TABLE>
- ---------------
(1) Gives effect to the Merger and to Other Acquisitions (as defined below)
Century consummated in 1992 and 1993 or expects to consummate in early 1994
as of the dates and based on the assumptions and adjustments described under
"Unaudited Pro Forma Consolidated Condensed Financial Information."
(2) The "pro forma equivalent" amounts set forth above with respect to the
Celutel Common Stock are calculated by multiplying the respective Century
pro forma consolidated amounts by a common stock equivalent exchange factor
of .33 as of and for the year ended December 31, 1992 and .31 as of and for
the nine months ended September 30, 1993. As of each such date, the
associated exchange factor was calculated by dividing (i) the number of
shares of Century Stock that would be issuable under the Merger Agreement if
all of the Aggregate Merger Consideration were payable in stock (applying
the assumptions set forth in Note 2 under "Unaudited Pro Forma Consolidated
Condensed Financial Information") by (ii) the number of Celutel Share
Equivalents as of such date, determined as if all outstanding Celutel
Preferred Stock had been converted into Celutel Common Stock as described
under "Agreement and Plan of Merger-Allocation of Aggregate Merger
Consideration Among Celutel Stockholders" and all outstanding Celutel
Warrants had been settled in the manner indicated under "Agreement and Plan
of Merger-Allocation of Aggregate Merger Consideration Among Celutel
Stockholders--Allocation to Warrant Holders." The "historical" amounts set
forth above with respect to the Celutel Common Stock reflect actual
historical results. If the historical book value amounts are adjusted to
reflect the effect of the above-listed assumptions used in calculating the
pro forma equivalent amounts, such historical book value amounts would be
$(.47) and $(.53) as of December 31, 1992 and September 30, 1993,
respectively.
ELECTION OF DIRECTORS
There will also be submitted to the Celutel stockholders at the Meeting a
proposal to elect five Directors of Celutel to serve until the earlier of the
consummation of the Merger or Celutel's next annual meeting of stockholders and
until their respective successors are elected and qualified. Messrs. Frank S.
Scarpa, Douglas Dittrick, J. Walter Corcoran, Avy H. Stein and John R. Willis
have been nominated for re-election as Directors at the Meeting. See
"Introduction-Record Date; Quorum; Vote Required" and "Election of Directors."
xvii
<PAGE>
INVESTMENT CONSIDERATIONS
STOCKHOLDERS OF CELUTEL SHOULD CONSIDER THE FOLLOWING INVESTMENT
CONSIDERATIONS IN DETERMINING WHETHER TO VOTE IN FAVOR OF THE MERGER PROPOSAL
AND TO ACQUIRE THE CENTURY STOCK OFFERED BY THIS PROXY 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. 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
1
<PAGE>
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 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 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
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
DEPENDENCE OF VALUE OF MERGER CONSIDERATION ON VALUE OF CENTURY STOCK. IF
THE MERGER IS CONSUMMATED AT A TIME WHEN THE AVERAGE CENTURY PRICE IS LESS THAN
$27, THEN THE NUMBER OF SHARES OF CENTURY STOCK TO BE ISSUED AT CLOSING WOULD BE
LESS THAN THE NUMBER TO BE ISSUED IN THE ABSENCE OF THE $27 PRICE FLOOR, AND,
ACCORDINGLY, THE VALUE OF THE MERGER CONSIDERATION AS OF SUCH TIME (DETERMINED
SOLELY BY REFERENCE TO SUCH TRADING PRICE) WOULD BE LESS THAN IT WOULD BE IF
SUCH TRADING PRICE WERE $27 OR MORE. SEE "AGREEMENT AND PLAN OF
MERGER-DETERMINATION OF AGGREGATE MERGER CONSIDERATION." THE CENTURY STOCK HAS
NOT TRADED AT A PRICE ABOVE $27 SINCE NOVEMBER 4, 1993. THERE CAN BE NO
ASSURANCE AS TO THE TRADING PRICE OF THE CENTURY STOCK PRIOR TO, ON OR AFTER THE
CLOSING DATE. See "Information About Century-Market Prices for Century Stock."
Celutel Stockholders are therefore urged to obtain current market quotations.
CONTROL OF CELUTEL BY PRINCIPAL STOCKHOLDERS. The Principal Stockholders
beneficially own shares of Celutel Stock entitling them to cast in excess of a
majority of Celutel's total voting power. Under the terms of an existing
stockholders' agreement, the Principal Stockholders have agreed to take all
actions within their control so that the authorized number of directors of
Celutel will be five persons, with two persons designated by CIVC, two persons
designated by Mr. Scarpa and one person jointly designated by CIVC and Mr.
Scarpa. Both of CIVC's designees are executive officers of CIVC. Mr. Scarpa's
designees are himself and Douglas Dittrick. See "Election of Directors."
AGREEMENT OF PRINCIPAL STOCKHOLDERS TO VOTE FOR THE MERGER
PROPOSAL. Subject to certain exceptions and limitations described herein, the
Principal Stockholders have agreed to vote in favor of the Merger Proposal.
These votes in and of themselves will be sufficient to adopt the Merger Proposal
without the vote of any other stockholders of Celutel. See "Introduction-Record
Date; Quorum; Vote
2
<PAGE>
Required." For a description of the rights of Celutel stockholders to dissent
from the Merger Proposal under the Delaware GCL, see "Rights of Dissenting
Stockholders of Celutel."
INDEMNIFICATION OBLIGATIONS; ADJUSTMENTS TO MERGER CONSIDERATION; PUBLIC
STOCKHOLDER HOLDBACK OF MERGER CONSIDERATION; STOCKHOLDERS' REPRESENTATIVE. At
the Closing, Century will deliver to the LC Escrow Agent, out of the cash that
would otherwise be payable as Merger Consideration to the Public Stockholders,
the Public Stockholder Holdback Amount (which is estimated to be approximately
$530,800 in the aggregate or approximately $.32 per share of Celutel Common
Stock held by the Public Stockholders). This amount will be held in escrow
pursuant to the LC Escrow Agreement to fund each Public Stockholder's pro rata
share of any Post-Closing Liabilities. The Public Stockholder Holdback Amount
will be disbursed to the Public Stockholders one year after the Closing (unless
the term of the Letter of Credit is extended by the Stockholders' Representative
and the Issuer under the circumstances described herein) only to the extent that
any amounts remain after payment of all Post-Closing Liabilities that may arise.
No assurance can be given that any such amounts will remain following such
payments. The Non-Public Stockholders will be obligated to pay their pro rata
share (after giving effect to the Allocation Agreement) of Post-Closing
Liabilities, and, as more fully described under "Agreement and Plan of
Merger-Holdback of Funds Under LC Escrow Agreement," each Non-Public Stockholder
will be required to establish either cash or credit collateral to secure its
reimbursement obligations to the Issuer for Post-Closing Liabilities. BY VIRTUE
OF THE CELUTEL STOCKHOLDERS' ADOPTION OF THE MERGER PROPOSAL AT THE MEETING,
EACH NON-DISSENTING CELUTEL STOCKHOLDER WILL BE DEEMED TO HAVE APPOINTED CIVC AS
THE STOCKHOLDERS' REPRESENTATIVE AND AS HIS AGENT AND ATTORNEY-IN-FACT TO
ADMINISTER THE DISBURSEMENT OF THE FUNDS HELD PURSUANT TO THE LC ESCROW
AGREEMENT AND FOR THE OTHER PURPOSES DESCRIBED HEREIN. For additional
information, see "Agreement and Plan of Merger-Determination of Aggregate Merger
Consideration," "-Indemnification," "-Holdback of Funds Under LC Escrow
Agreement" and "-Stockholders' Representative."
OTHER CONSIDERATIONS RELATING TO AGGREGATE MERGER CONSIDERATION. Although
the Merger Consideration payable at Closing cannot be definitively calculated
until immediately prior to the Closing Date, the minimum aggregate consideration
payable under the Merger Agreement will be $50,167,000 cash (after deducting the
Public Stockholder Holdback Amount estimated at $530,800) and between 1,536,000
and 1,878,000 shares of Century Stock. On a per share basis, this consideration
will equal $3.65 cash (after deducting the Public Stockholder Holdback Amount
estimated at $.32 per share) and between .120 and .147 shares of Century Stock.
The minimum amounts of Merger Consideration presented above are based on
various adverse assumptions that Celutel considers unlikely, as more fully
described herein. Celutel therefore anticipates that the actual Merger
Consideration will be slightly higher than the minimum Merger Consideration
described above. IN CONSIDERING WHETHER TO VOTE IN FAVOR OF THE MERGER PROPOSAL
OR TO EXERCISE YOUR RIGHT TO DISSENT THEREFROM UNDER DELAWARE LAW, YOU ARE URGED
TO CONSIDER, AMONG OTHER THINGS, THAT YOU MAY RECEIVE NO MORE THAN THE MINIMUM
AMOUNT OF CASH AND NUMBER OF SHARES OF CENTURY STOCK DESCRIBED ABOVE. IF FOR ANY
REASON THE MERGER CONSIDERATION AT CLOSING WILL BE LESS THAN THE MINIMUM AMOUNT
OF CASH AND NUMBER SHARES DESCRIBED ABOVE, CELUTEL WILL SUPPLY YOU WITH
SUPPLEMENTAL MATERIALS THAT WILL RESOLICIT YOUR PROXY AND WILL ADJOURN THE
MEETING UNTIL AT LEAST 20 BUSINESS DAYS AFTER THE MAILING OF SUCH MATERIALS. For
further information concerning the Merger Consideration, see "Agreement and Plan
of Merger-- Determination of Aggregate Merger Consideration."
If on the Closing Date the Average Century Price is $ (which was the
closing per share sale price on January , 1994, the last trading date
preceding the date of this Proxy Statement), the value of the minimum aggregate
consideration on such date (determined solely by reference to such trading
price) would be $ , which equals $ on a per Celutel Share Equivalent
basis. CELUTEL
3
<PAGE>
STOCKHOLDERS SHOULD BE AWARE THAT CHANGES IN THE TRADING PRICE OF CENTURY STOCK
WILL AFFECT THE VALUE OF THEIR MERGER CONSIDERATION AND ARE ACCORDINGLY URGED TO
OBTAIN CURRENT MARKET QUOTATIONS.
In addition, due to the stock dividends that accrue on a daily basis with
respect to the Celutel Preferred Stock, any delays in consummating the Merger
will, in the absence of any countervailing factors, decrease the portion of the
Aggregate Merger Consideration allocable to holders of Celutel Common Stock. See
"Agreement and Plan of Merger-Allocation of Aggregate Merger Consideration Among
Celutel Stockholders--Effect of Preferred Stock Dividends on Allocation."
INTERESTS OF CERTAIN PERSONS IN THE MERGER. Celutel's executive officers
and certain of Celutel's directors have certain interests that present them with
actual or potential conflicts of interest in connection with the Merger. The
Merger Agreement provides that (i) Mr. Scarpa will receive a $650,000 severance
payment in settlement of his 1988 employment agreement, as amended, (ii)
Celutel's three other executive officers will receive bonus payments in an
aggregate amount equal to 1% of the amount used in calculating the Aggregate
Merger Consideration, calculated exclusive of Celutel's transaction costs
related to the Merger (but in no event in excess of $1.1 million), pursuant to
the Management Stay Bonus Plan adopted by the Celutel Board of Directors in
March 1992 and (iii) CIVC and certain current and former officers and directors
of Celutel will be entitled to continued benefits under certain indemnification
agreements and by-law provisions. In addition, Century and Celltech, a company
beneficially owned by Mr. Scarpa and Celutel's three other executive officers
that provides electronic data processing and billing services to Celutel, have
agreed to amendments to the agreements pursuant to which those services are
provided in consideration of payments to Celltech of $525,000. See "Agreement
and Plan of Merger-Executive Officer Benefits", "-Other Closing
Conditions--Amendment of Celltech Agreements" and "-Indemnification of CIVC and
Celutel's Officers and Directors."
4
<PAGE>
INTRODUCTION
This Proxy Statement and the accompanying forms of proxy have been
furnished in connection with the solicitation by the Board of Directors of
Celutel of proxies to be used at the annual meeting of stockholders to be held
at the time and place specified in the accompanying Notice of Annual Meeting of
Stockholders, and at any adjournments or postponements thereof (the "MEETING").
Only holders of record of Celutel Common Stock or Celutel Preferred Stock at the
close of business on January 3, 1994 (the "RECORD DATE") are entitled to notice
of and to vote at the Meeting. This Proxy Statement and the accompanying proxies
are first being mailed to stockholders of Celutel on or about January , 1994.
Celutel will bear the costs of soliciting proxies from its stockholders.
Although not anticipated, proxies may be solicited without extra remuneration by
directors, officers or employees of Celutel, by mail, telephone, telex,
telefacsimile, telegram or personal contact.
PURPOSE OF MEETING
The purpose of the Meeting is (i) to consider and vote upon a proposal (the
"MERGER PROPOSAL") to adopt the Merger Agreement (and the accompanying LC Escrow
Agreement), pursuant to which, among other things, (a) Celutel Acquisition
Corp., a wholly-owned subsidiary of Century ("CENTURY SUB"), will merge with and
into Celutel (the "MERGER"), (b) each outstanding share of Celutel Stock (other
than shares held by dissenting stockholders) and each Celutel Warrant will be
converted into an amount of cash and number of shares of Century Stock
determined as described under "Agreement and Plan of Merger-Determination of
Aggregate Merger Consideration" and "-Allocation of Aggregate Merger
Consideration Among Celutel Stockholders," and (c) the Celutel stockholders will
appoint CIVC as their Stockholders' Representative in connection with the Merger
Agreement and LC Escrow Agreement, and (ii) to elect five Directors to hold
office until the earlier of (a) the consummation of the Merger or (b) Celutel's
next annual meeting of stockholders and until their respective successors are
duly elected and qualified.
The Board of Directors of Celutel is not aware of any other matters to be
presented at the Meeting. If, however, other matters are properly brought before
the Meeting, the persons named in the enclosed proxies will have discretion to
vote or abstain from voting thereon according to their best judgment.
For further information concerning the Merger, the Merger Agreement and the
accompanying LC Escrow Agreement, see "Agreement and Plan of Merger," and for
further information regarding the election of Directors, see "Election of
Directors."
VOTING AND REVOCATION OF PROXIES
If properly executed and timely returned, the enclosed proxies will be
voted in accordance with the instructions indicated thereon and will supersede
all previously delivered proxies. If no voting instructions are given, duly
executed and delivered proxies will be voted in favor of the Merger Proposal and
for each of the five below-listed nominees for election to Celutel's Board of
Directors. Shares as to which the proxy holders have been instructed to abstain
from voting will be so indicated in the tabulation of voting results and will be
counted for purposes of establishing a quorum. Shares that have not been voted
by brokers who hold shares on behalf of the beneficial owner ("BROKER
NON-VOTES") will not be counted for purposes of establishing a quorum. Because
the Merger Proposal must be adopted by a majority of Celutel's total voting
power, abstentions and broker non-votes will have the same effect as voting
against the Merger Proposal. Because Celutel's Directors are elected by
plurality vote, withholding authority to vote for any nominee named herein will
not affect the outcome of the vote. For
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information concerning the voting agreements of the Principal Stockholders and
certain other stockholders, see "-Record Date; Quorum; Vote Required."
Stockholders holding both Celutel Common Stock and Celutel Preferred Stock have
been delivered separate proxies for each such class of stock.
A proxy may be revoked at any time before it is voted by (i) attending the
Meeting and voting in person or (ii) delivering a written revocation or a
later-dated proxy to the Secretary of Celutel prior to the commencement of the
Meeting.
RECORD DATE; QUORUM; VOTE REQUIRED
The Board of Directors of Celutel has set the Record Date as the date to
determine those record holders of Celutel Common Stock and Celutel Preferred
Stock entitled to notice of and to vote at the Meeting. The holders of Celutel
Common Stock and Celutel Preferred Stock will vote as a single class with
respect to each matter specified in the accompanying Notice of Annual Meeting of
Stockholders. On that date there were outstanding 3,516,188 shares of Celutel
Common Stock, each of which is entitled to one vote with respect to each matter
to be voted upon at the Meeting, and 4,254.1388 shares of Celutel Preferred
Stock, including accrued and unpaid stock dividends payable thereon. As of such
date, these shares of Celutel Preferred Stock were convertible into an aggregate
of 8,508,278 shares of Celutel Common Stock and, pursuant to the terms of
Celutel's certificate of incorporation, the holders of such stock are entitled
to one vote for each share of Celutel Common Stock into which it is convertible
as of the Record Date. See "Comparative Rights of Century and Celutel
Stockholders-Preferred Stock."
Holders of Celutel Stock entitled to cast a majority of the total voting
power of Celutel must attend the Meeting in person or be duly represented by
proxy in order for a quorum to be properly constituted at such meeting.
The Delaware GCL requires that the Merger Proposal be adopted by the
affirmative vote of the holders of a majority of the total voting power of the
Celutel Stock. Under the Merger Agreement, CIVC and Mr. Scarpa have agreed to
vote all shares of Celutel Stock held by them in favor of the Merger Proposal,
unless (i) between October 8, 1993 and the date of the Meeting there has been a
material adverse change in the operations, assets, business or condition of
Century, which is defined in the Merger Agreement to exclude, among other
things, material adverse changes caused by events or conditions not within
Century's control and decreases in the trading price of Century Stock that do
not relate to events or conditions affecting Century, or (ii) the Merger
Agreement has been terminated in accordance with its terms. For a description of
Celutel's rights to terminate the Merger Agreement, see "Agreement and Plan of
Merger-Amendment, Waiver and Termination." In the absence of either of these
circumstances, CIVC and Mr. Scarpa will be required to vote in favor of the
Merger Proposal even if Century Stock continues to trade below the $27 floor
price used in calculating the number of shares of Century Stock issuable in the
Merger. As of the Record Date, CIVC and Mr. Scarpa together beneficially owned
an aggregate of 2,821.6708 shares of Celutel Preferred Stock (including accrued
and unpaid stock dividends thereon) and an aggregate of 1,382,766 shares of
Celutel Common Stock, which shares of Celutel Stock entitle them to an aggregate
of 7,026,107 votes at the Meeting or approximately 58% of the total votes
entitled to be cast with respect to the Merger Proposal. These votes in and of
themselves will be sufficient to adopt the Merger Proposal without the vote of
any other Celutel stockholder. In addition, as of the Record Date Celutel's
three other executive officers and three of its other Directors held shares of
Celutel Stock entitling them to vote approximately 10.5% of Celutel's total
voting power and have advised Celutel that they intend to vote in favor of the
Merger Proposal. Celutel's directors and officers and certain persons who may be
deemed to be affiliates of Celutel are entitled to cast approximately 71% of
Celutel's voting power. For further information concerning the amount of Celutel
Stock beneficially owned by Celutel's directors, executive officers and
principal
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stockholders and the method of determining such beneficial ownership, see
"Information About Celutel-Security Ownership of Certain Beneficial Owners and
Management."
If a quorum is present, Directors will be elected at the Meeting by a
plurality of the votes of the holders of outstanding shares of Celutel Stock
present in person or by proxy at the Meeting. In accordance with their
obligations under a 1990 stockholders agreement, the Principal Stockholders have
agreed to vote in favor of the five nominees named herein. These votes, in and
of themselves, will be sufficient to elect these nominees without the vote of
any other Celutel stockholder. See "Election of Directors."
Neither the laws of the State of Louisiana, the jurisdiction in which
Century is incorporated, nor the rules of the New York Stock Exchange require
that the Merger Proposal or the issuance of the Century Stock pursuant to the
Merger be approved by the Century stockholders.
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BACKGROUND AND OTHER GENERAL
INFORMATION RELATING TO THE MERGER
BACKGROUND OF MERGER
INTRODUCTION. In early 1990, Celutel began to seek additional debt and
equity capital, or, alternatively, to enter into a business combination. As a
result of these efforts, CIVC made its investment in Celutel in May 1991. See
"Information About Celutel-Security Ownership of Certain Beneficial Owners and
Management." After CIVC's investment in Celutel in 1991, Celutel began to
consider certain specific strategic transactions in order to maximize
stockholder value, including acquiring or effecting a business combination with
another cellular company, purchasing additional minority interests in its
operating subsidiaries, selling a portion of its cellular subsidiaries, selling
all of Celutel, obtaining additional equity investments and restructuring its
equity (including converting Celutel Preferred Stock into Celutel Common Stock).
Celutel also considered whether it could operate more efficiently as a private
company.
In reviewing these alternatives, Celutel concluded that the trend towards
industry consolidation would create significant competitive pressure for Celutel
to either expand through acquisition, merge with another entity or sell the
business. In September 1991, Celutel retained Daniels & Associates, a
communications broker ("DANIELS"), to assist it in identifying and contacting
parties with an interest in such transactions.
In an effort to expand through acquisition, from September 1991 to June
1992 Celutel continued to acquire additional minority interests in its operating
subsidiaries, but Celutel's attempts at that time to purchase additional
strategically located cellular systems were unsuccessful, principally as a
result of limited financing opportunities. In order to obtain additional
financing, Celutel considered whether it could obtain additional equity capital,
but concluded that additional equity would not be available on acceptable terms
or in the amounts it considered necessary to compete in light of then-current
industry trends. Celutel also considered selling in one or more transactions all
or a substantial portion of its assets but concluded that such transactions
would result in significant taxable gain (except in the case of the sale of the
MGC Properties, as defined and described below). Finally, although the
possibility of converting the Celutel Preferred Stock into Celutel Common Stock
was considered, it was concluded that such a transaction would not provide
Celutel with financing necessary to pursue an acquisition strategy. As a result
of the lack of feasibility of the other alternatives, Celutel concluded that a
business combination with another entity offered the most advantageous
prospects.
Meanwhile, from time to time, management of Celutel, and on occasion
certain members of Celutel's Board, had further discussions with the various
investment bankers and other third parties, including entities in the
telecommunications industry, which had expressed interest in a business
combination transaction involving Celutel. These informal discussions continued
from time to time until July 1992, at which time the Board of Directors of
Celutel retained Lazard, as financial advisor, in order to assist it in
ascertaining valuations for Celutel, identifying potential merger partners or
acquirors, and otherwise evaluating and advising the Board with respect to
strategic alternatives which would maximize stockholder values. On July 6, 1992,
Celutel entered into an engagement letter with Lazard. Lazard, as part of its
investment banking business, is continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes. Celutel selected Lazard as its financial advisor
on the basis of Lazard's experience and expertise in transactions similar to the
Merger and following discussions with other investment bankers. Lazard is a full
service securities firm and, in the course of its normal trading activities, may
from time to time effect transactions and hold positions in the securities of
Celutel and Century. In August 1992, following the termination of their previous
arrangements, Celutel and Daniels entered into a new, more limited agreement
pursuant to which Daniels agreed to support Lazard and Celutel in such efforts.
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Following discussions between Lazard and management, Celutel's Board
authorized Lazard and Daniels to contact potentially interested acquirors, and
in September 1992 Lazard prepared and distributed to approximately 17
potentially interested acquirors (including Century) a confidential offering
memorandum describing Celutel and its attractiveness as an investment. From
September 1992 to August 1993 Lazard and Daniels identified and contacted these
and other persons interested in acquiring certain or all of Celutel's cellular
operating properties in an attempt to solicit bids from all interested
purchasers. Although Celutel and its financial advisors engaged in discussions
and preliminary negotiations with various potential strategic and financial
acquirors, only Century and Telephone and Data Systems, Inc. (the "OTHER
BIDDER") submitted offers to purchase Celutel.
NEGOTIATIONS WITH CENTURY AND OTHER BIDDER. In early 1993, Celutel and
Century engaged in discussions regarding the acquisition by Century of all of
Celutel but no agreement was reached. On February 11, 1993, Celutel entered into
a letter of intent with Century relating to the proposed acquisition by Century
of Celutel's operating systems in Pascagoula and Biloxi-Gulfport, Mississippi
(the "MGC PROPERTIES"). A definitive agreement was entered into on April 21,
1993 (the "MGC AGREEMENT"). This agreement provided for the purchase by Century
of the MGC Properties at a price of approximately $36 million (subject to
adjustment), of which approximately $14.4 million was to be paid in cash and
approximately $21.6 million was to be paid in the form of Century Stock. Celutel
intended to use the proceeds from this transaction, including the proceeds from
the resale of the Century Stock, to repay a substantial portion of its
outstanding bank indebtedness. Celutel estimated that its bank indebtedness
would have been reduced to approximately $8,000,000. The consummation of the
agreement was subject to various closing conditions, including obtaining the
necessary regulatory approvals. As of December 31, 1993, the MGC Properties
represented approximately 25% of Celutel's total pops and approximately 42% of
Celutel's total assets on a book value basis. The MGC Agreement implied a value
of approximately $128 per pop for the MGC Properties, based on pops owned by
Celutel as of December 31, 1993. For a description of the $ to $132 per pop
price range implied by the minimum Merger Consideration, see "Agreement and Plan
of Merger-Determination of Aggregate Merger Consideration--Estimates of
Aggregate Merger Consideration."
In July 1993, Celutel and Century commenced further negotiations regarding
Century's acquisition of all of Celutel and, although the closing conditions
under the MGC Agreement were met so as to enable a completion of that
transaction on August 31, 1993, the closing of that transaction was deferred
pending the results of such negotiations.
Prior to entering into the MGC Agreement with Century, Celutel also engaged
in negotiations with the Other Bidder who had evidenced an interest in acquiring
all of Celutel but no agreement was reached. After entering into the MGC
Agreement with Century, Celutel received a proposed letter of intent from the
Other Bidder relating to the acquisition of Celutel's remaining operating
systems in Brownsville and McAllen, Texas and in Jackson, Mississippi. Such
letter of intent also provided for the acquisition of the MGC Properties in the
event the MGC Agreement was not consummated.
Celutel continued to negotiate with the Other Bidder on the previously
submitted proposed letter of intent in an attempt to obtain more acceptable
terms and conditions, including a higher purchase price. As stated above, in
July 1993 Celutel also commenced further negotiations with Century relating to
Century's acquisition of all of Celutel (including the MGC Properties). After
extensive negotiations with both parties, during the week of August 16, 1993
Celutel received written offers from both parties in the form of letters of
intent that proposed business combinations pursuant to which Celutel
stockholders would receive consideration one-half in the form of cash and
one-half in the form of stock.
Celutel's Board of Directors met on August 17 and 18, 1993 to consider
these offers. All members of the Board of Directors, representatives from
Lazard, representatives of management, Celutel's legal counsel and special
counsel to certain members of the Board (see "--Other") were present at this
meeting (except that Mr. Corcoran was absent on August 17, 1993). At the meeting
on August 17, 1993, the Board, with the assistance of Lazard, management and
legal counsel, reviewed the terms of
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both offers and concluded that management should continue to communicate with
the two competing bidders during the course of its meeting and seek improved
offers from each of them so that the Board could make a decision on August 18,
1993. On the basis of its evaluation of the two offers described below, and its
desire to obtain a higher price and better terms for the Celutel stockholders,
the Board directed Lazard to contact the Other Bidder, indicate that its bid was
less favorable and that it would have to deliver an improved offer in order for
its bid to be accepted. The Board also directed management of Celutel to contact
Century to seek a higher price and improved terms.
During the evening of August 17, 1993, Lazard contacted the Other Bidder
and received a revised offer which increased the offered purchase price on a per
pop basis but also changed certain components of the offer in such a way as to
limit significantly the increase in the total price offered. Such revised offer
also failed to improve certain significant terms of its offer that the Board
viewed as unfavorable. As a result, on August 18, 1993, Celutel and Lazard
contacted representatives of the Other Bidder requesting it to improve those
unfavorable terms prior to presenting the revised offer to the Board later that
day. The Other Bidder did not submit a revised offer responding to this
additional request. Celutel again contacted Century on August 18, 1993 to seek a
higher price and improved terms for its stockholders and informed Century that
it would have to improve its offer in order for it to be accepted. Later that
day, Century submitted an improved offer which it characterized as its final
offer.
During the meeting on August 17 and 18, 1993, Celutel's management
presented to the Board a summary computation comparing the net price per share
of Celutel Stock to be received by the Celutel stockholders under each offer,
and Celutel's legal counsel reviewed for the Board the principal terms of each
offer. Based on its then-current estimates and the then-current trading prices
of the bidders' stock, management concluded that the net price per share of
Celutel Stock under the two offers were substantially equivalent (with the Other
Bidder's offer being less than 1% higher, viewed solely on a net price per share
basis). Based on Celutel's then-current estimates of the amounts of the
aggregate consideration offered by each bidder (which have been calculated to
include certain obligations proposed to be paid or assumed by the bidders and to
give effect to certain tax savings), and based on the then-current trading
prices for each bidder's stock, the per pop value implied by the Century offer
was approximately $129.23, and the per pop value implied by the Other Bidder's
offer was approximately $129.90, in each case calculated based on pops owned by
Celutel as of December 31, 1993. For purposes of comparing the per pop values
implied by each bidder's offer, the implied per pop value of the consideration
offered by the Other Bidder has been calculated to represent a blended per pop
value of all of Celutel's properties based on the assumptions that (i) Century
would have purchased the MGC Properties at the approximately $128 implied per
pop value (as described under "-Negotiations with Century and Other Bidder") and
(ii) the Other Bidder would have purchased the remaining Celutel properties at
an approximately $ per pop value. For a description of the $ (if the
Average Century Price is $ , the closing per share price of Century Stock on
the last trading date preceding the date of this Proxy Statement) to $132 (if
the Average Century Price is between $27 and $33) per pop price range implied by
the minimum if Aggregate Merger Consideration, see "Agreement and Plan of
Merger-Determination of Aggregate Merger Consideration--Minimum and Anticipated
Aggregate and Per Share Merger Consideration."
On both August 17 and August 18, 1993, Lazard reviewed in detail its
written presentation materials for the Celutel Board and stated that, subject to
completion of its due diligence, it was of the opinion that the financial terms
of both Century's offer and the Other Bidder's offer were within the range of
fairness to Celutel's Public Stockholders. See "Opinion of Financial Advisor."
During the continuation of its meeting on August 18, 1993, after an
extensive evaluation of the financial consideration contained in the two offers,
and after taking into account all other financial aspects of each offer, the
Board unanimously agreed that, from a financial point of view, the offers were
substantially equivalent. The Board unanimously decided, however, that the other
terms and conditions contained in the Century proposal were more advantageous to
Celutel and its stockholders than those
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contained in the offer of the Other Bidder. In making this determination, the
Board principally considered (i) the breadth of the exclusivity provisions and
the Board's ability to accept higher unsolicited offers which might be received
from other potential acquirors after signing a letter of intent, (ii) the
breadth of the ability of the buyer to terminate the letter of intent after
completing its due diligence of Celutel, (iii) the amount of the termination
fees, (iv) indemnification provisions, (v) the stock price, stock price
stability, stock price protection and long-term investment opportunities with
respect to each bidder's stock to be issued in the transaction, (vi) tax
savings, (vii) lock-up provisions and (viii) management's experience in
negotiating with the two bidders and its judgment as to the likelihood of
entering into and consummating a definitive merger agreement on the terms set
forth in the offers.
Based on the foregoing considerations and the other considerations
described under "-Background of Merger--Introduction" and "-Recommendation of
the Celutel Board of Directors and Reasons for the Merger," on August 18, 1993
the Board unanimously concluded that (i) the Century offer, taken as a whole,
was more favorable than the offer of the Other Bidder, (ii) based on the advice
of Lazard, the Century offer was fair from a financial point of view to the
Public Stockholders, subject to Lazard completing its due diligence review of
Century and Celutel, and (iii) acceptance of such offer was in the best
interests of the Celutel stockholders, and the Board unanimously approved the
Century letter of intent (the "CENTURY LETTER OF INTENT"), which was entered
into on August 18, 1993, and authorized Celutel's officers to negotiate a
definitive merger agreement with Century.
The Celutel Board met on September 9, 1993 to review the status and terms
of the proposed Merger Agreement and to receive Lazard's review and report on
the fairness of the proposed Merger Consideration to the Public Stockholders
from a financial point of view. All members of the Board, representatives from
Lazard and management and Celutel's legal counsel (including special counsel to
certain members of the Board) were present.
At the September 9, 1993 meeting, representatives of Lazard reviewed in
detail the assumptions and analyses performed by Lazard in connection with the
preparation of its fairness opinion and delivered its oral opinion to the
Celutel Board that the Merger Consideration to be received by the Public
Stockholders pursuant to the Merger Agreement is fair to such stockholders from
a financial point of view. See "-Opinion of Financial Advisor." Also at the
September 9, 1993 meeting, Celutel's legal counsel and management reviewed for
the Board a summary of the principal terms of the draft Merger Agreement and
advised that the principal terms of the draft Merger Agreement were
substantially the same as the terms set forth in the Century Letter of Intent.
NEGOTIATIONS OF CERTAIN MATTERS WITH CENTURY. The Merger Agreement reflects
the extensive arm's-length negotiations between Celutel and Century over several
months. In negotiating and evaluating the Merger Agreement, Celutel's officers
and directors considered all of the material terms and conditions of the Merger
Agreement viewed as a whole.
The amount of the overall consideration payable by Century pursuant to the
Merger Agreement was negotiated by (i) starting with the $36 million price that
Century had agreed to pay for the MGC Properties pursuant to the MGC Agreement,
(ii) adding thereto a price for the other Celutel properties determined by
multiplying a per pop price of $130.10 by certain 1992 estimates of Celutel's
pops for these properties, subject to an agreement that such price would be
adjusted to, among other things, reflect subsequently acquired pops and
estimated 1993 pops when available, (iii) as discussed further herein, deducting
therefrom the amount of Celutel's long-term indebtedness (which is defined under
the Merger Agreement as all of Celutel's indebtedness for borrowed money other
than intercompany indebtedness and indebtedness deemed to be a current liability
under generally accepted accounting principles) and (iv) as discussed further
herein, adding or deducting therefrom Celutel's working capital surplus or
deficit, respectively (determined in accordance with generally accepted
accounting principles). In addition, Century agreed (i) to assume Celutel's
obligations to pay a $650,000 severance payment to Mr. Scarpa, (ii) to assume
Celutel's obligations to pay up to $1.1 million of bonus payments
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to Celutel's three other executive officers and (iii) to pay $525,000 to a
company beneficially owned by Mr. Scarpa and Celutel's three other executive
officers in connection with the amendment of certain contracts of Celutel's
operating subsidiaries, all of which are described further herein. During the
course of the negotiations, Century insisted on post-Closing adjustments to the
Merger Consideration that would permit it to verify Celutel's long-term
indebtedness and working capital as of the Closing Date, and which were similar
to the adjustments previously agreed to in the MGC Agreement. As a result, the
parties agreed to the post-Closing adjustments described under "Agreement and
Plan of Merger-Determination of Aggregate Merger Consideration--Post-Closing
Adjustments."
As described above under "-Negotiations with Century and Other Bidder," the
per pop price implied by the Century transaction is slightly higher than the per
pop price which would have been paid by Century for the MGC Properties (based on
December 31, 1993 pops). During negotiations Century consistently took the
position that Celutel's Texas properties are less advantageous demographically,
and therefore less attractive than the MGC Properties. As a result, Celutel
concluded it would not be able to obtain any significant premium as a result of
the sale of all of Celutel to Century. Celutel and Century agreed to Aggregate
Merger Consideration generally payable 50% in cash and 50% in stock because
Century had insisted on a large stock component in the MGC Purchase Agreement
and had indicated that it would require a substantial portion of the Aggregate
Merger Consideration to be paid in Century Stock, and Celutel was willing to
agree to the stock component in part because the Other Bidder's offer was
generally payable 50% in cash and 50% in stock.
During the negotiations, Century insisted upon fixing the maximum number of
shares of Century Stock issuable in connection with the Merger through use of a
$27 floor price to the Average Century Price. Following extensive negotiations
of this and other issues, Celutel agreed to this request in exchange for a
reciprocal agreement to use a $33 ceiling price fixing the minimum amount of
shares issuable, as well as certain conditions precedent to Celutel's and the
Principal Stockholders' obligations under the Merger Agreement in the event of a
material adverse change in Century. However, notwithstanding Celutel's repeated
efforts, Century refused to include a closing condition allowing Celutel to
refrain from consummating the Merger if the Century Stock traded below a minimum
floor price. Although Celutel's Board viewed this particular aspect of the
negotiations negatively, the Board ultimately concluded that the Merger
Agreement was fair to and in the best interests of the Celutel stockholders,
principally considering with respect to this issue the following factors: (i)
that the price of the Century Stock was trading near the midpoint of the $27-$33
price range at the time this range was agreed upon in August 1993 (see
"Information About Century-Market Prices for Century Stock"), (ii) Century's
historical stock appreciation and stock price stability, (iii) that the fixed
floor and ceiling price range offered potential advantages to both parties, (iv)
that the conditions precedents relating to material adverse changes in Century
offered important protection to Celutel's stockholders, (v) that any decline in
the market price of Century Stock that did not result from a material adverse
change in the business of Century would likely be due to market conditions that
would similarly affect the value of Celutel Common Stock, (vi) that Century had
indicated its unwillingness to proceed with the Merger without a price floor,
(vii) that the present time was favorable for Celutel to enter into a business
combination, and (viii) that insisting upon such a closing condition might cause
a breakdown of negotiations. With respect to negotiating the Merger Agreement's
indemnification provisions, the Celutel Board considered Century's historical
unwillingness to acquire businesses without indemnification rights (which it
reiterated in negotiating the MGC Agreement and the Merger Agreement) and
concluded that it was in the best interests of Celutel's stockholders to extend
indemnification rights, provided there were reasonable limits on the length of
the indemnification period and the Public Stockholders' maximum financial
exposure (see "Agreement and Plan of Merger-Indemnification"). With respect to
the adjustments to the Aggregate Merger Consideration, the Celutel Board
reviewed the factors described above as well as the fact that such adjustments
were reasonable and customary, that the Other Bidder requested similar
adjustments, and that Century had agreed to allow a working capital adjustment
in Celutel's favor in the event of a working capital surplus. For a detailed
discussion of all the terms and conditions of the Merger Agreement, see
"Agreement and Plan of Merger."
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For information regarding the recommendation of the Celutel Board and the
reasons therefor, see "Background and Other General Information Relating to the
Merger-Recommendation of the Celutel Board of Directors and Reasons for the
Merger."
APPROVAL OF MERGER AGREEMENT. At a meeting held on October 7, 1993, at
which all members of the Board, representatives from Lazard and management and
Celutel's legal counsel (including special counsel to certain members of the
Board) were present, the Board reviewed the final proposed Merger Agreement with
Century.
At the October 7, 1993 meeting, Lazard again confirmed its oral fairness
opinion to the Board (see "-Opinion of Financial Advisor") and legal counsel
summarized all material changes in the final proposed Merger Agreement presented
to the Board since the draft reviewed by the Board at the September 9, 1993
meeting. After considering all of the factors described above and under
"-Recommendation of the Celutel Board of Directors and Reasons for the Merger,"
the Board of Directors of Celutel unanimously approved the Merger Agreement and
directed that such Merger Agreement be submitted to the Celutel stockholders for
their consideration. On October 8, 1993, Celutel and Century entered into the
Merger Agreement.
At a meeting held on January 5, 1994, at which all members of the Board,
representatives of Lazard and management, and Celutel's legal counsel (including
special counsel to certain members of the Board) were present, the Board, among
other things, authorized the submission of this Proxy Statement to Celutel's
stockholders along with the accompanying recommendation that the Celutel
stockholders vote in favor of the Merger Proposal contained under
"-Recommendation of the Celutel Board of Directors and Reasons for the Merger."
At this meeting, Lazard again confirmed its oral fairness opinion to the Board.
For further information on this meeting, see "-Recommendation of the Celutel
Board of Directors and Reasons for the Merger."
Pursuant to the Merger Agreement, Mr. Scarpa and CIVC, who beneficially
owned as of the Record Date shares of Celutel Stock entitling them to cast
approximately 58% of Celutel's total voting power, have agreed, subject to
certain exceptions and limitations, that they will vote in favor of the Merger
Proposal, in which event the Merger Proposal would be adopted without regard to
the vote of any other Celutel stockholders. See "Introduction-Record Date;
Quorum; Vote Required."
OTHER. During the course of negotiations, representatives of CIVC and the
other holders of Preferred Stock considered and discussed with Celutel's
management various alternative structures for the sale (including a possible
sale of their capital stock). Management, CIVC and the other Non-Public
Stockholders subsequently entered into the Allocation Agreement in order for the
holders of Celutel Preferred Stock to obtain what they believed to be the value
of their Celutel Preferred Stock and related rights in connection with the sale
of Celutel without adversely affecting the Public Stockholders. The holders of
Preferred Stock believed that they were entitled to a premium with respect to
the Celutel Preferred Stock because it is an inherently more valuable security
than the Celutel Common Stock for various reasons, including its (i) rights to
dividends at a rate of 18% per annum, (ii) conversion rights and redemption
features, (iii) controlling voting rights and (iv) high liquidation preference.
See "Comparative Rights of Century and Celutel Stockholders-Preferred Stock."
The holders of Celutel Preferred Stock believed that they would obtain the value
of their Celutel Preferred Stock if the portion of the Aggregate Merger
Consideration allocable to the Celutel Preferred Stock were computed as if such
stock were optionally redeemed by Celutel and the holders exercised all
redemption warrants issuable as a consequence of such redemption. Nonetheless,
the holders of Celutel Preferred Stock and the other Non-Public Stockholders
agreed to allocate this premium solely among the Non-Public Stockholders so as
not to affect adversely the Public Stockholders. As explained further herein,
the Allocation Agreement does not adversely affect the Public Stockholders
because under both the Merger Agreement and the Allocation Agreement the portion
of the Aggregate Merger Consideration allocable to the Public Stockholders is
determined as if all Celutel Preferred Stock were converted into Celutel
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Common Stock. Under the Allocation Agreement, the remainder of the Aggregate
Merger Consideration is generally allocated among the Non-Public Stockholders on
an as-if-redeemed basis, which results in the Non-Public Stockholders receiving
less than the Public Stockholders per share of Celutel Common Stock with respect
to their Celutel Common Stock. See "Agreement and Plan of Merger-Allocation of
Aggregate Merger Consideration Among Celutel Stockholders--Allocation
Agreement." For a description of the controlling interest in Celutel of CIVC and
Mr. Scarpa, see "Investment Considerations-Considerations Relating to the
Merger--Control of Celutel by Principal Stockholders."
In connection with the sale of Celutel, Mr. Scarpa and the directors
designated by CIVC (Messrs. Stein and Willis) agreed that the other members of
the Board (who did not have the same interest in the Merger as Mr. Scarpa and
CIVC as principal stockholders) should retain separate counsel in order to
review and assist them in resolving any potential conflicts of interest that may
arise during the course of negotiations regarding the sale. Messrs. Corcoran and
Dittrick retained Christy & Viener to represent them in such capacity and to pay
particular attention to the interests of the Public Stockholders. For a
description of certain voting arrangements with respect to the election of
directors, see "Election of Directors." Celutel is represented by Kirkland &
Ellis (as special counsel in connection with the Merger), William S. Clarke,
P.A. (Celutel's regular outside counsel), and Piper & Marbury (special counsel
for certain matters related to the Merger). Kirkland & Ellis also represents
CIVC in connection with the Merger and acts as principal outside counsel to
CIVC. K&E Partners (a partnership formed by certain partners of Kirkland &
Ellis) holds as of the Record Date approximately 16 shares of Celutel Preferred
Stock and 3,930 shares of Celutel Common Stock (or approximately 0.3% of the
Celutel Share Equivalents (as defined below)). Piper & Marbury also represents
management (including Mr. Scarpa) in connection with the Merger.
OTHER TRANSACTIONS WITH CENTURY. On June 15, 1993, Celutel entered into an
agreement with PriCellular Corporation to purchase an approximately 8.7%
minority interest in Celutel's subsidiary that holds the Biloxi-Gulfport
nonwireline cellular license. By letter agreement dated August 30, 1993, Celutel
assigned to Century its right to acquire approximately 54% of this 8.7%
interest. Celutel and Century completed the purchase of these shares on August
31, 1993. The August 30, 1993 letter agreement provides that if neither the
Merger nor the MGC Agreement is completed, Celutel will purchase the shares that
Century acquired thereunder at a price equal to Century's purchase price of
$594,340.
On November 3, 1993, Celutel entered into an agreement with McCaw Cellular
Communications, Inc. to purchase approximately 1.8%, 1.9% and 1.5% minority
interests in Celutel's subsidiaries that hold the McAllen-Edinburg-Mission,
Brownsville-Harlingen and Biloxi-Gulfport nonwireline cellular licenses,
respectively. By letter agreement dated November 3, 1993, Celutel assigned to
Century its right to acquire the 1.5% interest in the Biloxi-Gulfport license.
Celutel and Century completed the purchase of these shares on November 4, 1993.
The November 3, 1993 letter agreement provides that if neither the Merger nor
the MGC Agreement is completed, Celutel will purchase the shares that Century
acquired thereunder at a price equal to Century's purchase price of $242,700.
RECOMMENDATION OF THE CELUTEL BOARD OF DIRECTORS AND REASONS FOR THE MERGER
During their two-day meeting on August 17 and 18, 1993, the Board of
Celutel, with the assistance of Lazard and legal counsel, considered the terms
of the proposed letters of intent from Century and the Other Bidder and reviewed
various business, financial and legal considerations relating thereto, all as
described above. In determining whether to enter into and recommend approval of
the Merger Agreement, at its meetings on August 17 and 18, September 9, and
October 7, 1993, the Board principally considered the following factors in
support of the conclusions reached: (i) that the Aggregate Merger Consideration
represents a substantial premium over the recent market prices for the Celutel
Common Stock, (ii) that the value of Celutel implied by Century's offer to
acquire Celutel was within
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the estimated range of values of Celutel provided to the Board by Lazard, (iii)
that the value of Century's offer to acquire Celutel was within the range of
values on a per pop basis of recent transactions in the telecommunications
industry provided to the Board by Lazard, (iv) information presented by Lazard
supporting its view that it believed it had contacted all parties potentially
interested in acquiring Celutel, as well as an analysis of the provisions of the
Merger Agreement that would permit Celutel to terminate the Merger Agreement if,
in connection with receiving a higher unsolicited acquisition offer involving
Celutel, the Board, in exercising its fiduciary duties, determined that
acceptance of such offer would be in the best interests of the Celutel
stockholders, (v) all of the factors described above under "-Background of
Merger" and (vi) all of the terms and conditions contained in the Merger
Agreement viewed as a whole. In addition, the Celutel Board considered and
relied upon the opinion of Lazard as to the fairness to the Public Stockholders
from a financial point of view of the Merger and information with respect to the
financial condition, earnings, dividends, business, operations, assets,
management and prospects of Century and Celutel (including the prospects of
Celutel if it were to continue as an independent entity) and the historical
price performance of Century Stock. See "-Opinion of Financial Advisor."
Celutel's Board of Directors also concluded, after considering the advice
of management and Lazard, that the present time was favorable for Celutel to
enter into a business combination. In reaching this conclusion, the Board
principally considered the following factors: (i) the trend towards
consolidation among cellular service providers and Celutel's determination (as
described above under "-Background of Merger--Introduction") that this trend
would create significant competitive pressure to expand through acquisition,
merge with another entity or sell the business, (ii) the significant additional
financing required for Celutel to acquire other attractive cellular properties
if it were to pursue a consolidation strategy and the limited ability of Celutel
to obtain additional debt or equity financing, (iii) the limited availability of
attractive acquisition candidates for Celutel if it were to pursue an
acquisition strategy, (iv) the high aggregate investment required to compete
against the well-capitalized wireline carriers in Celutel's current markets and
Celutel's limited financing ability, (v) competitive, technological and
regulatory changes in the telecommunications industry requiring substantial
future investment and incurrence of additional debt (and Celutel's limited
financing opportunities), (vi) the attractive valuations of cellular properties
in the current equity and corporate control markets, and (vii) the appreciation
in the value of Celutel since its 1991 recapitalization and CIVC investment
based on the proposed letters of intent received from Century and the Other
Bidder.
As indicated elsewhere herein, the trading price of Century Stock was
within the $27 to $33 range at the time the Century Letter of Intent and the
Merger Agreement were executed on August 18 and October 8, 1993, respectively.
Thereafter the Century Stock began to trade below $27. Since November 4, 1993,
the Century Stock has not traded above $27 and has traded as low as $23 1/4 (on
December 16, 1993). As a result of these developments, Celutel's officers and
directors have monitored closely the trading price of Century Stock and
conferred on a regular basis with Lazard to confirm that it remained in a
position to issue an updated written fairness opinion. As indicated above, on
January 5, 1994, the Celutel Board authorized the submission of this Proxy
Statement to Celutel's stockholders along with the accompanying recommendation
as of the date of this Proxy Statement that the Celutel stockholders vote in
favor of the Merger Proposal appearing at the end of this section.
In connection with its analysis underlying its conclusion that as of the
date of this Proxy Statement the Merger is fair from a financial point of view
to the Public Stockholders, the Board considered not only the favorable factors
described above but also the factors that could potentially be viewed as
unfavorable, including (i) the fact that the Century Stock had not traded above
$27 since November 4, 1993 and had traded as low as $23 1/4 as recently as
December 16, 1993, (ii) the adverse effect of the $27 price floor on the Closing
Date value of the Merger Consideration if the Merger is consummated when the
Average Century Price is less than $27, (iii)] the absence of a floor price
closing condition, (iv) the agreement of the Principal Stockholders to vote in
favor of the Merger Proposal even if the Average Century Price is below $27
(subject to certain conditions and limitations described herein), and (v) the
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fact that the $ to $132 per pop price range implied by the Merger is less
than the mean implied per pop value of $141 estimated by Lazard in connection
with its comparative acquisition transaction analysis described elsewhere
herein. See "-Opinion of Financial Advisor--Analyses."
In connection with determining that the Merger is nonetheless fair from a
financial point of view to the Public Stockholders, Celutel's Board (i)
considered and relied upon Lazard's oral fairness opinions delivered on August
17 and 18, September 9, and October 7, 1993 and January 5, 1994, Lazard's
written fairness opinions delivered as of October 8, 1993 and the date of this
Proxy Statement, and Lazard's oral indications (made from time to time in
response to inquiries of Celutel's management over the past several months) that
Lazard remained in a position to issue an updated written fairness opinion
notwithstanding the decrease in the trading price of Century Stock, (ii)
considered and relied upon Lazard's financial analyses described under "-Opinion
of Financial Advisor--General" and "-- Analyses" (including in particular
Lazard's analysis regarding why as of the date hereof the value of the Merger
Consideration is fair from a financial point of view to the Public Stockholders
even though it is below the mean values implied by Lazard's comparable
acquisition transaction analysis), (iii) considered the substantial premiums
that the Merger Consideration represents over recent market prices for the
Celutel Common Stock, (iv) considered management's recent review of Century's
recent Exchange Act filings and management's determination, based on such
review, that Century did not appear to have suffered any material adverse change
in its business, (v) considered the fact that no competing bids had been
received by Celutel since the public announcement of the transaction on August
19, 1993, (vi) considered all of the terms and conditions of the Merger
Agreement viewed as a whole, and (vii) considered each of the factors discussed
in the initial paragraphs of this section and those discussed under "-Background
of Merger--Negotiations of Certain Matters with Century," and reaffirmed its
conclusion that it was in the best interests of Celutel's stockholders to, in
general, pursue a business combination at this time and, specifically, to
consummate the Merger.
In reviewing these factors, the Celutel Board relied heavily on the oral
and written fairness opinions of Lazard. The Celutel Board believes it is
reasonable to rely on Lazard's opinions for several reasons. First, Lazard, as
part of its investment banking business is continually engaged in the valuation
of businesses and their securities in connection with mergers and acquisitions,
registered underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes. Second, in issuing its attached fairness opinion,
Lazard was aware that the closing sale price of Century Stock on the last
trading date preceding the date of such opinion was $ . See "-Opinion of
Financial Advisor--Analyses." Third, as indicated under "-Opinion of Financial
Advisor," representatives of Lazard have attended four meetings of the Celutel
Board between August 17, 1993 and January 5, 1994, and the Celutel Board has
reviewed and discussed with Lazard the analyses and assumptions underlying
Lazard's opinions.
The Board believes that the Merger is fair from a procedural point of view
to the Public Stockholders because (i) Lazard advised the Board that it believed
that the market conditions were favorable for Celutel to enter into a business
combination and that Lazard had contacted all parties it believed would be
potentially interested in acquiring Celutel and had assisted Celutel in an
offering process designed to obtain the best price and terms for Celutel's
stockholders, which process resulted in competitive bidding between two
independent third parties (see "-Background of Merger--Introduction"), (ii) the
directors who were not affiliated with the Principal Stockholders retained
special counsel to advise them and participate in the negotiation of the Merger,
with particular attention to the interests of the Public Stockholders, and the
Merger Agreement was negotiated by Celutel, the Principal Stockholders and their
counsel, with the participation of such special counsel, and (iii) before
approving the Merger Agreement, the Board received the Lazard fairness opinion,
as well as written assurances that, except as described in this Proxy Statement,
the Public Stockholders would receive the same per share consideration under the
Merger Agreement as the Principal Stockholders and no other financial benefit
would be extended to the Principal Stockholders as a result of the Merger.
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Based upon the foregoing, including the opinion of Lazard described below
and after extensive deliberations over the past year, on October 7, 1993, the
Board of Directors of Celutel unanimously approved the Merger Agreement and the
transactions contemplated thereby and, as of the date of this Proxy Statement,
THE CELUTEL BOARD RECOMMENDS THAT THE CELUTEL STOCKHOLDERS VOTE IN FAVOR OF THE
MERGER PROPOSAL. For a description of certain investment considerations relating
to the Merger, including the risk that the Century Stock will continue to trade
below $27 at the Effective Time of the Merger and the related effects associated
therewith, see "Investment Considerations-Considerations Relating to the
Merger," "Agreement and Plan of Merger-Determination of Aggregate Merger
Consideration--Minimum and Anticipated Aggregate and Per Share Merger
Consideration," "Information About Century-Market Prices for Century Stock" and
"Rights of Dissenting Stockholders of Celutel."
OPINION OF FINANCIAL ADVISOR
GENERAL. At the meeting of the Celutel Board of Directors held on August 17
and 18, 1993, at which the Celutel Board approved the Century Letter of Intent,
Lazard delivered its oral opinion, based on its work completed to that date,
that the consideration which the Public Stockholders would receive pursuant to
the merger proposed thereby (on terms substantially equivalent to those in the
Merger Agreement) was within a range of values that were fair from a financial
point of view to such stockholders. Lazard informed the Celutel Board at this
meeting that prior to delivering a written fairness opinion it would need to
complete its due diligence review of both Celutel and Century.
At the September 9, 1993 meeting of the Celutel Board, Lazard, having
completed its procedures, delivered its oral fairness opinion to the Celutel
Board. Lazard again confirmed its oral fairness opinion to the Celutel Board at
its meeting on October 7, 1993, at which the Celutel Board approved the Merger
Agreement. Shortly thereafter, Lazard delivered its formal written fairness
opinion to the Celutel Board. Lazard re-confirmed its fairness opinion orally at
the January 5, 1994 Celutel Board meeting. Lazard subsequently delivered to the
Celutel Board its updated written opinion as of the date of this Proxy Statement
that the Merger Consideration which the Public Stockholders will receive
pursuant to the Merger Agreement is fair to such stockholders from a financial
point of view. For purposes of its opinion Lazard defined Public Stockholders to
have the meaning ascribed thereto in this Proxy Statement.
The full text of Lazard's opinion dated the date of this Proxy Statement is
set forth in Appendix III to this Proxy Statement, which opinion sets forth the
assumptions made, matters considered and limits on the review undertaken.
Celutel stockholders are urged to read this opinion in its entirety. The Lazard
opinion is directed only to the Merger Consideration and does not constitute a
recommendation to any Celutel stockholder as to how such stockholder should vote
at the Meeting or as to any other matter. The summary of the Lazard opinion set
forth in this Proxy Statement is qualified in its entirety by reference to the
full text of such opinion. The Celutel Board did not impose any limitations on
Lazard with respect to the investigations or procedures which it followed in
issuing its opinions.
At the meetings of the Board of Directors held on August 17 and 18,
September 9 and October 7, 1993 and January 5, 1994 representatives of Lazard
were present and available to answer questions from the Board. The Directors
asked Lazard various questions, including questions relating to the fairness of
the Merger Consideration, the Century stock price and trading volume, various
financial aspects of the Merger Agreement, the acquisition environment for
cellular companies, the bidding process and Lazard's contacts with potential
acquirors since September 1992. Lazard responded to questions concerning the
fairness of the transaction to the Public Stockholders by reviewing the bases
and analyses underlying its opinion. See "--Analyses." Lazard responded to
questions regarding the Century stock price and trading volume and other
financial aspects of the Merger Agreement by reviewing Century's historical
stock prices and trading volumes and financial aspects of certain recent
comparable transactions. Lazard answered the questions concerning the
acquisition environment by
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discussing recent purchases of cellular companies and noting that each
transaction had its own unique features. Lazard responded to questions about the
bidding process by indicating that it believed it had contacted all potentially
interested parties and answered questions about contacts with potential
acquirors on a case by case basis.
LAZARD'S REVIEW AND ASSUMPTIONS. In connection with its attached opinion,
Lazard reviewed, among other things: (i) the Merger Agreement and this Proxy
Statement; (ii) certain historical business and financial information relating
to Celutel and Century, including certain recent Annual Reports to Stockholders
and Annual Reports on Forms 10-KSB or 10-K of Celutel and Century and certain
recent Quarterly Reports on Forms 10-QSB or 10-Q of Celutel and Century; (iii)
certain financial forecasts and other data which Celutel provided to Lazard
relating to the business of Celutel; (iv) discussions it held with members of
the senior management of Celutel and Century with respect to the business,
prospects and strategic objectives of Celutel and Century; (v) public
information with respect to certain other companies in lines of business and in
markets Lazard believed to be generally comparable to the business of Celutel
and Century; (vi) the financial terms of certain recent business combinations in
the telecommunications industry specifically and in other industries generally;
and (vii) the historical stock prices and trading volumes of the Celutel Common
Stock and Century Stock. In addition, Lazard conducted such other financial
studies, analyses and investigations as it deemed appropriate.
In issuing its opinion Lazard relied upon the accuracy and completeness of
the financial and other information which Celutel and Century provided to
Lazard. Lazard did not undertake any independent verification of such
information or any independent valuation or appraisal of any of the assets of
Celutel and Century. Lazard assumed, without independent verification, that
Celutel's financial forecasts were reasonably prepared on a basis reflecting the
best currently available judgments of Celutel's management as to the future
performance of Celutel. Lazard did not receive any financial forecasts from
Century. Lazard's opinion is based on economic, monetary and market conditions
existing on the date thereof. Lazard expressed no opinion as to what the value
of the Century Stock actually would be when issued to the Public Stockholders
upon consummation of the Merger.
In rendering its opinion Lazard assumed that obtaining the necessary
regulatory and governmental approvals for the Merger may delay its consummation,
and that, in the course of obtaining such approvals, no restriction would be
imposed that would have a material adverse effect on the contemplated benefits
of the Merger.
ANALYSES. Set forth below is a summary of the significant analyses
performed by Lazard in connection with rendering its written opinion dated the
date of this Proxy Statement and its oral and written opinions presented to
Celutel's Board.
The following paragraphs describe Lazard's valuation analysis of Celutel.
Comparable Acquisition Transaction Analysis. Lazard reviewed certain
publicly available information on announced sale transactions of cellular
businesses since August 1989. For each such transaction, Lazard analyzed the
estimated purchase price paid per pop for different metropolitan statistical
areas ("MSAS") ranks, which ranged from an estimated low of $27 per pop in the
smallest MSA to an estimated high of $350 per pop in the largest MSA. Utilizing
the high, low, and average price paid per pop within various groups of MSA
ranks, Lazard calculated the implied value for Celutel's assets based upon the
MSAs served by Celutel's cellular subsidiaries. Utilizing this methodology, the
implied per pop value of Celutel's cellular business was estimated at between
$32 and $209 and the mean implied per pop value was estimated at $141. Based on
Celutel's estimates, which assume a February 10, 1994 Closing, these per pop
prices imply prices per Celutel Share Equivalent of between $0 (which reflects
the fact that substantially all the purchase price would be used to repay
outstanding indebtedness) and $14.30 with a mean of $8.95.
In issuing its opinion dated as of the date of this Proxy Statement Lazard
noted that the minimum Merger Consideration value of $ per Celutel Share
Equivalent (which represents Celutel's estimates of the amount of the minimum
Merger Consideration, valuing the Century Stock at $
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per share, the closing sale price of the Century Stock on the last trading date
preceding the date of this Proxy Statement) is less than the mean value of
$8.95. Nevertheless, Lazard continues to believe that as of the date of this
Proxy Statement the Merger Consideration which the Public Stockholders will
receive pursuant to the Merger Agreement is fair to such stockholders from a
financial point of view. In reaching this conclusion Lazard took into account
the following factors with respect to its analysis of the mean value of $8.95.
First, Lazard believes that the $8.95 mean does not necessarily represent the
fair value implied by the range because its MSA analysis included a wide variety
of markets in different geographic areas with a significant difference in
demographics. Second, Lazard took into account that Celutel's markets are
located in: McAllen-Edinburg-Mission, Texas; Brownsville-Harlingen, Texas;
Jackson, Mississippi; Biloxi-Gulfport, Mississippi; and Pascagoula, Mississippi.
Lazard concluded that the populations in these markets are generally not as
dense as many of those in its MSA analysis. Third, Lazard also took into account
certain demographics of Celutel's markets affecting cellular usage (including
age, average income, proximity to major highways, average travel time to work
and the occupational profile of workers). Lazard concluded that the demographics
of Celutel's properties are not as favorable as many of those in the MSA
analysis. Finally, Lazard indicated that like any high or low figure a mean is
only one way to summarize in the form of a single number a complex data set and
the mean analysis represented only one part of all of its analyses which it
performed in connection with giving its opinion.
Comparable Public Company Analysis. Lazard compared certain publicly
available financial, operating and stock market performance data of selected
publicly traded cellular communications companies in the cellular communication
business with the historical financial, operating, and stock market performance
of Celutel. Lazard analyzed, among other things, the market values, the market
capitalizations, the total market value of net assets per pop and certain
operating statistics of Celutel and selected publicly traded companies. This
analysis showed that the total market value of net assets per pop for such
companies in the cellular communication business ranged from an estimated low of
$101 to an estimated high of $287. Based on Celutel's estimates, which assume a
February 10, 1994 Closing, these per pop values imply prices per Celutel Share
Equivalent of $5.78 to $20.43. The publicly traded cellular communications
companies reviewed by Lazard in this analysis included: Associated
Communications Corporation, BCE Mobile Communications Inc., Cellular
Communication, Inc., Centennial Cellular Corp., Contel Cellular Inc., LIN
Broadcasting, McCaw Cellular Communications, Inc., Rogers Cantel Mobile
Communications Inc., United States Cellular Corporation and Vanguard Cellular
Systems, Inc.
Stock Price and Volume Analysis. Lazard reviewed the performance of the per
share market prices and trading volumes of the Celutel Common Stock for various
time periods and compared such per share market price movements to the Standard
& Poor's Industrial Average of 500 stocks (the "S & P 500"). Lazard also
reviewed the per share market prices of the Celutel Common Stock for various
time periods and compared such per share market price movements to the movements
of a composite index of certain publicly traded cellular companies. Such
cellular companies included: Associated Communication Corporation, Cellular
Communications, Inc., Centennial Cellular Corp., Contel Cellular Inc., United
States Cellular Corporation and Vanguard Cellular Systems. Lazard noted that its
analysis of Celutel's stock price and volume history showed a very limited float
of shares traded by the public, which implied limited liquidity for stockholders
wishing to sell their shares without affecting the prevailing trading price.
Lazard also noted that the minimum Merger Consideration value of $ per
Celutel Share Equivalent (which represents Celutel's estimates of the amount of
the minimum Merger Consideration, valuing the Century Stock at $ per share,
the closing sale price of the Century Stock on the last trading date preceding
the date of this Proxy Statement) represented a % premium to Celutel's
trading price one day before announcement of the transaction and a % premium
to the trading price 30 days prior to announcement of the transaction.
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The following paragraphs describe Lazard's valuation analysis of Century.
Comparable Public Company Analysis. Lazard analyzed, among other things,
the market values, the market capitalizations, the dividend yields and the
projected price earnings ratios of Century and the following local telephone
companies: Telephone & Data Systems, Inc., Citizens Utilities, Lincoln
Telecommunications, Alltel Corporation, Rochester Telephone, Pacific Telecom,
Southern New England Telephone, Cincinnati Bell, and Sprint Corp. Lazard noted
that based on access lines, Century was the 15th largest local exchange
telephone company in the United States. Lazard further noted that Century's
cellular telephone operations contribute approximately 15% of its revenue and
that Century holds majority interests in cellular service providers to two of
the top 100 cellular markets.
In comparison to the other local telephone companies, the market valuations
of Century on an earnings per share basis and a cash flow basis were neither the
highest nor the lowest of the group of telephone companies reviewed.
Stock Price and Volume Analysis. Lazard reviewed the performance of the per
share market price and trading volume of Century Stock for various periods and
compared such per share market price movements to the S & P 500 and to various
indices of local telephone companies. Such companies include: Telephone & Data
Systems, Inc., Citizens Utilities, Lincoln Telecommunications, Alltel
Corporation, Rochester Telephone, Pacific Telecom, Southern New England
Telephone, Cincinnati Bell, and Sprint Corp. During the one year period from
August 3, 1992 to August 3, 1993 Century's stock traded at a closing price range
of $20 1/2 to $32 3/4. Century's trading volume indicated significantly greater
liquidity than that of Celutel.
No company or transaction used in the above analyses as a comparison is
identical to Celutel, Century or the Merger. Accordingly, an analysis of the
results of the foregoing necessarily involves complex considerations and
judgments concerning differences in companies and other factors that could
affect the public trading value of the companies to which they are being
compared.
In addition to the above-described analyses, Lazard also (i) considered the
fact that the minimum Aggregate Merger Consideration estimated by Celutel to be
payable to all Celutel stockholders will be $50,167,000 cash (after deducting
the Public Stockholder Holdback Amount estimated at $530,800) and 1,878,000
shares of Century Stock (assuming an Average Century Price of $27 or below),
(ii) considered the fact that the minimum amount of Merger Consideration
estimated by Celutel to be payable to the Public Stockholders with respect to
each share of Celutel Common Stock will be $3.65 cash (after deducting the
Public Stockholder Holdback Amount estimated at $.32 per share) and .147 shares
of Century Stock (assuming an Average Century Price of $27 or below), (iii) was
aware that if the Merger is consummated at a time when the Average Century Price
is less than $27, the value of the Merger Consideration as of such time
(determined solely by reference to such trading price) would be less than if
such price were $27 or more and would decrease as the trading price of the
Century Stock decreases, (iv) was aware that Century Stock has not traded above
$27 since November 4, 1993, (v) was aware of the Principal Stockholders'
agreement to vote in favor of the Merger Proposal even if the Average Century
Price is below $27 (subject to certain conditions and limitations described
herein) and (vi) considered the disclosures contained in this Proxy Statement
pertaining to the Merger Consideration (including those relating to the absence
of a floor price closing condition and including the valuation tables included
elsewhere herein).
After considering all information available to it, including all
information obtained in its above-described review and analyses and including
its assessment of economic, monetary and market conditions as of the date of its
opinion attached to this Proxy Statement (including the $ closing sale
price of Century Stock on the last trading date preceding the date thereof),
Lazard determined in issuing its attached opinion that, as of the date thereof,
the Merger Consideration is fair to the Public Stockholders from a financial
point of view. CELUTEL STOCKHOLDERS SHOULD BE AWARE THAT (I) SUBSEQUENT
DEVELOPMENTS, INCLUDING DECREASES IN THE TRADING PRICE OF THE CENTURY STOCK, MAY
AFFECT THE BASES UNDERLYING LAZARD'S OPINION, (II) LAZARD DOES NOT EXPRESS AN
OPINION AS TO WHAT THE ACTUAL VALUE OF THE MERGER CONSIDERATION (OR THE CENTURY
STOCK) WILL BE AT THE TIME OF THE CLOSING AND (III) AS DESCRIBED
20
<PAGE>
FURTHER UNDER "INTRODUCTION-RECORD DATE; QUORUM; VOTE REQUIRED," THE PRINCIPAL
STOCKHOLDERS WILL BE REQUIRED, SUBJECT TO CERTAIN EXCEPTIONS, TO VOTE ALL THEIR
SHARES IN FAVOR OF THE MERGER PROPOSAL EVEN IF THE TRADING PRICE OF THE CENTURY
STOCK REMAINS BELOW THE $27 FLOOR PRICE OR DECLINES FURTHER.
The summary set forth above does not purport to be a complete description
of the analyses which Lazard performed. The preparation of a fairness opinion is
not susceptible to partial analysis or summary description. Lazard believes that
its analyses must be considered as a whole and that selecting portions of its
analyses and the factors considered by it, without considering all analyses and
factors, would create an incomplete view of the processes underlying the
preparation of its opinion. Lazard did not indicate that any of the analyses
which it performed had a greater significance than any other. The ranges of
valuations resulting from any particular analysis described above should not be
taken to be Lazard's view of the actual value of Century or Celutel or the
combined company.
In performing its analyses, Lazard made numerous assumptions with respect
to industry performance, general business and economic conditions and other
matters, many of which are beyond the control of Century or Celutel. The
analyses which Lazard performed are not necessarily indicative of actual values
or actual future results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared in connection with the
delivery of the Lazard opinion solely as part of Lazard's analysis of the
fairness of the Merger Consideration that the Public Stockholders will receive
pursuant to the Merger Agreement. The analyses do not purport to be appraisals
or to reflect the prices at which a company might actually be sold or the prices
at which any securities may trade at the present time or at any time in the
future.
As described above, although the Celutel Board relied heavily on Lazard's
opinion, it was one of many factors taken into consideration by the Celutel
Board in making its determination to approve the Merger Agreement. See
"-Recommendation of the Board of Directors and Reasons for the Merger." The
opinion of Lazard does not address the relative merits of the Merger as compared
to any alternative business strategies that might exist for Celutel or the
effect of any other business combination in which Celutel might engage.
CERTAIN FEES AND EXPENSES. Pursuant to a letter agreement dated July 6,
1992, as amended on August 18, 1993 and January 5, 1994 (the "ENGAGEMENT
LETTER"), Celutel engaged Lazard in connection with investigating its options
with respect to the long-term operational and strategic alternatives and whether
it should remain independent. See "-Background of Merger." Celutel has paid
Lazard $75,000 for its services pursuant to the terms of the Engagement Letter.
In addition, the Engagement Letter provides, among other things, that if Celutel
signs a definitive sale agreement by December 31, 1993, then Celutel will pay
Lazard an additional fee in cash equal to one percent of the aggregate
consideration received by Celutel or its stockholders plus, among other things,
the amount of any debt securities or other liabilities assumed (the "AGGREGATE
TRANSACTION VALUE"). Celutel further agreed to pay Lazard an additional fee in
cash equal to two percent of that portion of the Aggregate Transaction Valuation
that exceeds $130 million. Any additional payment would be subject to a credit
of $75,000 for fees previously paid. Celutel estimates that, upon completion of
the Merger, it would pay an additional fee to Lazard of approximately
$1,700,000. Such fee may be higher or lower depending on the value of the
Aggregate Merger Consideration and Celutel's long-term indebtedness upon
completion of the Merger. See "Agreement and Plan of Merger-Determination of
Aggregate Merger Consideration." Celutel has also agreed to reimburse Lazard for
the reasonable fees and disbursements of its counsel and for its reasonable and
other out-of-pocket expenses and to indemnify Lazard against certain liabilities
incurred in connection with its engagement.
ACCOUNTING TREATMENT
Century will account for the Merger as a purchase under generally accepted
accounting principles.
21
<PAGE>
AGREEMENT AND PLAN OF MERGER
The Merger will be consummated in accordance with the terms and conditions
set forth in the Merger Agreement. The following brief description of the Merger
Agreement does not purport to be complete and is qualified in its entirety by
reference to the Merger Agreement, a copy of which is attached hereto as
Appendix I and is incorporated herein by reference.
For a description of the rights of Celutel stockholders to dissent to the
Merger and demand appraisal rights under the Delaware GCL, see "Rights of
Dissenting Stockholders of Celutel." Stockholders of Celutel who perfect their
appraisal rights under the Delaware GCL are occasionally referred to herein as
"DISSENTING STOCKHOLDERS" and all other stockholders are occasionally referred
to as "NON-DISSENTING STOCKHOLDERS."
STRUCTURE AND EFFECTS OF MERGER
Celutel, on the one hand, and Century and Century Sub, on the other hand,
executed the Agreement and Plan of Merger on October 8, 1993 and Amendment No. 1
thereto as of January 5, 1994 (collectively, the "MERGER AGREEMENT"). CIVC and
Mr. Scarpa have also executed the Merger Agreement for the purpose of being
bound by certain of its provisions, including provisions relating to
indemnification, certain pre-Closing and post-Closing covenants, and certain
representations and warranties. Pursuant to the Merger Agreement, at the
Effective Time Century Sub will merge with and into Celutel, which will survive
such Merger under its current name and become a wholly-owned subsidiary of
Century. The certificate of incorporation and bylaws of Celutel in effect
immediately prior to the Effective Time will be the certificate of incorporation
and bylaws of Celutel as the surviving corporation in the Merger. The officers
and directors of Century Sub immediately prior to the Effective Time will serve
as officers and directors of Celutel as the surviving corporation in the Merger.
The officers and directors of Century will remain unchanged.
EFFECTIVE TIME OF MERGER
The Merger will become effective at 7:00 P.M. (Delaware time) on the date
the parties file a certificate of merger with the Secretary of State of
Delaware. The closing of the Merger (the "CLOSING") will be held on a date to be
mutually agreed by the parties, but, unless Century and Celutel otherwise agree,
not later than the tenth business day following the later of (i) the adoption of
the Merger Proposal by the requisite vote of the Celutel stockholders or (ii)
the receipt of all required regulatory approvals for the Merger (the "CLOSING
DATE"). The parties currently anticipate that all required regulatory approvals
will be final and nonappealable as of the date of the Meeting, and currently
intend to hold the Closing and file a certificate of merger on the day the
Merger Proposal is adopted at the Meeting. Neither party will be obligated to
consummate the Merger unless all closing conditions to be met by the other party
have been satisfied or waived. See "Agreement and Plan of Merger-Regulatory
Approvals" and "-Other Closing Conditions."
DETERMINATION OF AGGREGATE MERGER CONSIDERATION
INTRODUCTION. The Aggregate Merger Consideration that the holders of
Celutel Stock and Celutel Warrants (collectively, "CELUTEL SECURITIES") will be
entitled to receive pursuant to the Merger Agreement is calculated on the basis
of a dollar figure (the "CALCULATION AMOUNT") derived by adjusting $146,316,000
by (i) an adjustment decreasing such amount by the aggregate amount of long-term
indebtedness of Celutel outstanding as of the Closing Date (the "INDEBTEDNESS
ADJUSTMENT") and (ii) an adjustment increasing or decreasing such amount by the
amount of Celutel's working capital surplus or deficit, respectively, as of the
Closing Date (the "WORKING CAPITAL ADJUSTMENT"). (In reviewing the attached
Merger Agreement, stockholders should note that the term "Aggregate Merger
Consideration" appearing therein is defined in the same manner as "Calculation
Amount" is defined herein.) For purposes of the Working Capital Adjustment,
working capital is defined as Celutel's current assets
22
<PAGE>
minus current liabilities, both as determined under the Merger Agreement. For
information on Celutel's estimates of the Calculation Amount as of the Closing
Date, see "--Minimum and Anticipated Aggregate and Per Share Merger
Consideration." The Aggregate Merger Consideration will be adjusted after the
Closing Date in the manner described below under "--Post-Closing Adjustments."
Under the Merger Agreement, 50% of the Calculation Amount will be payable
in cash (the "AGGREGATE CASH CONSIDERATION"), without interest, with the
remainder of the consideration payable in the form of Century Stock (the
"AGGREGATE STOCK CONSIDERATION"). As described in greater detail below, the
number of shares of Century Stock to be issued in connection with the Merger
depends upon the Average Century Price and whether such price is within a range
of $27 to $33 per share. UNLESS EXPRESSLY PROVIDED TO THE CONTRARY HEREIN, EACH
REFERENCE TO THE MERGER CONSIDERATION WILL ASSUME THAT THE AVERAGE CENTURY PRICE
USED IN CALCULATING THE NUMBER OF SHARES OF CENTURY STOCK TO BE DELIVERED WILL
BE AT OR BELOW $27. For further information on the number of shares and value of
Century Stock issuable in connection with the Merger, see "--Effect of Century
Price on Value of Aggregate Merger Consideration" and "--Minimum and Anticipated
Aggregate and Per Share Merger Consideration." For information on the
transferability of the shares of Century Stock issuable in connection with the
Merger, see "-Resales of Century Stock."
As described further under "-Allocation of Aggregate Merger Consideration
Among Celutel Stockholders," payment of the Aggregate Merger Consideration will
be allocated among the holders of Celutel Common Stock, Celutel Preferred Stock
and Celutel Warrants in accordance with their proportionate ownership of
"CELUTEL SHARE EQUIVALENTS," which is defined in the Merger Agreement and below
in such manner as to allocate such consideration among all holders of Celutel
Common Stock on a fully-diluted basis. Under the Merger Agreement, each share of
Celutel Common Stock is deemed to equal one Celutel Share Equivalent.
Based on certain assumptions described herein, the Century Stock to be
issued in connection with the Merger is expected to represent approximately 3.5%
of the total outstanding Century Stock (and, due to the enhanced voting rights
held by certain of Century's stockholders, approximately 1.4% of Century's total
voting power). Celutel's directors and officers and certain persons who may be
deemed to be affiliates of Celutel beneficially owned as of the Record Date
approximately 74% of the Celutel Share Equivalents and are expected to receive
approximately 72% of the Aggregate Merger Consideration after giving effect to
the Allocation Agreement. For information regarding certain interests in the
Merger of Celutel's executive officers and certain of Celutel's directors, see
"Investment Considerations-Considerations Relating to the Merger--Interests of
Certain Persons in the Merger."
MINIMUM AND ANTICIPATED AGGREGATE AND PER SHARE MERGER CONSIDERATION. Due
to the Indebtedness Adjustment and Working Capital Adjustment, the Aggregate
Merger Consideration payable at Closing cannot be definitively calculated until
immediately prior to the Closing Date and will fluctuate to the extent Celutel's
long-term indebtedness and working capital fluctuates. Set forth below is a
discussion of the minimum and anticipated amounts of Merger Consideration and
Aggregate Merger Consideration. As indicated above under "-Effective Time of
Merger," the parties intend to consummate the Merger on February 10, 1994. All
references to the amount of the minimum and anticipated Merger Consideration or
Aggregate Merger Consideration appearing herein are based on the assumption that
the Merger will be consummated on such date. No assurance can be given, however,
that the Merger will be consummated on such date.
Minimum Amount. The minimum Aggregate Merger Consideration payable under
the Merger Agreement will be $50,167,000 cash (after deducting the Public
Stockholder Holdback Amount estimated at $530,800) and between 1,536,000 and
1,878,000 shares of Century Stock. On a per share basis, based on the number of
Celutel Share Equivalents expected to be outstanding (or deemed to be
outstanding) on February 10, 1994, this consideration will equal $3.65 cash
(after deducting the Public Stockholder Holdback Amount estimated at $.32 per
share) and between .120 and .147 shares of Century Stock payable to the Public
Stockholders. If on the Closing Date the Average Century Price is
23
<PAGE>
$ (which was the closing per share sale price on January , 1994, the last
trading date preceding the date of this Proxy Statement), the value of the
minimum Aggregate Merger Consideration on such date would be $ , which
equals $ on a per Celutel Share Equivalent basis. CELUTEL STOCKHOLDERS
SHOULD BE AWARE THAT CHANGES IN THE TRADING PRICE OF CENTURY STOCK WILL AFFECT
THE VALUE OF THEIR MERGER CONSIDERATION, AND ARE ACCORDINGLY URGED TO OBTAIN
CURRENT MARKET QUOTATIONS. For further information on the value of the minimum
Merger Consideration, see "--Effect of Century Price on Value of Aggregate
Merger Consideration."
The minimum amounts of Merger Consideration described above are based on
various adverse assumptions that Celutel considers unlikely, including that
Celutel will incur the maximum amount of long-term indebtedness permitted under
its current line of credit as a result of either of two events that are neither
occurring nor expected to occur: (i) Celutel's operating revenues decreasing at
an unprecedented rate or (ii) Celutel experiencing a higher percentage of
uncollectible receivables compared with historical amounts. Celutel therefore
anticipates that the actual Merger Consideration will be slightly higher than
the minimum Merger Consideration, as described further immediately below.
Anticipated Amount. Based upon Celutel's estimates of operating results
through February 10, 1994 and estimates of transaction costs, Celutel
anticipates that the Aggregate Merger Consideration payable under the Merger
Agreement will be $50,773,000 cash (after deducting the Public Stockholder
Holdback Amount estimated at $530,800) and between 1,555,000 and 1,900,000
shares of Century Stock. On a per share basis, based on the number of Celutel
Share Equivalents expected to be outstanding (or deemed to be outstanding) on
February 10, 1994, this consideration would equal $3.69 cash (after deducting
the Public Stockholder Holdback Amount estimated at $.32 per share) and between
.122 and .149 shares of Century Stock payable to the Public Stockholders.
The Indebtedness and Working Capital Adjustments used in calculating these
anticipated amounts are based upon Celutel's good faith estimates and
assumptions, which Celutel believes to be reasonable as of the date of this
Proxy Statement, regarding expected results of operations and working capital
requirements through February 10, 1994. Celutel's estimates of its working
capital requirements include estimates of its transaction costs to be incurred
in connection with the Merger Agreement, including the cost of obtaining the
Letter of Credit described under "-Indemnification--Letter of Credit," the fees
and expenses of the LC Escrow Agent to be paid at Closing described under
"-Holdback of Funds Under LC Escrow Agreement--Withdrawal of Funds from Escrow
Account," the aggregate fees of its legal counsel, accountants and financial
advisors, and certain severance payments to Celutel's non-officer headquarters
employees pursuant to a severance plan adopted in August 1993. THERE ARE
FREQUENTLY DIFFERENCES BETWEEN ESTIMATED AND ACTUAL RESULTS, BECAUSE EVENTS AND
CIRCUMSTANCES FREQUENTLY DO NOT OCCUR AS EXPECTED. ACCORDINGLY, THERE CAN BE NO
ASSURANCE THAT THE ESTIMATES OF ANTICIPATED MERGER CONSIDERATION OR AGGREGATE
MERGER CONSIDERATION SET FORTH IN THE FOREGOING PARAGRAPH WILL BE THE AMOUNT OF
CONSIDERATION ACTUALLY REALIZED BY THE CELUTEL STOCKHOLDERS PURSUANT TO THE
MERGER.
Other. Notwithstanding the day-to-day fluctuations in Celutel's long-term
indebtedness and working capital, several factors limit the potential adverse
effects of these adjustments on the Calculation Amount. The amount of additional
credit available under Celutel's credit facility is limited to $900,000. In
addition, covenants in this facility and other agreements substantially restrict
Celutel's ability to incur additional long-term debt. Moreover, based on
Celutel's prior operating history, its sustained growth in customers, and the
relatively short period of time between the date of the Proxy Statement and the
anticipated Closing Date, Celutel believes that the likelihood of a precipitous
decrease in its working capital is relatively low.
IN CONSIDERING WHETHER TO VOTE IN FAVOR OF THE MERGER PROPOSAL OR TO
EXERCISE YOUR RIGHT TO DISSENT THEREFROM UNDER DELAWARE LAW AND RECEIVE CASH
EQUAL TO THE "FAIR VALUE" OF YOUR SHARES (AS DETERMINED BY
24
<PAGE>
JUDICIAL APPRAISAL) IN LIEU OF THE MERGER CONSIDERATION, CELUTEL STOCKHOLDERS
ARE URGED TO CONSIDER, AMONG OTHER THINGS, THAT YOU MAY RECEIVE NO MORE THAN THE
MINIMUM AMOUNT OF CASH AND NUMBER OF SHARES OF CENTURY STOCK DESCRIBED ABOVE. IF
FOR ANY REASON THE MERGER CONSIDERATION AT CLOSING WILL BE LESS THAN THE MINIMUM
AMOUNT OF CASH AND NUMBER OF SHARES DESCRIBED ABOVE, CELUTEL WILL SUPPLY YOU
WITH SUPPLEMENTAL MATERIALS THAT WILL RESOLICIT YOUR PROXY AND WILL ADJOURN THE
MEETING UNTIL AT LEAST 20 BUSINESS DAYS AFTER THE MAILING OF SUCH MATERIALS.
Based on pops owned by Celutel as of December 31, 1993 and based on the
minimum Aggregate Merger Consideration described above (before adjusting for the
Indebtedness Adjustment and the Working Capital Adjustment) and other amounts
payable by Century in connection with the Merger (see "Background and Other
General Information Relating to the Merger-Background of Merger-- Negotiation of
Certain Matters with Century"), the per pop value of Celutel implied by the
Merger is approximately $132 (if the Average Century Price is between $27 and
$33) and $ (if the Average Century Price is $ , the closing per share sale
price of Century Stock on the last trading date preceding the date of this Proxy
Statement).
EFFECT OF CENTURY PRICE ON VALUE OF AGGREGATE AND PER SHARE MERGER
CONSIDERATION. The number of shares of Century Stock issuable in the Merger will
be determined by dividing 50% of the Calculation Amount by the average of the
per share closing prices of the Century Stock as reported in the NYSE Composite
Transaction Section of The Wall Street Journal for each of the ten trading days
immediately preceding the third trading day prior to the Closing Date (the
"AVERAGE CENTURY PRICE"), subject to a $27 floor price (which, based on the
minimum Aggregate Merger Consideration described herein, fixes the maximum
aggregate number of Century shares at 1,878,000) and a $33 ceiling price (which
fixes the minimum aggregate number of Century shares at 1,536,000), and subject
to customary anti-dilution provisions. For information on the reasons for
including these ceiling and floor prices, see "Background and Other General
Information Relating to the Merger-Background of Merger-- Negotiations of
Certain Matters with Century." If the Average Century Price is between $27 and
$33 at the time the Merger is consummated, then the number of shares of Century
Stock to be issued in the Merger would equal 50% of the Calculation Amount
divided by the Average Century Price. As a result, for each different price
within this $27 to $33 range, the number of shares of Century Stock to be issued
in the Merger would vary so that the value (determined solely by reference to
the Average Century Price) of the Aggregate Stock Consideration as of the
Closing Date would be fixed at 50% of the Calculation Amount. If, however, the
Average Century Price is below $27 or above $33 at the time the Merger is
consummated, then the number of shares of Century Stock to be issued in the
Merger would equal 50% of the Calculation Amount divided by $27 (the floor
price) or $33 (the ceiling price), respectively. As a result, for each different
price below $27 or above $33, the number of shares of Century Stock to be issued
in the Merger would be fixed and the value (determined solely by reference to
the Average Century Price) of the Aggregate Stock Consideration as of the
Closing Date would vary. For example, if the Average Century Price was
$ (the average closing price per share of Century Stock for the ten
trading days immediately preceding the date of this Proxy Statement) and the
Calculation Amount was $ (see "--Minimum and Anticipated Aggregate
and Per Share Merger Consideration"), the number of shares of Century Stock to
be issued in the Merger would be approximately , and the value of the
Aggregate Stock Consideration as of such time would be $ (determined
solely by reference to such average closing price), which value would be less
than 50% of the Calculation Amount.
The effect of the $33 ceiling price is that if the Merger is consummated at
a time when the Average Century Price exceeds $33, then the value of the Merger
Consideration as of such time (determined solely by reference to the Average
Century Price) would be greater than if such price were within the $27 to $33
range. Conversely, the effect of the $27 floor price is that if the Merger is
consummated at a
25
<PAGE>
time when the Average Century Price is less than $27, the value of the Merger
Consideration as of such time (determined solely by reference to the Average
Century Price) would be less than if such price were within the $27 to $33
range.
At the time when Celutel accepted Century's offer in August 1993 and at the
time it signed the Merger Agreement in October 1993, the Average Century Price
was between $27 and $33. See "Information About Century-Market Prices for
Century Stock" and "Background and Other General Information Relating to the
Merger." The Century Stock has not traded at a price above $27 since November 4,
1993. See "Information About Century--Market Prices for Century Stock." NO
ASSURANCE CAN BE GIVEN AS TO WHAT THE TRADING PRICE OF CENTURY STOCK WILL BE ON
OR AFTER THE CLOSING DATE. IN CONSIDERING WHETHER TO VOTE IN FAVOR OF THE MERGER
PROPOSAL OR TO EXERCISE YOUR RIGHT TO DISSENT THEREFROM AND RECEIVE CASH EQUAL
TO THE "FAIR VALUE" OF YOUR SHARES (AS DETERMINED BY JUDICIAL APPRAISAL) IN LIEU
OF THE MERGER CONSIDERATION, YOU ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS
AND TO CALCULATE THE AVERAGE CENTURY PRICE IMMEDIATELY PRIOR TO THE MEETING.
The Principal Stockholders will remain obligated to vote in favor of the
Merger Proposal even if the Average Century Price continues to trade at a price
less than $27, unless there has been a material adverse change (as defined in
the Merger Agreement) in Century since October 8, 1993, or unless the Merger
Agreement is terminated in accordance with its terms. See "Introduction-Record
Date; Quorum; Vote Required." In addition, Celutel will be obligated to
consummate the Merger even if the Average Century Price is less than $27, unless
there has been a material adverse change (as defined in the Merger Agreement) in
Century between the date of the Meeting and the Closing or unless the Merger
Agreement is terminated in accordance with its terms. See "-Other Closing
Conditions."
The following tables set forth the value (in each case determined solely by
reference to the Average Century Price) as of the Closing Date of the Merger
Consideration and Aggregate Merger Consideration at two different assumed
Calculation Amounts (which correspond to the minimum and anticipated amounts of
Merger Consideration described above) if the Average Century Price is less than
$27, between $27 and $33, or greater than $33. For purposes of Table No. 1 the
Calculation Amount has been assumed to be $101,397,000 and for purposes of Table
No. 2 the Calculation Amount has been assumed to be $102,608,000. For further
information on the basis of these assumed Calculation Amounts, see
"-Determination of Aggregate Merger Consideration--Minimum and Anticipated
Aggregate and Per Share Merger Consideration."
TABLE NO. 1--BASED ON CELUTEL'S ESTIMATE
OF THE MINIMUM CALCULATION AMOUNT OF $101,397,000
<TABLE> <CAPTION>
VALUE OF MERGER CONSIDERATION PER SHARE EQUIVALENT(1) VALUE OF AGGREGATE
AVERAGE CENTURY ----------------------------------------------------- MERGER
PRICE CASH PORTION(2) STOCK PORTION(3) COMBINED(2)(3) CONSIDERATION(2)(3)
- --------------------------- ----------------- ----------------- --------------- -------------------------
<S> <C> <C> <C> <C>
$21 $ 3.65 $ 3.08 $ 6.73 $ 89,600,000
$23 $ 3.65 $ 3.38 $ 7.03 $ 93,355,000
$25 $ 3.65 $ 3.67 $ 7.32 $ 97,110,000
between $27 and $33 $ 3.65 $ 3.96 $ 7.61 $ 100,866,000
$35 $ 3.65 $ 4.20 $ 7.85 $ 103,938,000
$37 $ 3.65 $ 4.44 $ 8.09 $ 107,011,000
$39 $ 3.65 $ 4.68 $ 8.33 $ 110,084,000
</TABLE>
- ---------------
(1) Does not give effect to any allocations among the Non-Public Stockholders
under the Allocation Agreement (see "--Allocation Agreement"); based on the
assumption that the Celutel Warrants will be settled in the manner described
under "-Allocation of Aggregate Merger Consideration Among Celutel
Stockholders--Allocation to Warrant Holders."
(2) AFTER deducting the Public Stockholder Holdback Amount applicable to the
Public Stockholders of approximately $530,800, or $.32 per share. See
"-Determination of Aggregate Merger Consideration."
(3) For each Average Century Price indicated above, the value of the stock
portion of the consideration has been calculated by multiplying the number
of shares of Century Stock issuable under the Merger Agreement by such
price.
26
<PAGE>
TABLE NO. 2--BASED ON CELUTEL'S ESTIMATE
OF THE ANTICIPATED CALCULATION AMOUNT OF $102,608,000
<TABLE> <CAPTION>
VALUE OF MERGER CONSIDERATION PER SHARE EQUIVALENT(1) VALUE OF AGGREGATE
AVERAGE CENTURY ----------------------------------------------------- MERGER
PRICE CASH PORTION(2) STOCK PORTION(3) COMBINED(2)(3) CONSIDERATION(2)(3)
- --------------------------- ----------------- ----------------- --------------- -------------------------
<S> <C> <C> <C> <C>
$21 $ 3.69 $ 3.12 $ 6.81 $ 90,676,000
$23 $ 3.69 $ 3.42 $ 7.11 $ 94,476,000
$25 $ 3.69 $ 3.71 $ 7.40 $ 98,277,000
between $27 and $33 $ 3.69 $ 4.01 $ 7.70 $ 102,077,000
$35 $ 3.69 $ 4.25 $ 7.94 $ 105,186,000
$37 $ 3.69 $ 4.50 $ 8.19 $ 108,296,000
$39 $ 3.69 $ 4.74 $ 8.43 $ 111,405,000
</TABLE>
- ---------------
(1) Does not give effect to any allocations among the Non-Public Stockholders
under the Allocation Agreement (See "--Allocation Agreement"); based on the
assumption that the Celutel Warrants will be settled in the manner described
under "-Allocation of Aggregate Merger Consideration Among Celutel
Stockholders--Allocation to Warrant Holders."
(2) AFTER deducting the Public Stockholder Holdback Amount applicable to the
Public Stockholders of approximately $530,800, or $.32 per share. See
"-Determination of Aggregate Merger Consideration."
(3) For each Average Century Price indicated above, the value of the stock
portion of the consideration has been calculated by multiplying the number
of shares of Century Stock issuable under the Merger Agreement by such
price.
------------------------
IN CONSIDERING WHETHER TO VOTE IN FAVOR OF THE MERGER PROPOSAL OR TO
EXERCISE YOUR RIGHT TO DISSENT THEREFROM AND RECEIVE CASH EQUAL TO THE "FAIR
VALUE" OF YOUR SHARES (AS DETERMINED BY JUDICIAL APPRAISAL) IN LIEU OF THE
MERGER CONSIDERATION, YOU ARE URGED TO CONSIDER, AMONG OTHER THINGS, THAT YOU
MAY RECEIVE NO MORE THAN THE MINIMUM AMOUNT OF CASH AND NUMBER OF SHARES OF
CENTURY STOCK DESCRIBED HEREIN. IF FOR ANY REASON THE MERGER CONSIDERATION AT
CLOSING WILL BE LESS THAN THE MINIMUM AMOUNT OF CASH AND NUMBER OF SHARES
DESCRIBED HEREIN, CELUTEL WILL SUPPLY CELUTEL STOCKHOLDERS WITH SUPPLEMENTAL
MATERIALS THAT WILL RESOLICIT YOUR PROXY AND WILL ADJOURN THE MEETING UNTIL AT
LEAST 20 BUSINESS DAYS AFTER THE MAILING OF SUCH MATERIALS.
PUBLIC STOCKHOLDER HOLDBACK. Under the Merger Agreement, each Celutel
stockholder is required to pay its pro rata share of any liabilities that may
arise after the Closing (collectively, "POST-CLOSING LIABILITIES") in connection
with (i) any indemnity claims made by Century or its affiliates pursuant to the
Merger Agreement, (ii) any post-Closing adjustment to the Aggregate Merger
Consideration or (iii) the incurrence of certain fees and expenses. Due to the
administrative impracticability of collecting from each Public Stockholder its
pro rata share of any Post-Closing Liabilities, the cash portion of the
Aggregate Merger Consideration payable to the Public Stockholders will be
reduced by an amount (the "PUBLIC STOCKHOLDER HOLDBACK AMOUNT") to be determined
at Closing (which is estimated to be approximately $530,800 in the aggregate or
approximately $.32 per share of Celutel Common Stock held by the Public
Stockholders). The Non-Public Stockholders are not subject to a holdback under
the Merger Agreement because (i) Century was willing to assume the risk of
collecting from such stockholders their pro rata share of any post-Closing
adjustment to the Aggregate Merger Consideration and (ii) it was anticipated
that the issuer (the "ISSUER") of the Letter of Credit (as defined below) would
also assume such risk in seeking reimbursement for indemnity claims paid to
Century. As more fully described in "-Holdback of Funds Under LC Escrow
Agreement," the Issuer has required the Non-Public Stockholders to provide cash
collateral or establish credit to secure and
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fund reimbursement of their pro rata shares of any indemnity claims paid to
Century. For more information on these Post-Closing Liabilities, see
"-Indemnification--Letter of Credit," "--Post Closing Adjustments" and
"-Holdback of Funds Under LC Escrow Agreement--Withdrawal of Funds from Escrow
Account."
As described under "-Indemnification--Letter of Credit" and "-Holdback of
Funds Under LC Escrow Agreement," the Public Stockholder Holdback Amount will be
deposited into escrow at Closing and will be disbursed to the Public
Stockholders upon termination of the Letter of Credit (as it may be extended by
the Stockholders' Representative and the Issuer under the circumstances
described herein) only to the extent that any amounts remain after paying all
Post-Closing Liabilities that may arise, provided that if at such time there is
an unresolved indemnification claim of Century, the disputed amount will be
transferred to a separate escrow account and be held pursuant to the terms of
the Escrow Agreement. No assurance can be given that any such amounts will
remain following such payments. See "-Indemnification--Letter of Credit" and
"-Holdback of Funds Under LC Escrow Agreement."
POST-CLOSING ADJUSTMENTS. The Aggregate Merger Consideration calculated at
the Closing will be based on Celutel's good faith estimates as of the Closing
Date of the Indebtedness Adjustment and the Working Capital Adjustment. Within
30 days after the Closing, Century will recalculate the Working Capital
Adjustment and seek to confirm the amount of the Indebtedness Adjustment, and
will advise the Stockholders' Representative of its findings. If the
Stockholders' Representative does not agree with Century's findings, then
Century and the Stockholders' Representative will negotiate in good faith to
resolve such dispute and agree upon the amount of the final Aggregate Merger
Consideration and submit any unresolved disputes to an independent accounting
firm, whose resolution will be final and binding on Celutel, Century and their
respective stockholders. If the Aggregate Merger Consideration calculated at
Closing exceeds the final calculation of the Aggregate Merger Consideration,
then all Celutel stockholders will be required to refund such excess to Century,
and if the Aggregate Merger Consideration calculated at Closing is less than the
final calculation of the Aggregate Merger Consideration, then Century will be
required to pay such shortfall to the LC Escrow Agent (to hold on behalf of the
Public Stockholders) and to the Non-Public Stockholders. All payments made by or
to the Celutel stockholders will be made pro rata based on the portion of the
Aggregate Merger Consideration allocable to such holders (after taking into
account, in the case of the Non-Public Stockholders, the Allocation Agreement).
Assuming the Merger is consummated on February 10, 1994, the aggregate Pro Rata
Share attributable to the Public Stockholders will be approximately 13.16%.
Amounts payable by the Public Stockholders will be payable solely out of the LC
Escrow Fund, and amounts payable by the Non-Public Stockholders will be payable
directly by such stockholders. See "-Holdback of Funds Under LC Escrow
Agreement."
ALLOCATION OF AGGREGATE MERGER CONSIDERATION AMONG CELUTEL STOCKHOLDERS
MERGER AGREEMENT. At the Effective Time (i) all outstanding Celutel
Securities (other than shares of Celutel Stock held by dissenting stockholders)
will automatically be converted into an aggregate amount of cash and an
aggregate number of shares of Century Stock determined as described under "--
Determination of Aggregate Merger Consideration" and (ii) each issued and
outstanding share of common stock of Century Sub will be converted into one
share of common stock of Celutel. Subject to the terms and conditions set forth
in the Merger Agreement and the Allocation Agreement (see "-- Allocation
Agreement"), each Celutel stockholder will be entitled to receive (i) a cash
payment (without interest) equal to such holder's Pro Rata Share Equivalent
Interest (as defined below) of the Aggregate Cash Consideration (less, in the
case of each Public Stockholder, such stockholder's pro rata share of the Public
Stockholder Holdback Amount), (ii) a certificate for a number of shares (rounded
down to the nearest whole share) of Century Stock equal to such holder's Pro
Rata Share Equivalent Interest of the Aggregate Stock Consideration and (iii) in
lieu of the issuance of a fractional share of Century Stock, a cash payment
(without interest) equal to such fraction multiplied by the Average
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Century Price (along with the nontransferable, contingent right to receive such
stockholder's pro rata share of any remaining portion of the Public Stockholder
Holdback Amount upon termination of the LC Escrow Agreement). See
"-Indemnification--Letter of Credit" and "-Holdback of Funds Under LC Escrow
Agreement." The "PRO RATA SHARE EQUIVALENT INTEREST" of each holder of Celutel
Securities means the fraction determined by dividing the Celutel Share
Equivalents held by such holder by the aggregate number of Celutel Share
Equivalents held by all record holders of Celutel Securities, in each case as
determined immediately prior to the Effective Time under the Merger Agreement
(and, in the case of the Non-Public Stockholders, after taking into account the
Allocation Agreement). "CELUTEL SHARE EQUIVALENTS" means, with respect to any
holder of Celutel Securities, the sum of (i) the number of shares of Celutel
Common Stock held by such holder, (ii) the number of shares of Celutel Common
Stock into which the Celutel Preferred Stock (including all accrued and unpaid
stock dividends thereon) held by such holder is convertible pursuant to
Celutel's certificate of incorporation (which provides that each holder of
Celutel Preferred Stock is entitled to convert each share of such stock into
2,000 shares of Celutel Common Stock), and (iii) the number of shares of Celutel
Common Stock which would have been held by such holder if all Celutel Warrants
held by such holder had been purchased by Celutel in the manner described below
under "--Allocation to Warrant Holders."
ALLOCATION TO WARRANT HOLDERS. Celutel has outstanding warrants (the
"CELUTEL WARRANTS") that entitle the following holders to purchase the following
number of shares of Celutel Common Stock on the terms set forth below:
<TABLE> <CAPTION>
NUMBER OF SHARES
OF CELUTEL
COMMON STOCK
SUBJECT TO EXERCISE
HOLDER EXERCISE PRICE EXPIRATION DATE
- ----------------------------------------------------------------- ----------------- ----------- -----------------
<S> <C> <C> <C>
Frank S. Scarpa.................................................. 1,000,000 $ 5.00 May 14, 1996
Frank S. Scarpa.................................................. 744,843 5.50 May 14, 1996
Forrest L. Metz.................................................. 25,000 7.00 May 14, 1996
Forrest L. Metz.................................................. 25,000 8.00 May 14, 1996
Forrest L. Metz.................................................. 25,000 15.30 May 14, 1996
</TABLE>
Mr. Scarpa's warrants were issued on January 5, 1988 and May 17, 1988 in
consideration for loans concurrently extended to Celutel by Mr. Scarpa. The
original expiration dates of these warrants were January 5, 1993 and May 17,
1993, respectively. On May 14, 1991, the expiration dates of these warrants were
extended to May 14, 1996 in consideration of Mr. Scarpa's concurrent
cancellation of warrants to purchase 891,520 shares of a separate class of
common stock entitled to enhanced voting rights, which warrants had an exercise
price of $5.50 per share. See "Information About Celutel-Certain Transactions."
Mr. Metz's warrants were issued on May 18, 1988 and April 27, 1989 in
consideration of employee services and were originally scheduled to expire on
May 17, 1992 and April 26, 1994. In consideration of the termination of Mr.
Metz's employment agreement with Celutel in 1991, the expiration dates of such
warrants were extended to May 14, 1996.
Under the Merger Agreement, each of Messrs. Scarpa and Metz have agreed
with Celutel to settle his respective Celutel Warrants by providing that each
such warrant will be converted at the Effective Time into the right to receive
such amounts of cash and Century Stock as he would have received had Celutel
purchased his Warrants immediately prior to such time in exchange for shares of
Celutel Common Stock having an equivalent value (excluding, in the case of Mr.
Scarpa, the effects of the Allocation Agreement). Under the Merger Agreement,
the value of each Celutel Warrant is deemed to equal the difference between such
warrant's exercise price and the value of a share of Celutel Common Stock,
multiplied by the number of shares of such stock purchasable upon exercise of
such warrant. For
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such purposes, the value of a share of Celutel Common Stock will be determined
under the Merger Agreement immediately prior to Closing by dividing the
Calculation Amount by the aggregate number of Celutel Share Equivalents
(determined as if all Celutel Warrants and Celutel Preferred Stock had been
previously settled in the manner described herein). For purposes of determining
each Celutel stockholder's pro rata share of any Post-Closing Liabilities and
receiving post-Closing adjustments to the Aggregate Merger Consideration,
Messrs. Scarpa and Metz will be treated as if they held prior to Closing a
number of shares of Celutel Common Stock equal to the number of Celutel Share
Equivalents as to which they will be entitled under the Merger Agreement.
EFFECT OF PREFERRED STOCK DIVIDENDS ON ALLOCATION. By virtue of the
continuing accrual of stock dividends on the Celutel Preferred Stock at a rate
of 18% per annum, and the fact that the Calculation Amount is a fixed amount
(subject to the Indebtedness and Working Capital Adjustments described above),
the Aggregate Merger Consideration allocable to the holders of Celutel Preferred
Stock will increase and the Aggregate Merger Consideration allocable to the
holders of Celutel Common Stock will decrease over time as additional dividends
(which are payable in additional shares of Celutel Preferred Stock) accrue on
the Celutel Preferred Stock. See "Comparative Rights of Century and Celutel
Stockholders-Preferred Stock."
As discussed under "-Effective Time of Merger," the parties currently
intend to consummate the Merger on the day the Merger Proposal is adopted at the
Meeting. If any unforeseen events cause the Closing to be delayed, Celutel
estimates (based on the assumptions described under "-Determination of Aggregate
Merger Consideration--Estimates of Aggregate Merger Consideration") that this
will cause the value of the Merger Consideration payable to the Public
Stockholders to decrease by approximately $.03 per Celutel Share Equivalent for
each 15 days of delay if all other factors remain constant. Although Celutel
believes that this dilutive effect may be partially offset by internally
generated funds that would favorably impact the Working Capital Adjustment or
Indebtedness Adjustment, no attempt has been made to calculate this amount, and
no assurance can be given that any such offset would be realized.
ALLOCATION AGREEMENT. Pursuant to an Allocation Agreement originally dated
as of August 18, 1993 and re-executed as of October 6, 1993 (the "ALLOCATION
AGREEMENT"), each holder of shares of Celutel Preferred Stock (including CIVC
and Messrs. Stein and Willis, directors of Celutel), and Celutel's senior
management (comprised of Mr. Scarpa and Celutel's three other executive
officers) (collectively, the "NON-PUBLIC STOCKHOLDERS"), agreed to reallocate
the portion of the Aggregate Merger Consideration payable to them under the
Merger Agreement. The purpose of the Allocation Agreement is to give the holders
of the Celutel Preferred Stock the full value of their rights as holders of such
stock without adversely affecting the Public Stockholders. See "Background and
Other General Information Relating to the Merger-Background of Merger--Other."
Under the Merger Agreement, the portion of the Aggregate Merger Consideration
payable to the Public Stockholders is determined as if all Celutel Preferred
Stock were converted into Celutel Common Stock. Under the Allocation Agreement,
the remainder of the Aggregate Merger Consideration is generally allocated among
the Non-Public Stockholders as if all of the Celutel Preferred Stock were
optionally redeemed by Celutel as of the Closing Date and the holders exercised
all redemption warrants deemed issued as a consequence of such deemed optional
redemption. The effect of such agreement is that, as among the Non-Public
Stockholders, the holders of Celutel Preferred Stock receive more (and the
holders of Celutel Common Stock receive less) under the Allocation Agreement
than they otherwise would under the Merger Agreement. THE ALLOCATION AGREEMENT
DOES NOT AFFECT IN ANY MANNER THE AMOUNT OF THE AGGREGATE MERGER CONSIDERATION
TO WHICH THE PUBLIC STOCKHOLDERS ARE ENTITLED OR WHICH THEY WILL RECEIVE.
As a result of the Allocation Agreement, assuming that (i) the Closing
occurs on February 10, 1994, (ii) the Calculation Amount is $102.6 million and
(iii) the Average Century Price is between $27 and $33, an aggregate of
approximately $1.6 million will be reallocated from Celutel's management
(including Messrs. Scarpa, Donnelly, Warren, Mrs. Hart and the Scarpa Family
Trust), to the other
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Non-Public Stockholders (including CIVC and Messrs. Stein, Willis and
McGillivray, William Blair Venture Partners III, L.P., PNC Capital Corporation,
K&E Partners and Harrison I. Steans).
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL. The following discussion summarizes certain material federal
income tax consequences of the Merger to holders of Celutel Common Stock and
Celutel Preferred Stock. The discussion is based on current provisions of the
Code, existing and proposed Treasury Regulations, current administrative rulings
of the Internal Revenue Service ("IRS") and judicial decisions, all of which are
subject to change. The discussion does not purport to be a complete analysis or
listing of all potential tax effects relevant to particular holders or
categories of holders subject to special treatment under certain federal income
tax laws or to holders who received Celutel Stock in connection with the
performance of services for Celutel. In addition, it does not describe any tax
consequences arising under the laws of any state, local or foreign jurisdiction.
THE FOLLOWING DISCUSSION ALSO DOES NOT ADDRESS THE TAX CONSEQUENCES TO THE
NON-PUBLIC STOCKHOLDERS OF THE ALLOCATION AGREEMENT OR THE TAX CONSEQUENCES TO
HOLDERS RELATING TO THE SETTLEMENT OF THEIR CELUTEL WARRANTS.
CONSEQUENCES OF THE MERGER. For federal income tax purposes, the Merger
will be treated as a taxable purchase of the Celutel Stock by Century.
Accordingly, each holder thereof will recognize gain or loss in an amount equal
to the difference between (a) the sum of the cash and the fair market value of
the Century Stock received and (b) his or her basis in the Celutel Stock
surrendered in the Merger. Such gain or loss will be capital gain or loss
(provided that the securities are capital assets in the hands of the holder) and
will be long-term capital gain or loss if such securities have been held for
more than one year. The basis of the Century Stock received by each Celutel
stockholder in the Merger will be the fair market value of the Century Stock at
the Effective Time and the holding period for such shares will begin on the day
after the Effective Date.
A Celutel stockholder who exercises dissenters' rights with respect to his
or her shares will be subject to tax on the receipt of the payments pursuant to
the stock redemption rules of Section 302 of the Code (taking into account the
stock attribution rules of Section 318 of the Code). In general, if the Celutel
stockholder holds his or her shares in Celutel as a capital asset at the
Effective Time, such stockholder will recognize capital gain or loss measured by
the difference between the amount of cash received by such shareholder and the
basis for his or her shares.
No gain or loss will be recognized by Century, Celutel or Century Sub. The
basis and holding period of Celutel's assets immediately after the Merger will
be the same as the basis and holding periods of such assets in its hands
immediately before the Merger.
CONSEQUENCES OF THE ESCROW. It is unclear under current law whether the
portion of a Public Stockholder's (or Non-Public Stockholder's) gain which is
attributable to his or her contingent right to receive a portion of the Public
Stockholder Holdback Amount deposited in escrow (or the amounts deposited in
escrow by certain Non-Public Stockholders) is taxable to the holder at the
Effective Time or when any cash is subsequently received from the escrow.
Celutel believes that the portion of a Celutel stockholder's gain which is
attributable to cash deposited in escrow will be taxable to the holder as of the
Effective Time. It may be possible, however, for such stockholders to take the
position that the amounts which may ultimately be received from the escrow are
sufficiently uncertain that recognition of gain attributable thereto should be
deferred until such cash, if any, is actually received. The law concerning the
degree of uncertainty required to justify such deferral is unclear, but various
authorities indicate that deferral should only be allowed in "rare and
extraordinary cases."
The Public Stockholders and the Non-Public Stockholders depositing cash in
escrow will be subject to tax on the interest earned on cash held in the escrow.
This interest income will be taxed to such stockholders as it is earned rather
than at the time it is ultimately distributed to such stockholders.
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Holders of Celutel Stock should consult with their tax advisors concerning
the tax consequences of the LC Escrow Agreement.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY
AND IS BASED UPON PRESENT LAW. THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE
WITH RESPECT TO CELUTEL STOCK RECEIVED PURSUANT TO THE EXERCISE OF THE CELUTEL
WARRANTS, EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION. EACH CELUTEL
STOCKHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER TO HIM OR HER, AND TAX REPORTING REQUIREMENTS OF THE
MERGER INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER
TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER LAWS.
REGULATORY APPROVALS
The FCC has granted several orders approving the transactions contemplated
by the Merger, the last of which was granted on November 9, 1993 and became
final and nonappealable on December 20, 1993. Celutel and Century have received
all other regulatory approvals they believe are required to consummate the
Merger.
OTHER CLOSING CONDITIONS
GENERAL. In addition to receipt of required regulatory approvals described
above, the obligations of Century and Celutel to consummate the Merger are
subject to, among other things, the following conditions precedent: (i) the
Merger Proposal being adopted by a majority of the total voting power of Celutel
at the Meeting, (ii) the Registration Statement of which this Proxy Statement
forms a part remaining in effect, (iii) the Century Stock having been approved
for listing on the New York Stock Exchange, (iv) the material accuracy of the
other party's representations and warranties, (v) the material performance by
the other party of its obligations under the Merger Agreement, (vi) the absence
of any injunctions or other court orders preventing consummation of the Merger,
(vii) the absence of any litigation with a reasonable likelihood of success
seeking to enjoin the Merger or any related transactions, (viii) execution and
delivery of the LC Escrow Agreement and the termination agreement with respect
to Mr. Scarpa's employment agreement (described under "-Executive Officer
Benefits"), (ix) receipt of any required third-party consents, legal opinions
and other closing certificates and documents, and (x) the satisfaction of other
customary closing conditions.
The obligation of Century to consummate the Merger is further conditioned
upon, among other things, (i) the absence of a material adverse change in any of
Celutel's cellular system operating subsidiaries, (ii) the number of Celutel
Share Equivalents held by dissenting Celutel stockholders not exceeding 5% of
the aggregate Celutel Share Equivalents as of the Closing Date, (iii) delivery
to Century of a one-year irrevocable Letter of Credit in the amount of $3.5
million to assure performance of the indemnity obligations of Celutel's
stockholders as described below under "-Indemnification-- Letter of Credit,"
(iv) Mr. Scarpa's assumption of the obligation to pay not less than 25% of the
remaining rent under Celutel's headquarters lease, (v) the amendment of the
billing service agreements between Celltech and certain of Celutel's operating
subsidiaries on the terms described below under "--Amendment of Celltech
Agreements" and (vi) Century's receipt of various agreements and other
instruments, including the Escrow Agreement, releases executed by the Non-Public
Stockholders, the affiliates agreements described under "-Resales of Century
Stock," a termination agreement with respect to certain agreements between CIVC
and Celutel, and a resignation letter executed by each director and officer of
Celutel.
The obligation of Celutel to consummate the Merger is further subject to
the absence of a material adverse change with respect to Century between the
date of the Meeting and the Closing Date. For a description of the manner in
which "material adverse change" is defined in the Merger Agreement, see
"Introduction-Record Date; Quorum; Vote Required."
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No assurance can be given that the conditions to consummating the Merger
can or will be satisfied or waived in a timely manner or at all.
AMENDMENT OF CELLTECH AGREEMENTS. As described further under "Information
About Celutel-Certain Transactions," certain cellular telephone operating
subsidiaries of Celutel receive electronic and data processing and billing
preparation services under agreements with Celltech. Mr. Scarpa beneficially
owns 85% of the capital stock of Celltech and the remainder is beneficially
owned in equal amounts by Celutel's three other executive officers. These
agreements currently provide that they will remain in effect through May 1997.
The Merger Agreement provides that Century will not be obligated to consummate
the Merger unless these agreements are amended to provide that (i) the price for
services thereunder may not be increased and (ii) the agreements will be
terminated on the earlier of the first anniversary of the Closing Date or at
Century's option upon the occurrence of certain specified events. Century and
Celltech have agreed to the terms of these amendments in exchange for
post-Closing cash payments to Celltech aggregating $525,000.
INDEMNIFICATION
INDEMNIFICATION BY CELUTEL STOCKHOLDERS. The Merger Agreement provides that
after the Closing Century and its directors, officers, agents, affiliates,
successors and permitted assigns (collectively, "CENTURY INDEMNITEES") are
entitled to be indemnified against claims, losses (including in certain
circumstances any diminution in value of Celutel or its assets), liabilities,
judgments, damages, costs and expenses (collectively, "LOSSES") incurred by the
Century Indemnitees, directly or indirectly, relating to or arising out of (i)
any inaccuracy in any representation or warranty made by Celutel or the
Principal Stockholders in the Merger Agreement (including any exhibit or
schedule thereto) or in certain documents to be delivered at Closing, (ii) any
breach by Celutel or the Principal Stockholders of any agreement or obligation
under the Merger Agreement or under certain Closing documents, (iii) any claim
made by former Celutel stockholders (in their capacity as stockholders) or the
minority stockholders or partners of Celutel's cellular operating subsidiaries
(in their capacities as stockholders or partners) relating to any act or
omission of Celutel prior to the Closing or to the distribution of the Merger
Consideration, including the negotiation, execution, delivery, announcement or
performance of the Merger Agreement (collectively, "STOCKHOLDER CLAIMS"), (iv)
any claim asserted in connection with Celutel's purchase of additional ownership
interests in its cellular operating subsidiaries or any agreement pursuant to
which Celutel purchased or sold equity interests in any enterprise ("PURCHASE
AND SALE CLAIMS"), (v) claims relating to the expiration of certain of Celutel's
FCC operating licenses ("FCC CLAIMS") and (vi) claims relating to an automobile
accident involving one of Celutel's employees including certain pending
litigation to the extent such claims exceed applicable insurance (the
"AUTOMOBILE CLAIMS").
With respect to item (v) above, Celutel stockholders should note that
Celutel's point-to-point microwave construction authority lapsed in early 1993,
and since then its facilities have been operated under special temporary
authority. In mid-November 1993, the FCC reinstated these licenses. Although
Celutel does not believe that this matter will result in any material Losses,
there can be no assurance that the FCC will not impose fines.
With respect to item (vi) above, although there can be no assurance,
Celutel does not believe that there will be any material liability with respect
to such accident that is not covered by insurance.
Subject to the limitations and conditions described below and set forth in
the Merger Agreement, all holders of record of Celutel Stock and Celutel
Warrants immediately prior to the Effective Time will be obligated under the
Merger Agreement to indemnify the Century Indemnitees for indemnifiable Losses
incurred by them, other than the following Losses (collectively, "UNCOVERED
LOSSES"): (1) Losses arising out of Unlimited Claims (as defined below) and FCC
Claims, in each case as to which written notice was not given prior to the first
anniversary of the Closing Date and (2) Losses arising out of Unlimited Claims
that exceed the amount payable under the Letter of Credit (as defined below).
The
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Principal Stockholders are jointly and severally liable for all Uncovered
Losses. As explained in further detail below, no Public Stockholder will have
any obligation for indemnity claims in excess of his pro rata proportionate
interest in the Public Stockholder Holdback Amount. See "--Letter of Credit" and
"-Holdback of Funds Under LC Escrow Agreement."
INDEMNIFICATION BY CENTURY. The Merger Agreement provides that after the
Closing Century will be obligated to indemnify the Celutel stockholders of
record as of the Effective Time and their successors, heirs and personal
representatives (the "STOCKHOLDER INDEMNITEES") from and against all Losses
incurred, directly, or indirectly, relating to or arising out of any inaccuracy
of any representation or warranty made by Century in the Merger Agreement
(including any exhibit or schedule thereto) or any breach of any covenant or
other obligation of Century in the Merger Agreement.
LIMITATIONS ON INDEMNIFICATION. The indemnification obligations of the
Celutel stockholders and Century are subject to the limitations, conditions and
procedures described below and in the Merger Agreement. Under the Merger
Agreement neither the Celutel stockholders nor Century has any indemnification
liability unless written notice of an indemnity claim is given prior to the
first anniversary of the Closing Date, except that the Century Indemnitees may
make (1) a claim for inaccuracy of any representations or warranties made by
Celutel relating to certain securities laws matters, Stockholder Claims,
Purchase and Sale Claims and FCC Claims at any time prior to the third
anniversary of the Closing Date, (2) a claim for inaccuracy of any
representations or warranties made by Celutel relating to certain tax matters at
any time prior to the expiration of the applicable statute of limitations and
(3) an Automobile Claim at any time prior to the third anniversary of the
Closing Date or until such later date as any currently pending lawsuit is fully
resolved (the claims described in (1), (2) and (3) above, excluding FCC Claims,
are referred to as "UNLIMITED CLAIMS").
In addition, in the absence of common law fraud, neither the Celutel
stockholders nor Century will be liable for any Losses under the Merger
Agreement or any of the agreements or transactions contemplated thereby in
excess of $3.5 million in the aggregate (the "LIABILITY CAP"), except that (1)
the Liability Cap does not apply to limit the Principal Stockholders' joint and
several liability for Unlimited Claims and (2) the obligation of the Celutel
stockholders or Century to make any payments for post-Closing adjustments to the
Aggregate Merger Consideration shall not apply against the Liability Cap. See
"Agreement and Plan of Merger-Determination of Aggregate Merger
Consideration--Post-Closing Adjustments."
The Merger Agreement further provides that generally neither the
Stockholder Indemnitees nor the Century Indemnitees are entitled to
indemnification except to the extent the aggregate amount of all indemnifiable
Losses exceeds $200,000. Neither the Celutel stockholders nor Century will have
any indemnification liability for breaches of representations or warranties if
they can establish that the party asserting a Loss had actual knowledge prior to
the Closing of the inaccuracy of the representation or warranty giving rise to
such Loss. In addition, no Celutel stockholder will have any indemnification
liability for any inaccuracy of a representation or warranty or any breach of
any covenant, agreement or obligation of the Principal Stockholders other than
the Principal Stockholder who made or agreed to the specific representation,
warranty, covenant, agreement or obligation.
The Merger Agreement sets forth certain procedures and conditions with
respect to the making and defense of claims for indemnification and generally
allows the indemnifying party to control the defense of and, subject to certain
conditions contained in the Merger Agreement, settle or compromise claims for
which it may be responsible. The Merger Agreement provides that all claims
(other than certain Unlimited Claims and claims for Uncovered Losses) made by or
against the Celutel stockholders will be pursued, administered, collected and
defended by the Stockholders' Representative. See "-Stockholders'
Representative." All indemnification payments payable by the Public Stockholders
will be paid as described below under "--Letter of Credit," and no Public
Stockholder will have any personal liability therefor.
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LETTER OF CREDIT. As a condition to Closing, Celutel, at its expense
(estimated at $35,000), is required to obtain a letter of credit (the "LETTER OF
CREDIT"), which will be issued by PNC Bank, N.A., as the Issuer, in the
aggregate amount of $3.5 million in order to secure indemnity payments to the
Century Indemnitees under the Merger Agreement. If Century makes a claim for
indemnification under the Merger Agreement, Century will be entitled to payments
under the Letter of Credit if the Stockholders' Representative consents thereto.
If the Stockholders' Representative disputes an indemnification claim, then,
except as described below, no payments will be made under the Letter of Credit
until such dispute is adjudicated, settled or otherwise resolved. If upon the
expiration of the Letter of Credit there is pending a bona fide dispute with
Century, the Letter of Credit will provide that the disputed amount will be
deposited into escrow with the First American Bank & Trust of Louisiana (the
"ESCROW AGENT") to be held in accordance with the terms of the Escrow Agreement
(as defined below). See "-Holdback of Funds Under LC Escrow Agreement--Escrow
Agreement." The Letter of Credit will expire one year after the Closing unless
extended by the Stockholders' Representative and the Issuer in order to avoid
draws thereon payable to the Escrow Agent. All Losses of the Century Indemnitees
(other than Uncovered Losses) subject to indemnification by Celutel's
stockholders will be paid out of and pursuant to the Letter of Credit, which
payment will (subject to the Issuer's rights to reimbursement described under
"-Holdback of Funds Under LC Escrow Agreement--Issuer Reimbursements") release
the Celutel stockholders from further obligations with respect to such claims.
On November 30, 1993 the Issuer executed a commitment letter with respect to the
Letter of Credit. The issuance of the Letter of Credit at Closing is conditioned
upon, among other things, execution of the LC Escrow Agreement and certain other
related documents by the Stockholders' Representative, CIVC and Scarpa setting
forth the terms of certain reimbursement obligations to the Issuer.
HOLDBACK OF FUNDS UNDER LC ESCROW AGREEMENT
GENERAL. As described under "-Determination of Aggregate Merger
Consideration--Public Stockholder Holdback," Century will deliver at the Closing
the Public Stockholder Holdback Amount to the LC Escrow Agent, which will hold
such funds in accordance with the LC Escrow Agreement. The following summary of
the LC Escrow Agreement does not purport to be complete and is qualified in its
entirety by reference to the LC Escrow Agreement, a form of which is attached
hereto as Appendix IV and is incorporated herein by reference. BY VIRTUE OF THE
STOCKHOLDERS' ADOPTION OF THE MERGER PROPOSAL AT THE MEETING, EACH
NON-DISSENTING STOCKHOLDER WILL BE DEEMED TO HAVE AGREED TO ALL OF THE TERMS AND
CONDITIONS OF THE LC ESCROW AGREEMENT (WHICH AGREEMENT WILL BE CONFIRMED BY EACH
SUCH STOCKHOLDER BY EXECUTION OF THE LETTER OF TRANSMITTAL). See "-Procedures
for Receiving Merger Consideration." For information regarding the agreement of
the Principal Stockholders to vote in favor of the Merger Proposal, see
"Introduction-Record Date; Quorum; Vote Required."
The LC Escrow Agreement, when entered into at Closing, will set forth,
among other things, the terms and conditions by which (i) the Issuer is to be
reimbursed for any drawings made against the Letter of Credit (a "CLAIM"), (ii)
Century is to receive from or deliver to the Celutel stockholders any
post-Closing adjustment to the Aggregate Merger Consideration and (iii) the
Public Stockholders are to receive any amounts remaining in the LC Escrow
Account (as defined below) upon the expiration of the Letter of Credit (as it
may be extended by the Stockholders' Representative and the Issuer as described
above).
DEPOSIT OF FUNDS INTO ESCROW ACCOUNT. Upon receipt of the Public
Stockholder Holdback Amount from Century at the Closing, the LC Escrow Agent
will deposit such funds in a segregated account (the "LC ESCROW ACCOUNT"). The
LC Escrow Account will be divided into two separate sub-accounts of the LC
Escrow Account, one to secure the Public Stockholders' aggregate Pro Rata Share
(as defined below) of reimbursement obligations to the Issuer in the event of
any draws under the Letter of Credit, and the other to secure the Public
Stockholders' aggregate Pro Rata Share of the obligation to compensate Century
in the event of any post-Closing purchase price adjustment owing to Century.
Following the final post-Closing determination and payment of any adjustment to
the Aggregate
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Merger Consideration, if the aggregate amount of the funds previously securing a
purchase price adjustment and any additional amounts received by the LC Escrow
Agent from Century (in the form of a post-Closing purchase price adjustment
payment or an indemnification payment) exceeds $25,000, the LC Escrow Agent will
be required to distribute to each non-dissenting Public Stockholder its pro rata
share of such amounts and will hold any amounts subsequently received from
Century until the expiration of the Letter of Credit.
At the Closing, each Non-Public Stockholder will be required to
collateralize its Pro Rata Share of any reimbursement obligations to the Issuer
for draws under the Letter of Credit. CIVC, Messrs. Stein, Willis, Scarpa and
the Scarpa Family Trust will supply such collateral in the form of credit
pursuant to certain reimbursement agreements between such stockholders and the
Issuer. The other Non-Public Stockholders will supply such collateral in the
form of cash to be delivered to the LC Escrow Agent at the Closing and deposited
into a separate sub-account of the LC Escrow Account.
The LC Escrow Agent is obligated to invest all amounts in the LC Escrow
Account in a mutual fund which invests primarily in government securities or
directly in government securities, and all accrued interest and other income
thereon will become part of the LC Escrow Account.
WITHDRAWAL OF FUNDS FROM ESCROW ACCOUNT. Prior to the expiration of the
Letter of Credit, funds may be withdrawn from the LC Escrow Account for any of
the following purposes.
Issuer Reimbursements. Pursuant to the LC Escrow Agreement, each Celutel
stockholder will be required to reimburse the Issuer for its Pro Rata Share of
any Claim paid by the Issuer to the Century Indemnitees. In the case of the
Public Stockholders and the cash-collateralized Non-Public Stockholders, the
Issuer will instruct the LC Escrow Agent to withdraw such stockholders'
aggregate Pro Rata Share of the Claim from the LC Escrow Account and pay such
amount to the Issuer. Each credit-collateralized Non-Public Stockholder will be
obligated to pay its Pro Rata Share of each Claim directly to the Issuer
pursuant to the reimbursement agreements to be executed by such stockholders. As
used herein, the term "PRO RATA SHARE" means (i) in the case of the Public
Stockholders, each such stockholder's Pro Rata Share Equivalent Interest as of
the Effective Time, and (ii) in the case of the Non-Public Stockholders, each
such stockholder's pro rata share of the Aggregate Merger Consideration received
by it under the Merger Agreement (after giving effect to the Allocation
Agreement). Assuming the Merger is consummated on February 10, 1994, the
aggregate Pro Rata Share of the Public Stockholders will be 13.16%. See
"-Allocation of Aggregate Merger Consideration Among Celutel Stockholders."
Adjustments to Aggregate Merger Consideration. If under the Merger
Agreement there is a post-Closing adjustment to the Aggregate Merger
Consideration payable to Century, the LC Escrow Agent is required (upon receipt
of notice from the Stockholders' Representative) to pay Century each Public
Stockholder's Pro Rata Share of such adjustment from the appropriate sub-account
of the LC Escrow Account. Each Non-Public Stockholder will be obligated to pay
its Pro Rata Share of any such adjustment directly to Century. In the event that
the amounts held in the appropriate sub-account of the LC Escrow Agent are
insufficient to cover the Public Stockholders' Pro Rata Share, the Non-Public
Stockholders will be required (subject to certain limitations) to fund such
deficiency on a pro rata basis.
Expenses and Indemnification of LC Escrow Agent. Celutel will pay at
Closing the anticipated fees and expenses of the LC Escrow Agent (which are
expected to be approximately $32,500). Each Celutel stockholder will be
obligated to pay its Pro Rata Share of any additional fees and expenses and
certain indemnification claims incurred by the LC Escrow Agent in the course of
performance of its duties under the LC Escrow Agreement. The LC Escrow Agent
will have the unilateral right to withdraw each Public Stockholder's and each
cash-collateralized Non-Public Stockholder's Pro Rata Share of fees and expenses
and certain indemnification claims from the LC Escrow Account. Each
credit-collateralized Non-Public Stockholder will receive written notice from
the LC Escrow Agent of its obligation to pay its Pro Rata Share of fees and
expenses. In the event that the amounts in the LC
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Escrow Account are insufficient to make such payments, the Non-Public
Stockholders will be required to fund any such deficiency on a pro rata basis.
For additional information on post-Closing expenses, see "-Stockholders'
Representative--Authority" and "--Escrow Agreement."
Expenses and Indemnification of Stockholders' Representative. Each Celutel
stockholder will be obligated to pay its Pro Rata Share of any expenses and
liabilities incurred by the Stockholders' Representative in the course of
performance of its duties under the LC Escrow Agreement, the Merger Agreement
and the Escrow Agreement. The Stockholders' Representative will have the right
to collect such amounts by collecting (i) each Public Stockholder's and each
cash-collateralized Non-Public Stockholder's Pro Rata Share from the funds held
by the LC Escrow Agent in the LC Escrow Account by giving the LC Escrow Agent
proper notice and (ii) each credit-collateralized Non-Public Stockholder's Pro
Rata Share out of each such stockholder's individual funds by giving such
Non-Public Stockholder proper notice. In the event that the amounts in the LC
Escrow Account are insufficient to make such payments, the Non-Public
Stockholders will be required to fund any such deficiency on a pro rata basis.
Expenses and Indemnification of the Issuer. Each Celutel stockholder will
be obligated to pay its Pro Rata Share of certain indemnification claims
incurred by the Issuer in the course of the performance of its duties under the
LC Escrow Agreement and other reimbursement documents related to the issuance of
the Letter of Credit. The Issuer will have the right to collect such amounts by
collecting (i) each Public Stockholder's and each cash-collateralized Non-Public
Stockholder's Pro Rata Share from the funds held by the LC Escrow Agent in the
LC Escrow Account and (ii) each credit-collateralized Non-Public Stockholder's
Pro Rata Share out of each such stockholder's individual funds. In the event
that the amounts in the LC Escrow Account are insufficient to make such
payments, the Non-Public Stockholders will be required to fund any such
deficiency on a pro rata basis.
DISTRIBUTION UPON TERMINATION; NONASSIGNABILITY. Upon expiration of the
Letter of Credit (as it may be extended by the Issuer and the Stockholders'
Representative), the LC Escrow Agent is required to distribute to each Public
Stockholder and each cash-collateralized Non-Public Stockholder its pro rata
share of any amounts (including interest and other gains thereon and net of
related expenses) remaining in the LC Escrow Account. No assurance can be given
that any such amounts will remain at such time. All distributions to the Public
Stockholders will be made to the names and addresses provided in the Letters of
Transmittal delivered to the Exchange Agent, unless the Exchange Agent receives
notice of a different address in accordance with the procedures described in the
Letter of Transmittal. The contingent right of each Public Stockholder to
receive such payments shall be nontransferable and nonassignable (except for
transfers upon such stockholder's death or otherwise by operation of law) and
shall not be represented by any certificate or other written instrument.
ESCROW AGREEMENT. The Stockholders' Representative, Century and First
American Bank & Trust of Louisiana (the "ESCROW AGENT") will enter into an
escrow agreement (the "ESCROW AGREEMENT") at the Closing to provide for funds
which may be drawn under the Letter of Credit upon its expiration as a result of
unresolved indemnification claims made by Century. Amounts received by the
Escrow Agent will be deposited into an interest bearing account, with interest
accruing thereon net of related expenses, to be distributed to the Celutel
stockholders on an annual basis. Amounts held pursuant to the Escrow Agreement
will be disbursed by the Escrow Agent or its agent upon receipt of and in
accordance with written instructions from both Century and the Stockholders'
Representative and may be used to satisfy the fees and expenses of the Escrow
Agent. The terms and conditions of any disbursement of escrow funds to the
Celutel stockholders are expected to be similar to those governing disbursements
of funds from the LC Escrow Account. See "--Distribution Upon Termination;
Nonassignability."
STOCKHOLDERS' REPRESENTATIVE
DESIGNATION. By virtue of the Celutel stockholders' adoption of the Merger
Proposal at the Meeting, each non-dissenting Celutel stockholder will be deemed
to have appointed CIVC to serve as
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his sole Stockholders' Representative with respect to the matters set forth in
the Merger Agreement and the LC Escrow Agreement. UPON SUCH ADOPTION, EACH
NON-DISSENTING CELUTEL STOCKHOLDER WILL, EFFECTIVE AS OF THE EFFECTIVE TIME, BE
DEEMED TO HAVE (I) IRREVOCABLY APPOINTED THE STOCKHOLDERS' REPRESENTATIVE AS HIS
AGENT, PROXY AND ATTORNEY-IN-FACT FOR ALL PURPOSES OF THE MERGER AGREEMENT AND
THE LC ESCROW AGREEMENT AND (II) AGREED THAT SUCH AGENCY AND PROXY ARE COUPLED
WITH AN INTEREST, AND ARE THEREFORE IRREVOCABLE WITHOUT THE CONSENT OF THE
STOCKHOLDERS' REPRESENTATIVE AND SHALL SURVIVE THE DEATH, INCAPACITY,
BANKRUPTCY, DISSOLUTION OR LIQUIDATION OF ANY CELUTEL STOCKHOLDER, WHICH
APPOINTMENT AND AGREEMENT WILL BE CONFIRMED UPON SUCH STOCKHOLDER'S EXECUTION OF
THE LETTER OF TRANSMITTAL. See "-Procedures for Receiving Merger Consideration."
AS DESCRIBED UNDER "INTRODUCTION-RECORD DATE; QUORUM; VOTE REQUIRED," CIVC
AND MR. SCARPA HAVE AGREED (SUBJECT TO CERTAIN EXCEPTIONS AND LIMITATIONS) TO
VOTE ALL SHARES OF CELUTEL STOCK HELD BY THEM IN FAVOR OF THE MERGER PROPOSAL,
WHICH SHARES CONSTITUTE A SUFFICIENT NUMBER OF VOTES TO ADOPT THE MERGER
PROPOSAL (AND THEREBY TO APPOINT CIVC AS THE STOCKHOLDERS' REPRESENTATIVE)
WITHOUT THE VOTE OF ANY OTHER CELUTEL STOCKHOLDER.
AUTHORITY. The Stockholders' Representative will have the power and
authority to act on each Celutel stockholder's behalf to do, among other things,
the following (in each case in accordance with the Merger Agreement and the LC
Escrow Agreement): (i) to take all actions which the Stockholders'
Representative considers necessary or desirable in connection with the defense,
pursuit or settlement of any adjustments to the Aggregate Merger Consideration
and any claims for indemnification made by or against Century; (ii) to engage
and employ agents and representatives and to incur other expenses as it deems
necessary or advisable, (iii) to provide for expenses incurred in connection
with the administration of the foregoing (including expenses incurred by the
Stockholders' Representative) to be paid by directing the LC Escrow Agent and
Non-Public Stockholders to pay such amounts; (iv) to disburse all
indemnification payments received from Century; (v) to direct the LC Escrow
Agent to disburse any funds remaining in the LC Escrow Account upon expiration
of the Letter of Credit; (vi) to accept and receive notices; (vii) to extend the
Letter of Credit as provided above and amend and grant consents and waivers
after the Closing under the Merger Agreement and the LC Escrow Agreement; and
(viii) to take all other actions and exercise all other rights which the
Stockholders' Representative (in its sole discretion) considers necessary or
appropriate in connection with the Merger Agreement and the LC Escrow Agreement
(including providing for payments to Century in connection with adjustments to
the Aggregate Merger Consideration and indemnification claims pursuant to the LC
Escrow Agreement). ALL DECISIONS AND ACTS BY THE STOCKHOLDERS' REPRESENTATIVE
WILL BE BINDING UPON ALL OF THE CELUTEL STOCKHOLDERS, AND, EXCEPT TO THE EXTENT
OTHERWISE PROVIDED UNDER "--EXCULPATION," NO CELUTEL STOCKHOLDER SHALL HAVE THE
RIGHT TO OBJECT, DISSENT, PROTEST OR OTHERWISE CONTEST SUCH DECISIONS OR ACTS.
RESIGNATION. Under the Merger Agreement, the Stockholders' Representative
may resign for any reason and (in consultation with Douglas Dittrick and J.
Walter Corcoran, directors of Celutel (the "OUTSIDE DIRECTORS")) select another
representative to serve as the Stockholders' Representative under the Merger
Agreement and the LC Escrow Agreement. For more information on the Outside
Directors, see "Election of Directors."
CONFLICT. Under the Merger Agreement, in the event that the Stockholders'
Representative determines (in its sole judgment) that its interest in pursuing
or declining to pursue any claim against Century conflicts in any material
respect with the interests of the Celutel stockholders generally, the
Stockholders' Representative is obligated to consult with the Outside Directors.
If the Stockholders' Representative and the Outside Directors cannot agree on
how to handle such claim, the Outside Directors are obligated to assume the role
of Stockholders' Representative with respect to such claim and will be deemed to
be the Stockholders' Representative with respect to such claims for all purposes
under the Merger Agreement and the LC Escrow Agreement.
EXCULPATION. The Merger Agreement provides that neither the Stockholders'
Representative nor any of its agents will be liable to any Celutel stockholder
relating to the performance of its duties under
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the Merger Agreement or the LC Escrow Agreement for any errors in judgment,
negligence, oversight, breach of duty or otherwise, and that the Stockholders'
Representative will be indemnified and held harmless (pro rata by the Celutel
stockholders) against all expenses (including attorneys' fees), judgments, fines
and other amounts incurred in connection with any suit or claim to which the
Stockholders' Representative is made a party by reason of the fact that it was
acting as the Stockholders' Representative pursuant to the Merger Agreement or
the LC Escrow Agreement, in each case except to the extent it is finally
determined in a court having jurisdiction by clear and convincing evidence that
the actions taken or not taken by the Stockholders' Representative constituted
fraud or were taken or not taken in bad faith.
CERTAIN INFORMATION REGARDING CIVC. CIVC, an affiliate of Continental Bank,
N.A., was founded in 1970 as a licensed small business investment company to
engage in venture capital investing. CIVC specializes in $5 million to $25
million equity investments in a wide variety of equity transactions and
industries.
EXPENSES
Regardless of whether the Merger is consummated, the Merger Agreement
provides that all fees and expenses incurred in connection with the Merger
Agreement and related transactions shall be paid by the party incurring them.
For further information on the effect of Celutel's payment of certain fees and
expenses related to the Merger, see "-Determination of Aggregate Merger
Consideration-- Minimum and Anticipated Aggregate and Per Share Merger
Consideration," and for further information on the expenses relating to the
post-Closing escrow arrangements, see "-Holdback of Funds Under LC Escrow
Agreement--Withdrawal of Funds from Escrow Agreement."
EXECUTIVE OFFICER BENEFITS
Century has agreed that, within 30 days after the Closing, it will cause
Celutel to pay Frank S. Scarpa, the Chairman of the Board and President of
Celutel and a Principal Stockholder, the sum of $650,000 pursuant to the terms
of a termination agreement terminating Mr. Scarpa's 1988 employment agreement,
as amended. Mr. Scarpa's employment agreement provides that in the event of a
termination of Mr. Scarpa's employment in connection with a change in control of
Celutel (including the Merger) or similar transaction, Mr. Scarpa is entitled to
receive from Celutel a severance payment based upon the greater of three times
his then current compensation or the balance remaining to be paid under his
employment agreement. In addition, such agreement entitles Mr. Scarpa to such
life, accident, disability and health insurance policies as are then in effect
as to him prepaid for a period of three years, and a comparable office for a
period of twelve months. Pursuant to the termination agreement to be entered
into at Closing, Mr. Scarpa has agreed to a severance payment of $650,000 and
will waive the insurance and other benefits. In addition, pursuant to the terms
of the termination agreement, Mr. Scarpa will acknowledge his continuing
obligations under the confidentiality provisions of his employment agreement and
his continuing obligations under a Confidentiality and Noncompetition Agreement
entered into in May 1991 at the time of CIVC's investment in Celutel. Mr. Scarpa
and Century have agreed that the non-competition provisions contained in the May
1991 agreement will be amended to shorten the time period of the restrictions
from two years to one and to narrow the scope of the activities in which Mr.
Scarpa will be prohibited from engaging. For additional information on Mr.
Scarpa's employment agreement (including the extension of the term thereof in
late 1993), see "Information About Celutel-Compensation of Executive Officers."
On March 5, 1992, the Board of Directors of Celutel adopted a Management
Stay Bonus Plan for Celutel's three senior executives other than Mr. Scarpa.
Under this plan, Mr. Scarpa is authorized to distribute, in his sole discretion,
up to 1% of the net proceeds resulting from a sale of Celutel (after repayment
of all debt) to Messrs. Warren and Donnelly and Mrs. Hart. For further
information on these officers, see "Information About Celutel-Executive
Officers." In accordance with this plan,
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Century has agreed to cause Celutel to pay, within 30 days after the Closing, an
amount equal to 1% of the amount used to calculate Aggregate Merger
Consideration, calculated exclusive of Celutel's transaction costs related to
the Merger (but in no event in excess of $1.1 million), to these three officers.
Mr. Scarpa has made an irrevocable determination that this amount be divided in
equal thirds.
INDEMNIFICATION OF CIVC AND CELUTEL'S OFFICERS AND DIRECTORS
The Merger Agreement provides that after the Closing Century will maintain
and abide by Celutel's indemnification agreements and the indemnification
obligations under Celutel's Bylaws as in effect on the date delivered to
Century. Celutel has entered into indemnification agreements with Messrs. Warren
and Donnelly and Mrs. Hart, each of whom serves as an executive officer of
Celutel, and with Mr. Scarpa, and with certain former Directors and officers
specified in the Merger Agreement. CIVC has agreed to terminate at the Closing,
among other things, certain of its indemnification rights under existing
agreements with Celutel but will retain its indemnification rights with respect
to certain environmental matters.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various mutual representations and warranties
of Celutel and Century relating to, among other things, (i) organization and
other corporate matters, (ii) capitalization and capital stock, financial
statements and financial information, (iii) due authorization, execution and
delivery, and enforceability of the Merger Agreement and related agreements,
(iv) required third party and governmental consents and the absence of material
conflicts or violations under charter or bylaw provisions, agreements or other
instruments or applicable laws, (v) the timeliness and compliance of all filings
with the Commission and the material accuracy of information contained therein,
and compliance with securities laws, (vi) the accuracy of information supplied
by Century and Celutel for use in this Proxy Statement and the Registration
Statement, (vii) the absence of undisclosed brokers or finders fees, (viii)
compliance with all applicable laws, and (ix) other customary representations
and warranties.
The Merger Agreement also contains various representations and warranties
of Celutel relating to, among other things, (i) Celutel's ownership interest in
its cellular telephone operating subsidiaries and partnerships, (ii) the absence
since July 31, 1993 of certain material events, changes or effects relating to
any of Celutel's cellular telephone operating subsidiaries and other matters,
(iii) retirement and other employee benefit plans and employee-related matters,
including severance and other benefits and labor matters, (iv) pending and
threatened litigation and claims, including product liability claims, (v) title
to and sufficiency and condition of its assets, (vi) material contracts and
defaults, (vii) intellectual property, real estate and insurance matters, (viii)
certain tax, environmental and securities laws matters, (ix) investments and
outstanding indebtedness, (x) absence of undisclosed liabilities, (xi) interests
in customers and suppliers, and (xii) compliance with and validity of licenses
and permits (including FCC licenses) and other FCC matters. The Merger Agreement
contains other representations and warranties of Century relating to, among
other things, the accuracy of information contained in the Registration
Statement and the absence of certain events having a dilutive effect on
Century's stock.
Mr. Scarpa and CIVC also make certain representations and warranties to
Century as to themselves relating to, among other things, authority to enter
into the Merger Agreement, due execution and delivery and enforceability of the
Merger Agreement, the absence of material conflicts or violations with
agreements and other instruments, absence of required consents, absence of
material litigation and absence of stockholder agreements or other interests in
Celutel.
Subject to the limitations on the indemnification obligations under the
Merger Agreement, all representations and warranties will survive after the
Effective Time for the periods specified therein. See
"-Indemnification--Limitations on Indemnification."
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NON-SOLICITATION; TERMINATION FEE
Pursuant to the Merger Agreement, Celutel, CIVC and Mr. Scarpa have agreed
that, unless the Board of Directors makes a Fiduciary Determination (as defined
below), they will not (and will instruct their affiliates, directors, officers,
employees and representatives not to), among other things, (i) solicit or
encourage any acquisition proposal to acquire all or a substantial portion of
the assets or equity of Celutel or (ii) engage in discussions or negotiations
with, or furnish any information to, any person that is considering making an
acquisition proposal. In accordance with its obligations under the Merger
Agreement, Celutel has terminated all discussions conducted prior to the date of
the Merger Agreement with parties that previously indicated an interest in
acquiring Celutel. See "Background and Other General Information Relating to the
Merger-Background of the Merger."
If, following the receipt of an unsolicited bona fide acquisition proposal,
the Merger Agreement is terminated by Celutel upon a good faith determination by
the Board of Directors of Celutel, after considering the written advice of
outside counsel regarding its fiduciary duties, that acceptance of such proposal
is in the best interests of Celutel's stockholders and is required pursuant to
the Board's fiduciary duties under Delaware law (a "FIDUCIARY DETERMINATION"),
then Celutel has agreed to pay Century a fee, as liquidated damages, equal to 2%
of the amount used to calculate the Aggregate Merger Consideration, calculated
as of the date the Merger Agreement is terminated. Based on the assumptions and
estimates described under "-Determination of Aggregate Merger Consideration--
Minimum and Anticipated Aggregate and Per Share Merger Consideration," Celutel
estimates that the termination fee would be approximately $2.1 million if the
Merger Agreement were terminated on February 10, 1994.
The termination fee could have the effect of discouraging a third party
from pursuing an acquisition proposal involving Celutel because the cost of such
acquisition would be increased by the amount of the termination fee.
AMENDMENT, WAIVER AND TERMINATION
The Merger Agreement may be amended at any time before or after its
approval by Celutel's stockholders, provided that no amendment may be made after
stockholder approval that decreases the Aggregate Merger Consideration or
changes the form thereof or adversely affects the rights of Celutel's
stockholders without the further approval of the affected stockholders.
Upon consummating the Merger, each party is deemed to have acknowledged
that all conditions to its obligation to consummate the Merger have been
fulfilled or duly waived and, in the absence of common law fraud, to have waived
any right to subsequently assert that any such conditions were not fulfilled or
duly waived. Except for such deemed waivers or as otherwise provided in the
Merger Agreement, all waivers must be in writing.
The Merger Agreement may be terminated at any time prior to the Effective
Time by the mutual consent of Century and Celutel or unilaterally by either
Century or Celutel upon the occurrence or non-occurrence of certain specified
events, including (i) failure to obtain stockholder approval at the Meeting,
(ii) failure to consummate the Merger upon the earlier of ten days after receipt
of stockholder and regulatory approvals or March 6, 1994, subject to certain
exceptions, (iii) existence of any law or order of a court or other governmental
entity which makes consummation of the Merger illegal or otherwise prohibited,
(iv) any material inaccuracy in the representations and warranties of the other
party or parties, or any material breach of the obligations of the other party
or parties, or the occurrence of certain bankruptcy or insolvency events, and
(v) in the case of Celutel, if the Board of Directors of Celutel, upon receipt
of an unsolicited bona fide acquisition proposal, makes a Fiduciary
Determination. Upon termination of the Merger Agreement, neither party shall
have any liability to the others, except for (i) actual damages incurred as a
result of material breaches of representations, warranties or covenants, (ii)
common law fraud, (iii) in connection with acceptance of an acquisition proposal
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described above, a termination fee as discussed under "-Non-Solicitation;
Termination Fee" and (iv) the obligation to consummate the MGC Agreement as
described under "-Conduct of Business Pending the Mergers; Certain Covenants."
CONDUCT OF BUSINESS PENDING THE MERGER; CERTAIN COVENANTS
The Merger Agreement provides that until the Effective Time, Celutel and
Century will each conduct their respective businesses in the ordinary course of
business consistent with past practice and will use their reasonable best
efforts to maintain and protect their respective properties and business
organization and the services of their officers and employees, to keep available
the services of their officers and employees and maintain the relationships with
their respective customers and suppliers. The Merger Agreement also provides
that Celutel will, among other things, (i) conduct its business in compliance
with all applicable laws, permits and licenses, (ii) use its reasonable best
efforts to maintain and protect its permits and licenses and to resolve
expeditiously all pending litigation and claims, (iii) cause one of its cellular
telephone operating subsidiaries to construct an additional cellular base
station and make all required FCC filings relating thereto, (iv) refrain from
offering any securities of Celutel or its subsidiaries without the consent of
Century and (v) refrain from acquiring an equity interest in any entity other
than prescribed cellular entities.
The Merger Agreement also provides that Century will not announce or
consummate any open market purchases or issuer tender offers during the ten
trading days immediately preceding the third trading day prior to the Closing
Date.
The Merger Agreement also contains various customary covenants and
agreements by Century and Celutel, including covenants to cooperate and use
reasonable best efforts to obtain all necessary third-party and governmental
approvals, to satisfy all conditions to Closing and to consummate the Merger at
the earliest practical date.
As described under "Background and Other General Information Relating to
the Merger-Background of Merger," on April 21, 1993 Celutel entered into the MGC
Agreement with Century whereby Century agreed to acquire Celutel's interests in
the Biloxi-Gulfport and Pascagoula, Mississippi cellular operating systems for a
total purchase price of approximately $36 million. The Merger Agreement provides
that the MGC Agreement shall remain in full force and effect until consummation
of the Merger, but suspends the obligation of the parties thereto to perform
their obligations thereunder unless the Merger Agreement is duly terminated, in
which event the parties to the MGC Agreement will be obligated to consummate the
transactions contemplated thereby.
RESALES OF CENTURY STOCK
The Century Stock to be issued to stockholders of Celutel in connection
with the Merger will be freely transferable under the Securities Act, except for
shares issued to the persons who are "affiliates" of Celutel on the date of the
Meeting (the "CELUTEL AFFILIATES") for purposes of Rule 145 promulgated under
the Securities Act ("RULE 145"). Such persons may not sell their shares of
Century Stock acquired in connection with the Merger except pursuant to an
effective registration statement under the Securities Act covering such shares,
in compliance with Rule 145 or pursuant to another applicable exemption from the
registration requirements of the Securities Act. As a condition to the Closing
of the Merger, each Celutel Affiliate who holds Celutel Stock is required to
deliver to Century 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.
42
<PAGE>
Century has agreed in the Merger Agreement that it will at its expense for
a period of two years after the Closing, maintain continuously in effect the
Registration Statement (as defined below) covering the shares received by the
Selling Stockholders (as defined below) so as to permit resales of Century Stock
by the Selling Stockholders. The Selling Stockholders include persons who may be
Celutel Affiliates and certain related parties. Prior to the Closing, each
Selling Stockholder will agree to give Century two days prior notice of any sale
of Century Stock pursuant to the Registration Statement. No notice is required
for any sale pursuant to Rule 145 as described below. For further information,
see "Resales of Century Stock by Selling Stockholders."
Under Rule 145, the sale of Century Stock by a Celutel Affiliate will be
subject to certain restrictions, including the requirement that (i) Century has
filed all reports required to be filed by Section 13 of the Exchange Act during
the preceding twelve months, (ii) 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, and (iii)
such sale and all other sales made by such person (and certain related persons)
within the preceding three months do not exceed certain specified volume
limitations. If Century has filed all reports required to be filed by Section 13
of the Exchange Act during the preceding 12 months, each Celutel Affiliate who
is not an affiliate of Century will be able to sell Century Stock without
restriction beginning two years after the date the Century Stock was acquired
pursuant to the Merger. Any person who has not been an affiliate of Century for
at least three months may sell Century Stock without restriction beginning three
years after the date the Century Stock was acquired pursuant to the Merger.
Century has agreed to certify upon request whether it has filed all of its
reports under Section 13 of the Exchange Act.
PROCEDURES FOR RECEIVING MERGER CONSIDERATION
In connection with the mailing of this Proxy Statement, each Celutel
stockholder has been furnished with a Letter of Transmittal for use in
submitting to the Exchange Agent certificates representing Celutel Stock.
Immediately following the Effective Time, the Exchange Agent will deliver to
each former Celutel stockholder the appropriate amount of Merger Consideration
(less, in the case of the Public Stockholders, such stockholder's pro rata
portion of the Public Stockholder Holdback Amount described under
"-Determination of Aggregate Merger Consideration--Public Stockholder Holdback"
and subject to, in the case of the Non-Public Stockholders, the provisions of
the Allocation Agreement described under "-Allocation of Aggregate Merger
Consideration Among Celutel Stockholders") upon its receipt from such
stockholder of a Letter of Transmittal duly completed in accordance with its
instructions, together with all certificates previously representing shares of
Celutel Stock held by such stockholder. At all times after consummation of the
Merger but prior to such exchange, certificates previously representing Celutel
Stock will be deemed to represent the right to receive such amount of cash
(without interest) and the number of shares of Century Stock into which they
will have been converted at the Effective Time (or, with respect to dissenting
stockholders, the right to receive the fair value of his shares). Until
certificates previously representing shares of Celutel Stock are surrendered to
the Exchange Agent along with a duly completed Letter of Transmittal, (i) no
cash payment will be made to the holder of such certificates, (ii) no
certificates representing the Century Stock into which such surrendered shares
have been converted at the Effective Time will be issued, and (iii) dividends or
other distributions payable with respect to the shares of Century Stock issued
in connection with the Merger will not be paid.
AS EXPLAINED FURTHER IN THE ENCLOSED LETTER OF TRANSMITTAL AND UNDER
"-STOCKHOLDERS' REPRESENTATIVE," THE EXECUTION OF THE LETTER OF TRANSMITTAL BY
THE CELUTEL STOCKHOLDERS WILL CONSTITUTE THEIR ACKNOWLEDGMENT THAT CIVC, BY
VIRTUE OF THE CELUTEL STOCKHOLDERS' ADOPTION OF THE MERGER PROPOSAL AT THE
MEETING, WILL BE DEEMED TO HAVE BEEN IRREVOCABLY APPOINTED AS OF THE EFFECTIVE
TIME AS THE AGENT, PROXY AND ATTORNEY-IN-FACT OF ALL NON-DISSENTING CELUTEL
STOCKHOLDERS FOR ALL PURPOSES SPECIFIED HEREIN AND IN THE MERGER AGREEMENT AND
THE LC ESCROW AGREEMENT.
43
<PAGE>
Although no assurance can be given that the Merger will be consummated, IN
ORDER TO ENSURE THE EARLIEST POSSIBLE RECEIPT OF THE MERGER CONSIDERATION,
CELUTEL STOCKHOLDERS ARE ENCOURAGED AT THEIR EARLIEST CONVENIENCE TO COMPLETE
THE ENCLOSED LETTER OF TRANSMITTAL and to send it and their certificates
representing Celutel Stock in accordance with its instructions in the enclosed
stamped envelope addressed to the Exchange Agent. If the Merger is not
consummated, Century will cause all such certificates to be promptly returned by
the Exchange Agent and such certificates would continue to represent shares of
Celutel Stock.
Celutel stockholders whose certificates cannot be located are urged to
promptly follow the instructions specified in the enclosed Letter of
Transmittal.
RIGHTS OF DISSENTING STOCKHOLDERS OF CELUTEL
Stockholders of Celutel who follow the procedures specified in Section 262
of the Delaware GCL ("SECTION 262") will be entitled to have their shares of
Celutel Stock appraised by the Delaware Court of Chancery and to receive payment
of the "fair value" of such shares as determined by such court in lieu of the
consideration they would otherwise be entitled to receive pursuant to the Merger
Agreement. THE PROCEDURES SET FORTH IN SECTION 262 SHOULD BE STRICTLY COMPLIED
WITH. FAILURE TO FOLLOW ANY OF SUCH PROCEDURES MAY RESULT IN A TERMINATION OR
WAIVER OF APPRAISAL RIGHTS UNDER SECTION 262. In the event a stockholder of
Celutel seeking appraisal rights forfeits or waives such rights under Section
262, such stockholder shall immediately hereafter be deemed to have converted
his shares into the right to receive the Merger Consideration as described
herein and such stockholder, in order to receive such consideration, should
submit a Letter of Transmittal and all certificates previously representing
shares of Celutel Stock held by such stockholder to Century. See "-Procedures
for Receiving Merger Consideration."
The following discussion of the provisions of Section 262 is not intended
to be a complete statement of its provisions and is qualified in its entirety by
reference to the full text of that section, a copy of which is attached as
Appendix V to this Proxy Statement.
PROCEDURES TO PERFECT RIGHTS
Under Section 262, a stockholder of Celutel electing to exercise appraisal
rights must:
(1) deliver to Celutel, before the vote on the Merger Proposal, a
written demand for appraisal of his shares which reasonably informs Celutel
of the identity of the stockholder of record and that such record
stockholder intends thereby to demand the appraisal of his shares of
Celutel Stock. This written demand for appraisal is in addition to and
separate from any proxy or vote abstaining from or against the Merger
Proposal. Neither a vote against the Merger Proposal nor a proxy directing
such vote shall satisfy the requirement that a written demand for appraisal
be delivered to Celutel before the vote on the Merger Proposal. Such
written demand for appraisal should be delivered to the Corporate Secretary
of Celutel before the vote on the Merger Proposal either (i) in person at
the Meeting or (ii) in person or by mail (certified mail, return receipt
requested, being the recommended form of transmittal) to the Corporate
Secretary, at 900 Bestgate Road, Suite 400, Annapolis, Maryland 21401;
(2) refrain from voting in favor of or consent in writing to the
Merger Proposal. A failure to vote against the Merger Proposal will not
constitute a waiver of appraisal rights. HOWEVER, ANY STOCKHOLDER WHO
EXECUTES A PROXY AND WHO DESIRES TO PERFECT HIS APPRAISAL RIGHTS MUST MARK
THE PROXY "AGAINST" THE MERGER PROPOSAL because if the proxy is left blank,
it will be voted "For" the Merger Proposal; and
(3) continuously hold shares of Celutel Stock from the date of making
a demand for appraisal through the Effective Time and otherwise satisfy all
of the conditions set forth in Section 262.
44
<PAGE>
The written demand for appraisal must be made by or for the holder of
record of stock in such stockholder's name as it appears on his stock
certificates. If the stock is owned of record in a fiduciary capacity, such as
by a trustee, guardian or custodian, execution of the demand should be made in
such capacity and if the stock is owned of record by more than one person as in
a joint tenancy or tenancy in common, such demand should be executed by or for
all joint owners. An authorized agent, including one of two or more joint
owners, may execute the demand for appraisal for a stockholder of record.
However, the agent must identify the record owner or owners and expressly
disclose the fact that in executing the demand he is acting as agent for the
record owner. A record owner, such as a broker, who holds Celutel Common Stock
as nominee for others may exercise his right of appraisal with respect to the
shares held for all or less than all of the others. Where no number of shares is
expressly mentioned, the broker's demand will be presumed to cover all shares
standing in the name of such record owner.
COURT APPRAISALS
Within 10 days after the Effective Time, Celutel is required to, and will,
notify each stockholder of Celutel who has satisfied the conditions of Section
262. Within 120 days after the Effective Time, Celutel or any stockholder who
has satisfied the requirements of Section 262 may file a petition in the
Delaware Court of Chancery demanding a determination of the value of the shares
of Celutel Stock held by all stockholders entitled to appraisal rights. If no
petition for an appraisal is filed within 120 days after the Effective Time, or
if such stockholder delivers to Celutel a written withdrawal of his demand for
an appraisal and an acceptance of the Merger Proposal, either within 60 days
after the Effective Time or thereafter with the written approval of Celutel,
then the right of such stockholder to an appraisal will cease and such
stockholder shall be entitled to execute and deliver a Letter of Transmittal.
Stockholders of Celutel seeking to exercise appraisal rights should not assume
that Celutel will initiate any negotiations with respect to the "fair value" of
such shares. ACCORDINGLY, STOCKHOLDERS OF CELUTEL WHO WISH TO EXERCISE THEIR
APPRAISAL RIGHTS SHOULD REGARD IT AS THEIR OBLIGATION TO TAKE ALL STEPS
NECESSARY TO PERFECT THEIR APPRAISAL RIGHTS IN THE MANNER PRESCRIBED IN SECTION
262.
Within 120 days after the date of the Effective Time, any stockholder who
has complied with the provisions of Section 262 is entitled, upon written
request, to receive from Celutel a statement setting forth the aggregate number
of shares of Celutel Stock not voted in favor of adoption of the Merger Proposal
and with respect to which demands for appraisal were received by Celutel, and
the number of holders of such shares. Such statement must be mailed within 10
days after the written request therefor has been received by Celutel or within
10 days after expiration of the time for delivery of demands for appraisal under
Section 262, whichever is later.
Within 20 days after the service upon Celutel of a copy of a petition filed
in the Delaware Court of Chancery demanding an appraisal, Celutel is obligated
to file in the office of the Register in Chancery a verified list of all
stockholders who have demanded appraisal and with whom agreements as to the
value of their shares have not been reached by Celutel. After notice to such
stockholders, the Delaware Court of Chancery is empowered to conduct a hearing
upon the petition of any such stockholder. The court shall then determine those
stockholders entitled to appraisal and appraise the fair value of the shares
held by them, exclusive of any element of value arising from the accomplishment
or expectation of the Merger, together with a fair rate of interest to be paid,
if any, upon the amount determined to be the fair value. In determining fair
value, the Delaware Court of Chancery is to take into account all relevant
factors. In a 1983 decision, the Delaware Supreme Court discussed the
considerations that could be considered in determining fair value in an
appraisal proceeding, stating that "proof of value by any techniques or methods
which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered and that "fair price
obviously requires consideration of all relevant factors involving the value of
a company". The Delaware Supreme Court stated that in making this determination
of fair value the court must consider market value, asset value, dividends,
earnings, prospects, the nature of the enterprise and any other facts which
could be ascertained as of the date of the merger which throw any light on
future prospects of the corporation. Section 262 provides
45
<PAGE>
that fair value is to be "exclusive of any element of value arising from the
accomplishment or expectation of the merger". In its 1983 decision, the Delaware
Supreme Court construed Section 262 to mean that "elements of future value,
including the nature of the enterprise, which are known or susceptible of proof
as of the date of the merger and not the product of speculation, may be
considered".
Stockholders considering seeking appraisal should bear in mind that the
fair value of their shares determined under Section 262 could be more than, the
same as or less than, the value of the consideration to be delivered pursuant to
the Merger Agreement if they do not seek appraisal of their shares, and that
opinions of investment banking firms as to fairness are not opinions as to fair
value under Section 262. Costs of the appraisal proceeding may be taxed upon the
parties thereto by the court as the court deems equitable in the circumstances.
Upon application of a dissenting stockholder, the Delaware Court of Chancery may
order that all or a portion of the expenses incurred by any dissenting
stockholder in connection with the appraisal proceeding, including, without
limitation, reasonable attorneys' fees and the fees and expenses of experts, be
charged pro rata against the value of all shares entitled to appraisal.
Any stockholder of Celutel who has duly demanded an appraisal in compliance
with Section 262 will not, after the Effective Time, be entitled to vote his
shares for any purpose and will not be entitled to the payment of dividends or
other distributions on his shares (other than those payable to stockholders of
record as of a date prior to the Effective Time).
OTHER CONSIDERATIONS
Delaware case law provides that, in the absence of illegality, fraud or
overreaching, any record holder of Celutel Stock who desires to object to, or to
dissent from, the Merger shall be limited to the rights and remedies prescribed
in Section 262 and that the rights and remedies of Section 262 shall be
exclusive.
Century's obligation to consummate the Merger is subject to the condition
that the number of Celutel Share Equivalents held by dissenting Celutel
stockholders will not exceed 5% of the aggregate Celutel Share Equivalents as of
the Closing Date. See "Agreement and Plan of Merger-Other Closing Conditions."
46
<PAGE>
RESALES OF CENTURY STOCK BY SELLING STOCKHOLDERS
GENERAL
This Proxy Statement, as it may be amended or supplemented from time to
time, has also been prepared for use by the stockholders of Celutel named below
(the "SELLING STOCKHOLDERS") for purposes of offering and selling shares of
Century Stock to be issued to such stockholders in connection with the Merger
(the "ACQUIRED SHARES") in transactions in which such stockholders might
otherwise be deemed to be underwriters within the meaning of the Securities Act
and the regulations promulgated thereunder. As described under "Agreement and
Plan of Merger-Resales of Century Stock," Century has agreed to keep the
registration statement of which this Proxy Statement forms a part (the
"REGISTRATION STATEMENT") continuously effective with respect to the Acquired
Shares for up to two years following the Closing Date. Stockholders of Celutel
who are not Celutel Affiliates or affiliates of Century may freely transfer
under the Securities Act their shares of Century Stock received in the Merger.
The following table sets forth (i) each Selling Stockholder authorized to
use this Proxy Statement to offer and sell Acquired Shares, (ii) the material
relationships that such stockholder has had with Celutel within the past three
years (other than holding Celutel Stock), and (iii) the maximum number of
Acquired Shares that are reasonably expected to be issued to such stockholders
in connection with the Merger. Unless otherwise noted, each Selling Stockholder
has had the relationship with Celutel indicated below for at least three years.
For additional information regarding certain of the Selling Stockholders, see
"Election of Directors" and "Information About Celutel-Security Ownership of
Certain Beneficial Owners and Management."
<TABLE> <CAPTION>
MAXIMUM
NUMBER OF
SELLING STOCKHOLDER RELATIONSHIP WITH CELUTEL ACQUIRED SHARES(1)
- ---------------------------------------------- ---------------------------------------------- ------------------
<S> <C> <C>
Continental Illinois Venture Corporation...... -- 783,407
Frank S. Scarpa............................... Chairman of the Board, President and Chief 384,599
Executive Officer(5)
Scarpa Family Trust(2)........................ --(2) 38,328
Avy H. Stein.................................. Director since 1991 89,574
John R. Willis................................ Director since 1991 89,574
Burton E. McGillivray......................... -- 25,593
William Blair Venture Partners III, L.P.(4)... -- 146,163
Harrison I. Steans(4)......................... -- 28,539
K&E Partners(3)(4)............................ --(3) 5,683
PNC Capital Corporation(4).................... -- 85,309
Richard J. Donnelly........................... Vice President-Finance, Treasurer, and Chief 5,564
Financial Officer(5)
David A. Warren............................... Senior Vice President and Chief Operating 5,564
Officer(5)
Valerie S. Hart............................... Vice President-Marketing and Secretary(5) 5,564
</TABLE>
- ---------------
(1) To ensure that the above-listed table sets forth the maximum number of
Acquired Shares that are reasonably expected to be issued to each Selling
Stockholder, the table has been prepared based on the assumptions that (i)
the amount used to calculate the Aggregate Merger Consideration will be
approximately $105,300,000 (ii) the Average Century Price will be $27 and
(iii) the Closing Date will be February 10, 1994 (calculated after giving
effect to the Allocation Agreement). For information on the actual amount of
Aggregate Merger Consideration that Celutel estimates will be payable at
Closing, see "Agreement and Plan of Merger-Determination of Aggregate Merger
Consideration--Minimum and Anticipated Aggregate and Per Share Merger
Consideration." For further information see generally "Agreement and Plan of
Merger-Determination of Aggregate
(Footnotes continued on following page)
47
<PAGE>
(Footnotes continued from preceding page)
Merger Consideration" and "-Allocation of Aggregate Merger Consideration
Among Celutel Stockholders."
(2) This trust, of which Valerie S. Hart is the sole trustee, was created by Mr.
Scarpa for the benefit of his children and grandchildren.
(3) This partnership was formed by certain partners of Kirkland & Ellis, special
counsel to Celutel and CIVC in connection with the Merger. See "Background
and Other General Information Relating to the Merger-Background of Merger."
(4) These Selling Stockholders acquired their Celutel Stock from CIVC.
(5) These Selling Stockholders have had the relationships with Celutel for the
time periods described in "Information About Celutel-Executive Officers."
No resale of Acquired Shares may be effected under the Registration
Statement unless the Selling Stockholder has delivered, at least two business
days prior to the proposed resale, written notice of the sale and a
certification that the Selling Stockholder has taken, or will prior to such sale
take, all steps necessary to comply with the federal securities laws applicable
to such stockholder. Selling Stockholders may also sell Acquired Shares in
compliance with Rule 145 or pursuant to another applicable exemption to the
registration requirements of the Securities Act, in which case no such prior
notice to Century is required.
PLAN OF DISTRIBUTION
The Selling Stockholders may sell Acquired Shares from time to time under
the Registration Statement (i) through underwriters, brokers or dealers, (ii)
directly to one or more purchasers, or (iii) through agents. To the extent
required, a supplement or amendment to this Proxy Statement will be filed with
the Commission under the Securities Act disclosing, among other things, various
information relating to the resale. Century will not receive any part of the
proceeds of the sale of any Acquired Shares. Selling Stockholders may also sell
Acquired Shares in compliance with Rule 145 or pursuant to another applicable
exemption from the registration requirements of the Securities Act.
When resales are to be made through a broker or dealer selected by the
Selling Stockholder, a member of the New York Stock Exchange may be engaged to
act as the Selling Stockholder's agent in connection with the sale. The
commission paid to any broker, dealer, or agent by the Selling Stockholder is
expected to be the normal commission earned by such brokers, dealers or agents
in the ordinary course, including negotiated commissions to the extent
permissible. Sales of Acquired Shares by the member firm may be made on the New
York Stock Exchange (or any other securities exchange on which the Century Stock
is then trading) from time to time at prices prevailing at the time of such
sales. Any such sales may be by block trade. Any such member firm may be deemed
to be an underwriter within the meaning of the Securities Act, and any
commissions paid by the Selling Stockholder to such member firm may be deemed to
be underwriting discounts and commissions under such act.
If underwriters are used in the sale, Acquired Shares will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offer price or at varying prices determined at the time of sale. The obligations
of the underwriters to purchase the Acquired Shares will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all the
Acquired Shares in connection with such sale if any of the Acquired Shares are
purchased. Any public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
Agents and underwriters may be entitled under agreements entered into with
the Selling Stockholders to indemnification by the Selling Stockholders against
certain civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which the agents or underwriters may be
required to make in respect thereof. Agents and underwriters may engage in
transactions with, or perform services for, the Selling Stockholders in the
ordinary course of business and may be entitled to reimbursement for their
expenses.
48
<PAGE>
SELECTED FINANCIAL INFORMATION
The following selected financial data relating to Celutel is qualified by
reference to and should be read in conjunction with the financial statements and
other information of Celutel incorporated by reference herein. The following
selected consolidated financial data relating to Century is qualified by
reference to and should be read in conjunction with the consolidated financial
statements and other information of Century incorporated by reference herein and
the unaudited pro forma consolidated condensed financial information included
elsewhere herein. See "Incorporation of Certain Documents by Reference" and
"Unaudited Pro Forma Consolidated Condensed Financial Information."
CELUTEL SELECTED FINANCIAL DATA
The following table presents certain selected financial data for Celutel as
of and for each of the years ended in the five-year period ended April 30, 1993
and as of October 31, 1992 and 1993 and for the six-month periods ended October
31, 1992 and 1993. The data for each of the fiscal years in the five-year period
ended April 30, 1993 is derived from Celutel's financial statements, which have
been audited by Coopers & Lybrand, independent certified public accountants. The
financial statements as of April 30, 1993 and for each of the years in the
two-year period ended April 30, 1993 and the report thereon are incorporated by
reference herein. The unaudited financial information as of October 31, 1992 and
1993 and for the six-month periods ended October 31, 1992 and 1993 has not been
examined by independent public accountants; however, in the opinion of Celutel's
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the results of operations for the six-month periods
have been included therein. The results of operations for the first six months
of the fiscal year are not necessarily indicative of the results of operations
which might be expected for the entire fiscal year.
<TABLE> <CAPTION>
SIX MONTHS ENDED
OCTOBER 31, YEAR ENDED APRIL 30,
---------------------- --------------------------------------------------------
1993 1992 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT DATA:
Total Operating Revenues....... $ 15,001 $ 9,436 $ 21,456 $ 13,882 $ 8,753 $ 3,639 $ 3,281
Total Costs and Expenses....... $ (13,702) $ (10,432) $ (24,013) $ (17,461) $ (14,737) $ (8,062)* $ (6,906)*
Other Expense.................. $ (1,457) $ (1,657) $ (3,127) $ (3,400) $ (5,348) $ (883)* $ (1,087)*
Net Loss....................... $ (359) $ (2,376) $ (4,751) $ (6,791) $ (10,509) $ (4,991) $ (4,554)
Preferred stock dividend
requirement and amortization
of warrants and issuance
costs............................ $ (4,052) $ (3,487) $ (7,191) $ (5,981) $ -- $ -- $ --
Loss applicable to common
stockholders..................... $ (4,411) $ (5,863) $ (11,943) $ (12,772) $ (10,509) $ (4,991) $ (4,554)
PER SHARE DATA:
Average shares outstanding..... 3,516,188 3,516,190 3,516,188 3,240,939 2,624,071 2,532,760 2,316,989
Net Loss per share............. $ (0.10) $ (0.68) $ (1.35) $ (2.10) $ (4.01) $ (1.97) $ (1.96)
Preferred stock dividend
requirement and amortization
of warrants and issuance
costs, per share............ $ (1.15) $ (0.99) $ (2.05) $ (1.85) $ -- $ -- $ --
Loss per share applicable to
common stockholders.............. $ (1.25) $ (1.67) $ (3.40) $ (3.95) $ (4.01) $ (1.97) $ (1.96)
OCTOBER 31, APRIL 30,
---------------------- --------------------------------------------------------
1993 1992 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- --------- ---------
SELECTED BALANCE SHEET DATA:
Total Assets................... $ 43,949 $ 42,079 $ 42,168 $ 41,683 $ 40,682 $ 30,002 $ 9,864
Long-Term Debt and Redeemable
Preferred Stock............. $ 79,688 $ 72,234 $ 74,165 $ 67,713 $ 34,463 $ 30,900 $ 8,270
Total Stockholders' Deficit.... $ (45,050) $ (34,448) $ (40,640) $ (28,697) $ (19,938) $ (9,447) $ (5,266)
</TABLE>
- ---------------
No cash dividends were paid by Celutel with respect to the Celutel Stock in any
of the foregoing periods.
* Reclassified for comparative purposes.
49
<PAGE>
CENTURY 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 Century's 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
Cellular units in service--majority owned
markets....................................... 11,140 23,199 35,815 51,083 73,084 96,337
</TABLE>
50
<PAGE>
<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 principles...................... -- -- -- -- (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 earnings 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 share before
cumulative effect of changes in
accounting principles...................... $ 0.57 $ 0.49 $ 0.66 $ 0.79 $ 1.22 $ 0.82 $ 0.96
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
earnings per share......................... 40,739 44,540 46,944 47,432 52,814 52,527 55,703
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
<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>
51
<PAGE>
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 proposed
acquisition of a Michigan-based local exchange telephone company that Century
expects to consummate in early 1994 (such company and such acquisition being
hereinafter referred to as the "PROPOSED ACQUIREE" and the "PROPOSED
ACQUISITION," respectively) and Century's acquisition during 1992 and 1993 of
certain other companies (all such companies and acquisitions, including the
Proposed Acquiree and the Proposed 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 financial
statements and notes thereto of Century and Celutel, which are incorporated
herein by reference. See "Incorporation of Certain Documents by Reference."
52
<PAGE>
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 both such transactions had occurred on September 30, 1993.
<TABLE> <CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS-- CONSOLIDATED PRO FORMA
PROPOSED PROPOSED BEFORE ADJUSTMENTS-- PRO FORMA
CENTURY ACQUIREE ACQUIREE MERGER CELUTEL CELUTEL CONSOLIDATED
---------- ----------- ------------- ---------- --------- ----------- ----------
(NOTE 6)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents......... $ 31,975 $ 460 $ 0 $ 32,435 $ 1,196 $ 0 $ 33,631
Accounts receivable............... 54,946 223 (240) 54,929 4,417 0 59,346
Materials & supplies, at cost..... 5,846 61 0 5,907 530 0 6,437
Other............................. 3,690 37 0 3,727 199 0 3,926
---------- ----------- ------------- ---------- --------- ----------- ----------
96,457 781 (240) 96,998 6,342 0 103,340
---------- ----------- ------------- ---------- --------- ----------- ----------
Net Property, Plant & Equipment..... 794,099 4,359 0 798,458 13,764 0 812,222
---------- ----------- ------------- ---------- --------- ----------- ----------
Investments and Other Assets
Excess cost of net assets
acquired............................ 296,019 0 3,238 299,257 22,176 110,959 432,392
Other investments................. 92,640 549 0 93,189 0 0 93,189
Deferred charges and other
assets.............................. 21,020 56 0 21,076 1,667 (929) 21,814
---------- ----------- ------------- ---------- --------- ----------- ----------
409,679 605 3,238 413,522 23,843 110,030 547,395
---------- ----------- ------------- ---------- --------- ----------- ----------
Total Assets........................ $1,300,235 $ 5,745 $ 2,998 $1,308,978 $ 43,949 $ 110,030 $1,462,957
---------- ----------- ------------- ---------- --------- ----------- ----------
---------- ----------- ------------- ---------- --------- ----------- ----------
LIABILITIES AND EQUITY
Current Liabilities
Current maturities of long-term
debt................................ $ 15,529 $ 227 $ 0 $ 15,756 $ 12 $ 3,392 $ 19,160
Notes payable..................... 65,000 0 0 65,000 0 0 65,000
Accounts payable.................. 53,664 225 0 53,889 1,433 0 55,322
Accrued expenses and other
liabilities......................... 47,350 41 0 47,391 2,431 0 49,822
Advance billings and customer
deposits............................ 9,434 16 0 9,450 0 0 9,450
---------- ----------- ------------- ---------- --------- ----------- ----------
190,977 509 0 191,486 3,876 3,392 198,754
---------- ----------- ------------- ---------- --------- ----------- ----------
Long-Term Debt...................... 462,479 4,039 (240) 466,278 41,264 52,558 560,100
---------- ----------- ------------- ---------- --------- ----------- ----------
Deferred Credits and Other
Liabilities......................... 149,140 185 0 149,325 5,435 0 154,760
---------- ----------- ------------- ---------- --------- ----------- ----------
Preferred Stock--redeemable......... 0 0 0 0 38,425 (38,425) 0
---------- ----------- ------------- ---------- --------- ----------- ----------
Stockholders' Equity
Common stock...................... 51,262 3 92 51,357 703 1,195 53,255
Paid in capital................... 261,868 0 2,280 264,148 0 45,556 309,704
Retained earnings................. 193,775 1,009 (1,009) 193,775 (45,754) 45,754 193,775
Employee Stock Ownership Plan
commitment.......................... (9,720) 0 0 (9,720) 0 0 (9,720)
Preferred stock--non-redeemable... 454 0 1,875 2,329 0 0 2,329
---------- ----------- ------------- ---------- --------- ----------- ----------
497,639 1,012 3,238 501,889 (45,051) 92,505 549,343
---------- ----------- ------------- ---------- --------- ----------- ----------
Total Liabilities and Equity........ $1,300,235 $ 5,745 $ 2,998 $1,308,978 $ 43,949 $ 110,030 $1,462,957
---------- ----------- ------------- ---------- --------- ----------- ----------
---------- ----------- ------------- ---------- --------- ----------- ----------
</TABLE>
See "-Notes to Unaudited Pro Forma Consolidated Condensed Financial
Information."
53
<PAGE>
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 FORMA PRO FORMA
ADJUSTMENTS-- CONSOLIDATED PRO FORMA
OTHER OTHER BEFORE ADJUSTMENTS-- PRO FORMA
CENTURY ACQUIREES ACQUIREES MERGER CELUTEL CELUTEL CONSOLIDATED
--------- ----------- ------------- ----------- --------- ------------- -----------
(NOTE 10) (NOTE 7)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
Telephone......................... $ 255,918 $ 6,391 $ 0 $ 262,309 $ 0 $ 0 $ 262,309
Mobile Communications............. 61,010 0 0 61,010 21,173 0 82,183
--------- ----------- ------------- ----------- --------- ------------- -----------
Total revenues.................. 316,928 6,391 0 323,319 21,173 0 344,492
--------- ----------- ------------- ----------- --------- ------------- -----------
Expenses
Cost of sales and operating
expenses............................ 167,288 3,428 0 170,716 17,975 0 188,691
Depreciation and amortization..... 56,553 896 566 58,015 2,184 1,444 61,643
--------- ----------- ------------- ----------- --------- ------------- -----------
Total expenses.................. 223,841 4,324 566 228,731 20,159 1,444 250,334
--------- ----------- ------------- ----------- --------- ------------- -----------
Operating Income.................... 93,087 2,067 (566) 94,588 1,014 (1,444) 94,158
--------- ----------- ------------- ----------- --------- ------------- -----------
Other Income (Expense)
Interest expense.................. (22,186) (462) (527) (23,175) (2,193) (2,728) (28,096)
Gain on sales of assets........... 1,661 0 0 1,661 (1) 0 1,660
Other income, net................. 7,283 159 (30) 7,412 (193) 0 7,219
--------- ----------- ------------- ----------- --------- ------------- -----------
Total other income (expense).... (13,242) (303) (557) (14,102) (2,387) (2,728) (19,217)
--------- ----------- ------------- ----------- --------- ------------- -----------
Income (Loss) Before
Income Taxes...................... 79,845 1,764 (1,123) 80,486 (1,373) (4,172) 74,941
Income Taxes........................ 29,992 576 (185) 30,383 (114) (955) 29,314
--------- ----------- ------------- ----------- --------- ------------- -----------
Net Income (Loss)................... $ 49,853 $ 1,188 $ (938) $ 50,103 $ (1,259) $ (3,217) $ 45,627
--------- ----------- ------------- ----------- --------- ------------- -----------
--------- ----------- ------------- ----------- --------- ------------- -----------
Primary Earnings Per Share.......... $ 0.98 $ 0.97 $ 0.85
--------- ----------- -----------
--------- ----------- -----------
Fully Diluted Earnings Per Share.... $ 0.96 $ 0.95 $ 0.84
--------- ----------- -----------
--------- ----------- -----------
Weighted Average Common Shares
Outstanding:
Primary........................... 51,003 51,815 1,898 53,713
--------- ----------- ------------- -----------
--------- ----------- ------------- -----------
Fully Diluted..................... 55,703 56,589 1,898 58,487
--------- ----------- ------------- -----------
--------- ----------- ------------- -----------
</TABLE>
See "-Notes to Unaudited Pro Forma Consolidated Condensed Financial
Information."
54
<PAGE>
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 FORMA PRO FORMA
ADJUSTMENTS-- CONSOLIDATED PRO FORMA
OTHER OTHER BEFORE ADJUSTMENTS-- PRO FORMA
CENTURY ACQUIREES ACQUIREES MERGER CELUTEL CELUTEL CONSOLIDATED
--------- ----------- ------------- ------------ --------- ------------- -----------
(NOTE 10) (NOTE 8)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
Telephone...................... $ 297,510 $ 33,632 $ 0 $ 331,142 $ 0 $ 0 $ 331,142
Mobile Communications.......... 62,092 3,137 0 65,229 19,124 0 84,353
--------- ----------- ------------- ------------ --------- ------------- -----------
Total revenues............... 359,602 36,769 0 396,371 19,124 0 415,495
--------- ----------- ------------- ------------ --------- ------------- -----------
Expenses
Cost of sales and operating
expenses......................... 187,076 24,370 0 211,446 19,379 0 230,825
Depreciation and amortization.. 62,898 4,474 2,914 70,286 2,797 1,925 75,008
--------- ----------- ------------- ------------ --------- ------------- -----------
Total expenses............... 249,974 28,844 2,914 281,732 22,176 1,925 305,833
--------- ----------- ------------- ------------ --------- ------------- -----------
Operating Income (Loss).......... 109,628 7,925 (2,914) 114,639 (3,052) (1,925) 109,662
--------- ----------- ------------- ------------ --------- ------------- -----------
Other Income (Expense)
Interest expense............... (27,166) (2,194) (4,013) (33,373) (3,242) (3,637) (40,252)
Gain on sales of assets........ 3,985 0 0 3,985 54 0 4,039
Other income, net.............. 6,125 759 (120) 6,764 948 0 7,712
--------- ----------- ------------- ------------ --------- ------------- -----------
Total other income
(expense)........................ (17,056) (1,435) (4,133) (22,624) (2,240) (3,637) (28,501)
--------- ----------- ------------- ------------ --------- ------------- -----------
Income (Loss) Before Income Taxes
and Cumulative Effect of
Changes in Accounting
Principles....................... 92,572 6,490 (7,047) 92,015 (5,292) (5,562) 81,161
Income Taxes..................... 32,599 2,526 (1,364) 33,761 114 (1,236) 32,639
--------- ----------- ------------- ------------ --------- ------------- -----------
Income (Loss) Before Cumulative
Effect of Changes in Accounting
Principles....................... $ 59,973 $ 3,964 $ (5,683) $ 58,254 $ (5,406) $ (4,326) $ 48,522
--------- ----------- ------------- ------------ --------- ------------- -----------
--------- ----------- ------------- ------------ --------- ------------- -----------
Primary Earnings Per Share Before
Cumulative Effect of Changes in
Accounting Principles.......... $ 1.23 $ 1.13 $ 0.91
--------- ------------ -----------
--------- ------------ -----------
Fully Diluted Earnings Per Share
Before Cumulative Effect of
Changes in Accounting
Principles....................... $ 1.22 $ 1.12 $ 0.91
--------- ------------ -----------
--------- ------------ -----------
Weighted Average Common Shares
Outstanding:
Primary........................ 48,500 51,372 1,898 53,270
--------- ------------ ------------- -----------
--------- ------------ ------------- -----------
Fully Diluted.................. 52,814 56,138 (2,642) 53,496
--------- ------------ ------------- -----------
--------- ------------ ------------- -----------
</TABLE>
See "-Notes to Unaudited Pro Forma Consolidated Condensed Financial
Information."
55
<PAGE>
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) AMOUNT OF CASH AND VALUE OF CENTURY STOCK. As further described under
"Agreement and Plan of Merger-Determination of Aggregate Merger
Consideration", the amount of cash payable and the number of shares of
Century Stock issuable by Century as of the Closing Date will not be
determinable until immediately prior to such date. The pro forma
information has been prepared assuming a Calculation Amount of $102,500,000
and an Average Century Price of $25 per share.
<TABLE> <CAPTION>
AMOUNT OF CASH
AND VALUE OF
CENTURY STOCK
---------------
<S> <C>
Cash..................................................................... $ 51,250,000
1,898,148 shares of Century Stock at $25 per share....................... 47,453,700
---------------
$ 98,703,700
---------------
---------------
</TABLE>
See "Agreement and Plan of Merger-Determination of Aggregate Merger
Consideration" for information concerning the effect of the Average Century
Price on the number of shares of Century Stock to be issued.
(3) OPERATIONS. The pro forma adjustments do not consider the effect of
possible expense reductions that may occur in connection with integrating
Celutel's operations with Century's operations.
(4) 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.
(5) CELUTEL FINANCIAL INFORMATION. For financial reporting purposes, Celutel
has an April 30 fiscal year end. The unaudited pro forma consolidated
condensed balance sheet includes balance sheet information for Celutel as
of October 31, 1993. The unaudited pro forma consolidated condensed
statement of income for the nine-month period ended September 30, 1993
includes the financial information for Celutel for the nine months ended
October 31, 1993. The unaudited pro forma consolidated condensed statement
of income for the year ended December 31, 1992 includes the financial
information for Celutel for the twelve months ended January 31, 1993.
(6) SEPTEMBER 30, 1993 BALANCE SHEET PRO FORMA ADJUSTMENTS--CELUTEL. The pro
forma adjustments applicable to the Merger for the unaudited pro forma
consolidated condensed balance sheet as of September 30, 1993, as set forth
below, reflect a preliminary purchase price allocation which will be
refined subsequent to the Closing of the Merger. Based on current
information, Century does not anticipate that any subsequent refinements to
its preliminary purchase price allocation will have a material effect on
the pro forma information. Century intends to fund the Aggregate Cash
Consideration from proceeds to be received from the issuance of long-term
debt. Although Century is currently reviewing several financing
alternatives and has made no final determinations as to which alternative
to pursue, the pro forma information has been prepared assuming that
Century will obtain long-term financing at an assumed interest rate of
6.5%.
56
<PAGE>
<TABLE> <CAPTION>
DEFERRED
CHARGES AND REDEEMABLE
OTHER EXCESS CURRENT LONG-TERM PREFERRED COMMON PAID-IN
CASH ASSETS COST MATURITIES DEBT STOCK STOCK CAPITAL
--------- ----------- --------- ----------- --------- --------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Borrow cash portion of
purchase price.............. $ 51,250 $ 1,794 $ 49,456
Borrow to prepay Celutel's
debt........................ 41,276 1,445 39,831
Prepayment of Celutel
debt........................ (41,276) (12) (41,264)
Conversion of Celutel
Preferred Stock into
Celutel Common Stock...... (38,425) 1,650 36,775
Purchase Celutel:
Deliver consideration..... (51,250) 127,506 1,898 45,556
Eliminate Celutel equity,
excess cost of net
assets acquired and
deferred debt costs..... (929) (21,247) (2,353) (36,775)
Reflect estimated costs of
merger:
Borrow funds.............. 4,700 165 4,535
Pay costs................. (4,700) 4,700
--------- ----------- --------- ----------- --------- --------- ----------- ---------
$ 0 $ (929) $ 110,959 $ 3,392 $ 52,558 $ (38,425) $ 1,195 $ 45,556
--------- ----------- --------- ----------- --------- --------- ----------- ---------
--------- ----------- --------- ----------- --------- --------- ----------- ---------
<CAPTION>
RETAINED
EARNINGS
---------
Borrow cash portion of
purchase price..............
Borrow to prepay Celutel's
debt........................
Prepayment of Celutel
debt........................
Conversion of Celutel
Preferred Stock into
Celutel Common Stock......
Purchase Celutel:
Deliver consideration.....
Eliminate Celutel equity,
excess cost of net
assets acquired and
deferred debt costs..... 45,754
Reflect estimated costs of
merger:
Borrow funds..............
Pay costs.................
---------
$ 45,754
---------
---------
<CAPTION>
</TABLE>
(7) SEPTEMBER 30, 1993 INCOME STATEMENT PRO FORMA ADJUSTMENTS--CELUTEL. Set
forth below are the pro forma adjustments applicable to the Merger for the
unaudited pro forma consolidated condensed statement of income for the
nine-month period ended September 30, 1993:
<TABLE> <CAPTION>
DEPRECIATION AND
AMORTIZATION INTEREST EXPENSE INCOME TAXES
---------------- ---------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C>
Amortization of Century's excess cost of net assets
acquired (assuming a 40-year amortization period)..... $ 2,386
Eliminate amortization of Celutel's excess cost of net
assets acquired......................................... (942)
Interest on net borrowings at an assumed rate of 6.5%... (2,728)
Tax effect of interest expense (assuming a 35% tax
rate)................................................... (955)
-------- ---------------- -------
$ 1,444 $ (2,728) $ (955)
-------- ---------------- -------
-------- ---------------- -------
</TABLE>
The 1,898,000 increase in the weighted average common shares outstanding for the
calculation of primary and fully diluted earnings per share represents the
number of shares of Century Stock assumed to be issued upon the
consummation of the Merger. See Note 2.
A 1/8 percent change in the assumed interest rate would have changed net income
by approximately $34,000.
57
<PAGE>
(8) DECEMBER 31, 1992 INCOME STATEMENT PRO FORMA ADJUSTMENTS--CELUTEL. Set
forth below are the pro forma adjustments applicable to the Merger for the
unaudited pro forma consolidated condensed statement of income for the year
ended December 31, 1992:
<TABLE> <CAPTION>
DEPRECIATION AND
AMORTIZATION INTEREST EXPENSE INCOME TAXES
---------------- ---------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Amortization of Century's excess cost of net assets
acquired (assuming a 40-year amortization period)..... $ 3,181
Eliminate amortization of Celutel's excess cost of net
assets acquired......................................... (1,256)
Interest on net borrowings at an assumed rate of 6.5%... (3,637)
Tax effect of interest expense (assuming a 34% tax
rate)................................................... (1,236)
---------------- ---------------- -------------
$ 1,925 $ (3,637) $ (1,236)
---------------- ---------------- -------------
---------------- ---------------- -------------
</TABLE>
A 1/8 percent change in the assumed interest rate would have changed net income
by approximately $46,000.
The 1,898,000 increase in the weighted average common shares outstanding for the
calculation of primary earnings per share represents the number of shares of
Century Stock assumed to be issued upon the consummation of the Merger. See
Note 2. The net decrease of 2,642,000 in the fully diluted weighted average
common shares outstanding includes the increase of 1,898,000 shares assumed
to be issued upon the consummation of the Merger which is more than offset
by 4,540,000 incremental common shares attributable to 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.
(9) MERGER COSTS. A pro forma adjustment has been reflected in the unaudited
pro forma consolidated condensed balance sheet for $4,700,000 of estimated
costs related to the Merger expected to be incurred by Century and Celutel.
Such adjustment includes the fee to be paid to Lazard, the $650,000 to be
paid to Mr. Scarpa, the estimated amount to be paid under the Management
Stay Bonus Plan, the $525,000 to be paid to Celltech, the Letter of Credit
fee and estimated legal and accounting fees.
(10) OTHER ACQUISITIONS. For purposes of the pro forma information, the Other
Acquisitions include, in addition to the Proposed 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.
(11) ADDITIONAL PRO FORMA INFORMATION. The unaudited pro forma consolidated
condensed financial information has been prepared assuming an average
Century price per share of $25. Although the number of shares of Century
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.
58
<PAGE>
INFORMATION ABOUT CELUTEL
GENERAL
Celutel is engaged in the construction, development and operation of
cellular telephone systems servicing market areas in the Rio Grande River Valley
area of Texas, including the Brownsville-Harlingen, Texas and
McAllen-Edinburg-Mission, Texas MSA's, and the Jackson, Pascagoula, and
Biloxi-Gulfport, Mississippi MSA's. As of December 31, 1993, Celutel held
interests in cellular telephone systems in the following market areas:
<TABLE> <CAPTION>
CELUTEL'S
PERCENTAGE COMPANY
MONTH SYSTEM INTEREST AS OF "POPS" AS OF
MARKET TOTAL BECAME DECEMBER 31, DECEMBER 31,
SERVICE AREA NUMBER(1) POPULATION(2) OPERATIONAL 1993(3) 1993
- ---------------------------------------- ------------- ----------- --------------- ------------------- ----------------
<S> <C> <C> <C> <C> <C>
Brownsville-Harlingen, Texas............ 162 279,597 February 1988 77.4172% 216,456
McAllen-Edinburg-Mission, Texas......... 128 419,283 January 1988 67.2700% 282,052
Jackson, Mississippi.................... 106 406,000 August 1989 86.0649% 349,423
Biloxi, Mississippi(4).................. 173 213,986 February 1990 84.8151% 181,492
Pascagoula, Mississippi................. 252 120,464 November 1990 82.5723% 99,470
----------- ----------------
Total................................. 1,439,330 1,128,894
----------- ----------------
----------- ----------------
</TABLE>
- ---------------
(1) Market number is an FCC designated number utilized to identify the various
licensed areas.
(2) Based on the 1993 population estimates from Donnelly Marketing Information
Services.
(3) Such Percentage Interest represents Celutel's percentage ownership interest
in the corporation or general partnership holding the license to provide
cellular telephone service.
(4) In the event neither the Merger Agreement nor the MGC Agreement is
consummated, Celutel will be required to repurchase from Century an
additional 6.284% interest in this system. See "Background and Other General
Information Relating to the Merger-Background of Merger--Other Transactions
With Century."
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the executive
officers of Celutel.
<TABLE> <CAPTION>
NAME AGE PRINCIPAL OCCUPATION
- ----------------------------------------------------- ----------- -----------------------------------------------------
<S> <C> <C>
Frank S. Scarpa...................................... 58 Chairman of the Board, President, Chief Executive
Officer and Director
David A. Warren...................................... 39 Senior Vice President and Chief Operating Officer
Richard J. Donnelly.................................. 34 Vice President--Finance, Treasurer and Chief
Financial Officer
Valerie S. Hart...................................... 35 Vice President--Marketing and Secretary
</TABLE>
Mr. Scarpa has been the Chairman of the Board of Celutel since 1988 and
President of Celutel since November 1991. He is also a private investor with
interests in the telecommunications industry. From February 1983 through August
1987, Mr. Scarpa was an officer, director and principal stockholder of American
Cellular Network Corp., the owner and operator of cellular telephone systems in
the middle Atlantic states. American Cellular Network Corp. was acquired by
Comcast Corporation in June 1988. For more than the past five years, Mr. Scarpa
also has had interests in the cable television industry throughout the eastern
United States and has been an officer and director of numerous cable television
industry associations. Mr. Scarpa is the father of Valerie S. Hart, the Vice
President-Marketing and Secretary of Celutel.
Mr. Warren was elected Senior Vice President and Chief Operating Officer of
Celutel in March 1992 and since May 14, 1991 was employed by Celutel as Vice
President-Operations. He had been employed by Symphony Management Associates,
Inc., a private investment company controlled by Mr. Scarpa ("SYMPHONY"), for
the period from June 1, 1988 through May 14, 1991 (see "-Certain
59
<PAGE>
Transactions"). Prior thereto, he was, commencing in 1981, President and general
manager of Select-A-Seat Corporation of Colorado, a computerized ticketing and
reservation system, controlled by Mr. Scarpa since 1985.
Mr. Donnelly was elected Chief Financial Officer of Celutel in September
1988, Treasurer of Celutel in March 1990 and Vice President-Finance of Celutel
in June 1991. Between June 1, 1988 and May 14, 1991 he was employed by Symphony
(see "-Certain Transactions"). Prior to his employment by Symphony, he was
employed by Mr. Scarpa in various capacities and before that by Ernst & Young, a
public accounting firm.
Mrs. Hart was elected Vice President-Marketing of Celutel in June 1991 and
Secretary of Celutel in October 1992. She had been employed by Symphony from
June 1, 1988 through May 14, 1991 (see "-Certain Transactions"). Prior thereto
she was, commencing in 1987, general manager of Datatix-Salt Lake City, a
computerized ticketing reservation system controlled by Mr. Scarpa and prior
thereto was employed in cable television marketing. Mrs. Hart is the daughter of
Mr. Scarpa.
All of the executive officers will hold office until the earlier of (i) the
Closing Date or (ii) the next annual meeting of the Board of Directors following
the Meeting unless previously removed by the Board of Directors. Century's
obligation to consummate the Merger is conditioned upon, among other things, the
resignation of the executive officers on the Closing Date.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation paid during Celutel's three
fiscal years ended April 30, 1993 to the chief executive officer of Celutel and
the other three other executive officers of Celutel.
SUMMARY COMPENSATION TABLE
<TABLE> <CAPTION>
LONG TERM
OTHER COMPENSATION
ANNUAL AWARDS
NAME AND PRINCIPAL POSITION YEAR(1) SALARY BONUS COMPENSATION OPTIONS
- --------------------------------------------------- ----------- --------- --------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Frank S. Scarpa.................................... 1993 $ 354,383 -0- -0- -0-
Chairman and President 1992 $ 304,349 -0- -0- -0-
1991 $ 265,000 -0- -0- -0-
David A. Warren.................................... 1993 $ 135,508 $ 75,000 -0- -0-
Senior Vice President and Chief Operating Officer 1992 $ 24,403 -0- -0- -0-
1991 -0- -0- -0- -0-
Richard J. Donnelly................................ 1993 $ 135,508 $ 40,000 -0- -0-
Vice President-Finance and Treasurer 1992 $ 132,422 -0- -0- -0-
1991 -0- -0- -0- -0-
Valerie S. Hart.................................... 1993 $ 135,508 $ 50,000 -0- -0-
Vice President-Marketing and Secretary 1992 $ 126,756 -0- -0- -0-
1991 -0- -0- -0- -0-
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION
- --------------------------------------------------- -----------------
Frank S. Scarpa.................................... -0-
Chairman and President -0-
-0-
David A. Warren.................................... -0-
Senior Vice President and Chief Operating Officer -0-
-0-
Richard J. Donnelly................................ -0-
Vice President-Finance and Treasurer -0-
-0-
Valerie S. Hart.................................... -0-
Vice President-Marketing and Secretary -0-
-0-
<CAPTION>
</TABLE>
- ---------------
(1) Compensation paid during the fiscal year ended April 30.
Celutel is a party to an Employment Agreement with Mr. Frank S. Scarpa
dated November 11, 1988, pursuant to which Mr. Scarpa has been employed as
Celutel's Chairman of the Board of Directors since December 1, 1988. Under such
agreement, Mr. Scarpa will receive a salary of $400,000 for the year ending
December 31, 1993. In the event of a change of control of Celutel, Mr. Scarpa is
entitled, in the event of the termination of his employment, to be compensated
in an amount equal to the greater of three times his then current base salary or
the aggregate of all compensation payments otherwise payable through the
termination date of the Merger Agreement together with certain insurance and
office benefits. The agreement was originally scheduled to expire on December
31, 1993 but was extended in November 1993 through the earlier of the Effective
Time or December 31, 1994 to ensure Mr. Scarpa's continued service through the
Closing Date. The extension provides that Mr. Scarpa's salary will continue at
the rate of $400,000 per annum. For information on the settlement of this
Employment Agreement, see "Agreement and Plan of Merger-Executive Officer
Benefits."
60
<PAGE>
CERTAIN TRANSACTIONS
Set forth below is information regarding certain recent transactions
involving Celutel's executive officers and certain of its Directors, and CIVC,
which invested funds in Celutel in May 1991 in a transaction more fully
described in Celutel's periodic reports filed under the Exchange Act and
incorporated herein by reference. See "Incorporation of Certain Documents By
Reference." For information involving certain currently proposed transactions
involving Celutel's executive officers and certain Directors, see "Agreement and
Plan of Merger."
Certain of Celutel's cellular system operating subsidiaries have entered
into agreements with Celltech to provide electronic data processing and billing
services for the subsidiary. In March 1988, Mr. Frank S. Scarpa acquired control
of Celltech. Subsequently, Mr. Scarpa transferred a 5% interest in this company
to each of Messrs. Donnelly and Warren and Mrs. Hart. The terms of the operating
subsidiaries' agreements with the billing service company are substantially the
same as the terms of the billing company's agreements with non-affiliated
entities and are believed by Celutel to be no less favorable to Celutel than
could be obtained from non-affiliated persons. During the fiscal year ended
April 30, 1993, Celutel paid an aggregate of approximately $800,900 for services
pursuant to these agreements. See "Agreement and Plan of Merger-Other Closing
Conditions--Amendment of Celltech Agreements."
Prior to May 14, 1991, Celutel financed its activities primarily through
borrowings from Mr. Scarpa. At April 30, 1991, Celutel was indebted to Mr.
Scarpa in the amount of $37,310,643. Of this indebtedness, $30,900,000 was due
to be repaid on May 31, 1993 and the balance was due on demand. On September 24,
1990, Celutel's borrowings from Mr. Scarpa were amended to increase the interest
rate so as to conform with the interest rate payable by Mr. Scarpa on his bank
borrowings, the proceeds of which were loaned to Celutel. The interest rate was
increased from the prime rate plus 1 1/4% to the prime rate plus 1 3/4% of which
1/4% is deferred until the due date of the indebtedness and the balance was
payable currently. Mr. Scarpa's loans to Celutel were secured by substantially
all of its cellular systems assets. Mr. Scarpa's loan agreements with Celutel
provided that in the event Celutel defaulted in the payment of any of its
indebtedness or failed to pay its debts as they came due, Mr. Scarpa's loans to
Celutel would become immediately due and payable. During the fiscal years ended
April 30, 1992 and April 30, 1993, Celutel paid or accrued $147,249 and $-0-,
respectively, in interest to Mr. Scarpa.
As a condition to the closing of the 1991 CIVC investment in Celutel, $4.2
million of indebtedness owing by Celutel to Mr. Scarpa was repaid and Mr. Scarpa
used the proceeds to purchase at the closing 420 shares of Celutel Preferred
Stock.
With the aggregate proceeds from the borrowing from Provident National
Bank, N.A. (the "BANK") pursuant to a Bank Loan Agreement dated April 2, 1991
and the sale of the securities to CIVC, Celutel repaid in full on May 14, 1991
Celutel's remaining indebtedness to Mr. Scarpa aggregating $33,110,643 as of
such date, including accrued interest. In addition, Mr. Scarpa's guarantees of
indebtedness of Celutel and pledges of certain of his assets to secure
indebtedness of Celutel to the Bank were released. Celutel's guaranty of Mr.
Scarpa's indebtedness to the Bank was also released. These pledges and
guarantees collateralized an aggregate of $10,193,524, including accrued
interest, as of May 14, 1991, of Celutel's indebtedness owing to the Bank.
Celutel was, through May 13, 1991, a party to a Management Agreement dated
November 11, 1988 with Symphony whereby Symphony provided management services to
Celutel. During the fiscal year ended April 30, 1992, Celutel paid or accrued
fees in the amount of $38,492 to Symphony pursuant to the terms of the
agreement. As of April 30, 1991 Celutel was indebted to Symphony in the amount
of $726,928 for accrued and unpaid management fees and an additional $34,887 for
out-pocket-expenses. At the closing of the transaction with CIVC, Celutel paid
such sums in full to Symphony and the Management Agreement dated November 11,
1988 between Celutel and Symphony was terminated. Thereafter, no further
management fees were paid or payable by Celutel to Symphony. Mr. Scarpa holds
85% of the outstanding stock of Symphony.
61
<PAGE>
Concurrently with the closing of the transaction with CIVC, Mr. Scarpa and
Celutel cancelled warrants held by him to purchase 891,520 shares of Class B
Common Stock and Mr. Scarpa agreed that the remaining warrants he held were
exercisable to purchase 1,744,843 shares of Celutel Common Stock instead of
Class B Common Stock. Of such warrants, 1,000,000 continue to be exercisable at
$5.00 per share and the remainder continue to be exercisable at $5.50 per share.
In addition, in consideration of this amendment, Mr. Scarpa's warrants were
amended to provide that all the warrants will expire on May 14, 1996.
Previously, 1,000,000 warrants expired on January 5, 1993 and the remainder
expired on May 17, 1993. See "Agreement and Plan of Merger-Allocation of
Aggregate Merger Consideration Among Celutel Stockholders--Allocation to Warrant
Holders."
On January 27, 1992 and March 10, 1992, Celutel agreed to purchase from Mr.
Scarpa an aggregate of 4.725 shares of Common Stock of The McAllen Cellular
Telephone Co., Inc. for an aggregate purchase price of $764,009 and on January
27, 1992 Celutel agreed to purchase from Mr. Scarpa 198 shares of Brownsville
Cellular Telephone Co., Inc. for a purchase price of $212,982. The shares were
purchased by Mr. Scarpa on various dates in 1988. Celutel completed this
transaction on December 7, 1992. The terms of the purchase by Celutel were
approved by the disinterested members of the Board of Directors of Celutel and
such terms are believed by management of Celutel to be no less favorable to Mr.
Scarpa then could have been obtained if the transaction had been entered into
with a non-affiliated person.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
Celutel's Board of Directors held seven meetings during the fiscal year
ended April 30, 1993. The Board of Directors has an Audit Committee consisting
of Messrs. Corcoran and Willis which met twice during the fiscal year ended
April 30, 1993 and an Executive Compensation Committee consisting of Messrs.
Scarpa, Stein and Dittrick which did not meet during the fiscal year ended April
30, 1993. The Board of Directors does not have a nominating committee. The Audit
Committee recommended to the Board of Directors the retention of Coopers &
Lybrand as Celutel's independent accountants; reviewed the annual financial
statements and discussed them with the auditors and financial staff of Celutel
prior to their submission to the Board of Directors; reviewed the independence
of the independent accountants conducting the audit; reviewed the services
provided by the independent accountants; discussed with management and the
auditors Celutel's accounting system and related systems of internal control;
and consulted as it deemed necessary with the independent accountants and
Celutel's financial staff. The Executive Compensation Committee considers
matters relating to compensation and salaries of corporate officers. See
"Election of Directors-General."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of January 3, 1994, information with
respect to each person (including any "group" as that term is used in Section
13(d)(3) of the Exchange Act) who is known to Celutel to be the beneficial owner
of more than five percent of the Celutel Common Stock or the Celutel Preferred
Stock, as well as shares of Celutel Common Stock and Celutel Preferred Stock
beneficially owned by each Director or executive officer of Celutel and all
Directors and executive officers of Celutel as a group. As of January 3, 1994
Celutel had outstanding (i) 3,516,188 shares of Celutel Common Stock and (ii)
4,254.1388 shares of Celutel Preferred Stock (which amount, and all other
amounts of such stock set forth below, includes accrued and unpaid stock
dividends thereon). See "Comparative Rights of Century and Celutel
Stockholders-Preferred Stock" for a description of certain material terms of the
Celutel Preferred Stock.
62
<PAGE>
<TABLE> <CAPTION>
PERCENTAGE OF
NAMES AND ADDRESSES OF BENEFICIAL PERCENT OF TOTAL VOTING
HOLDER OR IDENTITY OF GROUP(1) NUMBER OF SHARES CLASS POWER
- ------------------------------------------- ----------------------------------------- ----------- ---------------
<S> <C> <C> <C>
Frank S. Scarpa Common Stock--3,832,622(2) 58.7% 17.4%
c/o Celutel, Inc. Preferred Stock--634.0556 14.9%
900 Bestgate Road
Suite 400
Annapolis, Maryland 21401
Scarpa Family Trust Common Stock--229,601(3) 6.1% 1.9%
c/o Valerie S. Hart, Trustee Preferred Stock--114.8006 2.7%
900 Bestgate Road
Suite 400
Annapolis, Maryland 21401
Continental Illinois Venture Common Stock--4,938,328(4)(5) 62.6% 41.1%
Corporation Preferred Stock--2,187.6152(5) 51.4%
231 South LaSalle Street
Chicago, Illinois 60697
Avy H. Stein Common Stock--564,299(6)(7) 14.0% 4.7%
c/o Continental Illinois Venture Preferred Stock--250.9463(7) 5.9%
Corporation
231 South LaSalle Street
Chicago, Illinois 60697
John R. Willis Common Stock--564,299(8)(9) 14.0% 4.7%
c/o Continental Illinois Venture Preferred Stock--250.9463(9) 5.9%
Corporation
231 South LaSalle Street
Chicago, Illinois 60697
Douglas Dittrick Common Stock--10,000 0.3% 0.1%
1200 East Ridgewood Avenue Preferred Stock--0 0%
East Wind, Suite 3D
Ridgewood, New Jersey 07450
J. Walter Corcoran Common Stock--0 0% --
61 Stag Lane Preferred Stock--0 0%
Greenwich, Connecticut 06831
David A. Warren Common Stock--41,667 1.2% 0.3%
c/o Celutel, Inc. Preferred Stock--0 0%
900 Bestgate Road
Suite 400
Annapolis, Maryland 21401
Richard J. Donnelly Common Stock--41,666 1.2% 0.3%
c/o Celutel, Inc. Preferred Stock--0 0%
900 Bestgate Road
Suite 400
Annapolis, Maryland 21401
Valerie S. Hart Common Stock--271,268(10)(11) 7.2% 2.3%
c/o Celutel, Inc. Preferred Stock--114.8006(10) 2.7%
900 Bestgate Road
Suite 400
Annapolis, Maryland 21401
William Blair Venture Partners Common Stock--920,793(12) 21.2% 7.7%
135 South LaSalle Street Preferred Stock--409.4808 9.6%
Chicago, Illinois 60606
</TABLE>
63
<PAGE>
<TABLE> <CAPTION>
PERCENTAGE OF
NAMES AND ADDRESSES OF BENEFICIAL PERCENT OF TOTAL VOTING
HOLDER OR IDENTITY OF GROUP(1) NUMBER OF SHARES CLASS POWER
- ------------------------------------------- ----------------------------------------- ----------- ---------------
<S> <C> <C> <C>
PNC Capital Corporation Common Stock--537,427(13) 13.46% 4.5%
Pittsburgh National Bank Building Preferred Stock--238.9965 5.6%
19th Floor
5th Avenue and Wood Streets
Pittsburgh, Pennsylvania 15222
All Directors and Officers as a Group (8 Common Stock--5,325,821 68.6% 44.3%
persons)(14) Preferred Stock--1,250.7488 29.4%
</TABLE>
- ---------------
(1) All of such persons hold their shares of record and beneficially except as
otherwise indicated. Beneficial ownership has been determined in accordance
with Rule 13d-3 promulgated under the Exchange Act. All of such persons
have duly and timely filed all requisite reports and forms pursuant to
Section 16(a) of the Exchange Act. Frank S. Scarpa is the father of Valerie
S. Hart.
(2) Includes 763,039 shares of Celutel Common Stock held of record and
beneficially, 1,744,843 shares of Celutel Common Stock issuable on exercise
of presently exercisable Warrants and 1,268,111 shares issuable on
conversion of his shares of Celutel Preferred Stock. See "Agreement and
Plan of Merger-Allocation of Aggregate Merger Consideration Among Celutel
Stockholders -- Allocation to Warrant Holders" with respect to provisions
contained in the Merger Agreement relating to these Warrants. Also includes
56,629 shares held by corporations of which Mr. Scarpa is the sole
stockholder. Does not include the shares indicated in footnote 3 as being
held by the Scarpa Family Trust.
(3) Includes (i) 114.8006 shares of Celutel Preferred Stock held of record and
beneficially by the Scarpa Family Trust, a trust established by Frank S.
Scarpa for the benefit of his children and grandchildren of which his
daughter, Valerie S. Hart, is the sole trustee, and (ii) 229,601 shares of
Celutel Common Stock issuable upon conversion of such Celutel Preferred
Stock. See notes 2 and 10.
(4) Includes 4,375,230 shares issuable on conversion of its shares of Celutel
Preferred Stock and 563,098 shares of Celutel Common Stock.
(5) Does not include Celutel Stock held by Messrs. Stein or Willis of which
CIVC might be deemed a beneficial owner.
(6) Includes 501,893 shares issuable on conversion of his shares of Celutel
Preferred Stock and 62,406 shares of Celutel Common Stock.
(7) Does not include Celutel Stock held by CIVC of which Mr. Stein might be
deemed a beneficial owner.
(8) Includes 501,893 shares issuable on conversion of his shares of Celutel
Preferred Stock and 62,406 shares of Celutel Common Stock.
(9) Does not include Celutel Stock held by CIVC of which Mr. Willis might be
deemed a beneficial owner.
(10) Includes 41,667 shares of Celutel Common Stock held of record and
beneficially and all shares that are indicated in footnote 3 as being held
by the Scarpa Family Trust, of which Ms. Hart is the sole trustee.
(11) Includes 229,601 shares issuable on conversion of her shares of Celutel
Preferred Stock and 41,667 shares of Celutel Common Stock.
(12) Includes 818,962 shares issuable on conversion of its shares of Celutel
Preferred Stock and 101,831 shares of Celutel Common Stock.
(13) Includes 477,993 shares issuable on conversion of its shares of Celutel
Preferred Stock and 59,434 shares of Celutel Common Stock.
(14) Does not include Celutel Stock held by CIVC of which Mr. Stein and Mr.
Willis might be deemed beneficial owners.
64
<PAGE>
MARKET PRICES FOR CELUTEL COMMON STOCK
Celutel Common Stock is listed on the American Stock Exchange ("AMEX") and
is traded under the symbol CLU. The following table sets forth the high and low
sale prices of Celutel Common Stock as reported on the AMEX Composite Tape for
each of the calendar quarters indicated:
<TABLE> <CAPTION>
SALE PRICES
--------------------
HIGH LOW
--------- ---------
<S> <C> <C>
1991:
First quarter............................................................... 4 5/8 2
Second quarter.............................................................. 4 3/4 3 1/4
Third quarter............................................................... 3 1/4 2 1/4
Fourth quarter.............................................................. 3 3/8 2 1/4
1992:
First quarter............................................................... 3 5/8 2 1/8
Second quarter.............................................................. 2 1/2 2
Third quarter............................................................... 2 5/8 1 3/4
Fourth quarter.............................................................. 4 3/16 2 1/2
1993:
First quarter............................................................... 5 3 3/8
Second quarter.............................................................. 4 3 1/2
Third quarter............................................................... 7 1/8 3 5/8
Fourth quarter..............................................................
--------- ---------
1994:
First quarter (through January , 1994)....................................
--------- ---------
</TABLE>
On August 18, 1993 (the trading day preceding public announcement of the
execution of the Century Letter of Intent), on October 8, 1993 (the trading day
preceding public announcement of the execution of the Merger Agreement) and on
January , 1994 (the trading day preceding the date of this Proxy Statement),
the closing per share sale prices of Celutel Common Stock, as reported on the
AMEX Composite Tape, were $4 1/2, $6 7/8 and $ , respectively. As of
January 3, 1994, Celutel had 1,249 record holders of Celutel Common Stock.
Celutel has never paid a cash dividend on Celutel Common Stock and management
has no present intention of commencing to pay such dividends.
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 Century's pops (calculated by reference to the 1992
Donnelly Marketing Information Services estimates). Century's business strategy
for its cellular operations is to secure operating control for 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.
65
<PAGE>
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."
MARKET PRICES FOR CENTURY STOCK
Century 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 sale prices of
Century Stock as reported on the New York Stock Exchange Composite Tape for each
of the quarters indicated:
<TABLE> <CAPTION>
SALE PRICES
--------------------
HIGH LOW
--------- ---------
<S> <C> <C>
1991:
First quarter............................................................... 21 5/8 18 5/8
Second quarter.............................................................. 21 1/2 16 3/8
Third quarter............................................................... 19 1/8 15 7/8
Fourth quarter.............................................................. 20 5/8 16 3/4
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 January , 1994)....................................
--------- ---------
</TABLE>
On August 18, 1993 (the trading day preceding public announcement of the
Century Letter of Intent), on October 8, 1993 (the trading day preceding public
announcement of the execution of the Merger Agreement), and on January , 1994,
(the trading day preceding the date of this Proxy Statement), the closing per
share sale price of Century Stock, as reported on the New York Stock Exchange
Composite Tape, was $29 7/8, $27 1/8 and $ , respectively. As of
December 2, 1993, there were approximately 5,700 stockholders of record of
Century Stock. NO ASSURANCE CAN BE GIVEN AS TO THE MARKET PRICE OF CENTURY
STOCK BEFORE, AT OR AFTER THE EFFECTIVE TIME.
Because the market price of Century Stock issuable in connection with the
Merger may increase or decrease, you are urged to obtain current market
quotations.
66
<PAGE>
COMPARATIVE RIGHTS OF CENTURY AND CELUTEL STOCKHOLDERS
If the Merger is consummated, stockholders of Celutel, other than
dissenting stockholders, will become stockholders of Century. The rights of
Century's stockholders are governed by and subject to the provisions of the
Louisiana Business Corporation Law and the Articles of Incorporation and Bylaws
of Century, rather than the provisions of the Delaware GCL and the Certificate
of Incorporation and Bylaws of Celutel. The following is a brief summary of
certain differences between the rights of stockholders of Century and the rights
of stockholders of Celutel and is qualified in its entirety by reference to the
relevant provisions of (i) the Louisiana Business Corporation Law ("LOUISIANA
LAW"), (ii) the Delaware GCL, (iii) the Articles of Incorporation of Century
(the "CENTURY ARTICLES"), (iv) the Certificate of Incorporation of Celutel (the
"CELUTEL CERTIFICATE"), (v) the Bylaws of Century (the "CENTURY BYLAWS"), (vi)
the Bylaws of Celutel (the "CELUTEL BYLAWS") 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
Under the Century Articles, each share of Century Stock that has been
beneficially owned by the same person or entity continuously since May 30, 1987
generally entitles the holder thereof to ten votes on all matters duly submitted
to a vote of stockholders. Otherwise, each share entitles the holder thereof to
one vote per share. Accordingly, each share issued in connection with the Merger
will entitle the holder to one vote, and, subject to the possibility of Century
issuing ten-vote shares in connection with business combinations accounted for
as poolings of interest, each other share of Century Stock issued by Century in
the future will entitle the holder to one vote. Holders of Century 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 June 30,
1993, the trustee for two of Century's employee benefit plans was the record
holder of Century 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 the discussion below
under the heading "-Laws and Organizational Document Provisions with Possible
Antitakeover Effects."
The holders of Celutel Common Stock are entitled to one vote per share on
all matters duly submitted to a stockholder vote. Holders of shares of Celutel
Preferred Stock are entitled to 2,000 votes per share on all matters duly
submitted to a stockholder vote and vote together with the Celutel Common Stock,
except as otherwise required by law.
PREFERRED STOCK
Under the Century Articles, the Board of Directors of Century is
authorized, without stockholder action, to issue preferred stock ("CENTURY
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 the Board of Directors includes, but is not limited to, the
determination or establishment of the following with respect to each series of
Century 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 Preferred Stock or among the series of Century Preferred Stock, (iv)
whether, and upon what terms, the Century Preferred Stock would be convertible
into or exchangeable for other securities of Century, (v) whether, and to what
extent, holders of Century 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 Century Preferred Stock.
67
<PAGE>
As of June 30, 1993, 18,162 shares of certain series of Century Preferred
Stock were outstanding. At such time, such shares were convertible into a total
of approximately 121,500 shares of Century Stock, and 4,260 of such shares were
immediately redeemable at the option of the Board of Directors. Each holder of
the currently outstanding Century Preferred Stock is entitled to receive
cumulative dividends prior to the distribution or declaration of dividends in
respect of the Century Stock and is entitled to vote as a class with the Century
Stock. Because each such share has been beneficially owned by the same person or
entity 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 stock, see "-Voting Rights " Century intends to issue a series of
Century Preferred Stock consisting of 75,000 shares in connection with Century's
proposed acquisition of a Michigan-based local exchange telephone company. At
the time of issuance, such shares will be convertible into a total of
approximately 74,000 shares of Century Common Stock which will entitle the
holders thereof to cast one vote per share. Upon the dissolution, liquidation or
winding up of Century, the holders of the currently outstanding Century
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 prior to any payments on the Century Common Stock.
For a discussion of the possible antitakover effects of the existence of
undesignated Century Preferred Stock, see the discussion below under "-Laws and
Organizational Document Provisions with Possible Antitakover Effects."
Under Celutel's Certificate, the Board of Directors of Celutel is
authorized, without stockholder action, to issue up to 50,000 shares of Celutel
Preferred Stock, $.20 par value per share. The Board of Directors is empowered
to issue the Celutel Preferred Stock in series and, subject to the Delaware GCL,
to fix the number of shares to be included in any series and the designation,
relative rights, preferences and limitations of such shares, the annual dividend
rate and whether such dividends shall be cumulative, the redemption price, if
any, and the terms and conditions of such redemption, the preferences in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
Celutel, and the voting and conversion rights, if any. The shares of Celutel
Preferred Stock have no pre-emptive or other subscription rights or liability to
further calls or assessments.
As of January 3, 1994, there were 4,254.1388 shares of Celutel Preferred
Stock (including accrued and unpaid stock dividends thereon). The terms of the
Celutel Preferred Stock require Celutel to pay dividends (payable in the form of
additional shares of Celutel Preferred Stock until 1996) which accrue on a daily
basis at a rate of 18% per annum of the $10,000 liquidation value of the Celutel
Preferred Stock. Each share of Celutel Preferred Stock may be converted into
2,000 shares of Celutel Common Stock, subject to certain modifications, and each
share of Celutel Preferred Stock votes on an as if converted basis. The Celutel
Preferred Stock may be redeemed at the option of Celutel for the liquidation
value thereof plus the value of all accrued and unpaid dividends and a premium
which declines over time. In such event, the holder of the Celutel Preferred
Stock will also receive warrants to purchase that amount of Celutel Common Stock
into which the Celutel Preferred Stock could have been converted. For further
information regarding the terms of the Celutel Preferred Stock, see
"Incorporation of Certain Documents by Reference."
PREFERRED STOCK PURCHASE RIGHTS
In November 1986, the Board of Directors of Century declared a distribution
of one preferred stock purchase right (a "RIGHT") for each outstanding share of
Century Stock, payable to stockholders 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 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, 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 Stock certificates
and are not exercisable or transferable apart
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from the Century 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 Stock or such
date as a majority of the Board of Directors shall become aware of such
acquisition of the Century 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
outstanding Century 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 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 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 stockholder 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 Stock
(other than pursuant to an all-cash tender offer for all of the outstanding
Century Stock that increases such Acquiring Person's beneficial ownership to 80%
or more of the outstanding shares of Century 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 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 "-Laws and Organizational Document Provisions with Possible Antitakeover
Effects."
Celutel does not have any preferred stock purchase rights or similar rights
outstanding.
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DIVIDENDS, REDEMPTIONS AND STOCK REPURCHASES
Under both the Delaware GCL and Louisiana Law, dividends may be declared by
the Board of Directors and paid out of surplus, and, if no surplus is available,
out of any net profits for the then current fiscal year or the preceding fiscal
year, or both, provided that such payment will not reduce capital below the
amount of capital represented by all classes of outstanding stock having a
preference as to the distribution of assets upon liquidation of the corporation.
Louisiana Law further provides that no dividend may be paid when the corporation
is insolvent or would thereby be made insolvent and that stockholders must be
notified of any dividend paid out of capital surplus.
Under Louisiana Law, 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 Delaware GCL, a corporation may redeem or
repurchase its outstanding shares so long as its capital is not impaired and
will not become impaired by a redemption or repurchase and provided that the
price for which any shares are repurchased is not then in excess of the price
for which they may then be redeemed.
The Century Articles, in accordance with Louisiana Law, provide that cash,
property or share dividends, shares issuable to stockholders in connection with
a reclassification of stock, and the redemption price of redeemed shares that
are not claimed by the stockholders 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 Celutel Certificate does not contain a
similar provision.
APPROVAL OF EXTRAORDINARY TRANSACTIONS
To authorize a (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 certificate of incorporation of a corporation,
Delaware GCL 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, Louisiana Law 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
stockholder meeting at which the transaction is considered and voted upon. The
Century Articles provide that certain articles thereof (primarily those relating
to approving certain business combinations, holding stockholder 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 stockholders and two-thirds of the votes entitled to
be cast by all stockholders other than Related Persons (which is defined therein
substantially similarly to the definition of Acquiring Persons set forth under
"-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 Organizational Document
Provisions with Possible Antitakeover Effects --Louisiana Fair Price Statute"
and "-Bylaws."
The Delaware GCL and Louisiana Law 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 certificate or articles of
incorporation, whether or not such holders are entitled to vote thereon by the
certificate or articles of incorporation, if such amendment would have certain
specified adverse effects on the holders of such class of stock.
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LIABILITY OF DIRECTORS AND OFFICERS
Under both the Delaware GCL and Louisiana Law, stockholders 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 stockholders by directors and, to a certain extent,
officers. Both the Delaware GCL and Louisiana Law permit corporations to (i)
include provisions in their certificate or articles of incorporation that limit
personal liability of directors (and, under Louisiana Law only, 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 stockholders 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.
The Celutel Certificate contains a similar provision, but only with respect to
directors.
Under both the Delaware GCL and Louisiana Law, 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.
The Century Bylaws provide for mandatory indemnification for current and
former directors and officers of Century to the fullest extent permitted by
Louisiana Law. Similarly, the Celutel Bylaws provide for mandatory
indemnification for, among others, current and former directors and officers of
Celutel in accordance with the Delaware GCL.
DISSENTERS' RIGHTS
Under Louisiana Law, a stockholder 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 stockholders 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) stockholders holding
shares of any class of stock that are listed on a national securities exchange,
subject to certain exceptions, or (ii) stockholders of a surviving corporation
whose approval is not required in connection with the transaction. In order to
exercise dissenters' rights under Louisiana Law, a dissenting stockholder must
follow certain procedures similar to the procedures that a dissenting
stockholder under the Delaware GCL must follow as discussed above under "Rights
of Dissenting Stockholders of Celutel."
Under the Delaware GCL, a stockholder has the right to dissent only as to
mergers and consolidations. The Delaware GCL provides that dissenters' rights
are inapplicable (1) to stockholders of a surviving corporation whose vote is
not required to approve the merger or consolidation, and (2) to any class of
stock listed on a national securities exchange or held by over 2,000
stockholders, unless such stockholders are required in the merger to accept in
exchange for their shares anything other than shares of the surviving
corporation, shares of another listed company or a company whose shares are
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held by over 2,000 stockholders, cash in lieu of fractional shares of such
companies, or any combination of the above. For a more complete description of
dissenters' rights under the Delaware GCL, see "Rights of Dissenting
Stockholders of Celutel," and the relevant sections of the Delaware GCL attached
as Appendix V.
INSPECTION RIGHTS
Under Louisiana Law, any stockholder, 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 stockholders 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 stockholders of a
public company subject to the Exchange Act, Century's stockholders are entitled
to receive periodic reports concerning Century's operations and performance.
Under the Delaware GCL, any person who is a stockholder of the corporation
has the right, subject to certain limited exceptions, to examine for any proper
purpose the corporation's relevant books and accounts. If after five business
days the corporation fails to reply or refuses to comply with such a request,
the stockholder may apply to the Court of Chancery to compel compliance.
LAWS AND ORGANIZATIONAL DOCUMENT PROVISIONS WITH POSSIBLE ANTITAKEOVER EFFECTS
Both the Delaware GCL and Louisiana Law permit corporations to include in
their articles or certificate 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 stockholders.
However, some stockholders may find these provisions to be disadvantageous to
the extent that they could limit or preclude meaningful stockholder
participation in certain transactions such as mergers or tender offers and
render more difficult or discourage certain takeovers in which stockholders
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 Celutel Certificate, 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 attempts. Set forth below is a discussion of the
provisions of the Century Articles and Louisiana Law 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 in a "Business
Combination" a controlling interest in the shares of a Louisiana corporation
having 100 or more beneficial stockholders at a price substantially 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 stockholders 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
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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 stockholders 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 stockholders 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 stockholders 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 stockholder vote re-enfranchising 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.
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EVALUATION OF TENDER OFFERS. The Century Articles expressly require, and
Louisiana Law 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. The
availability of this statute may increase the likelihood that directors
reviewing a tender offer will consider factors other than the price offered by a
potential acquiror. Other effects of this provision may be (i) 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 and (ii) to dissuade stockholders 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 "-Preferred Stock," the Board of
Directors of Century is authorized, without action of its stockholders, 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 stockholder 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 stockholder 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 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 Stock.
TIME-PHASE VOTING. As discussed above, each outstanding share of Century
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 stockholders 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 stockholders. Since 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
"-Voting Rights ."
PREFERRED STOCK PURCHASE RIGHTS. As discussed above under the heading
"-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
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interfere with any merger or other business combination approved by the Board of
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 Delaware GCL and Louisiana Law
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. 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 stockholders 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 stockholders 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
stockholders may believe would be in their best interests.
The Celutel Certificate does not provide for a classified Board of
Directors.
REMOVAL OF DIRECTORS. Under Louisiana Law, subject to certain exceptions,
the stockholders 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, by the holders of a majority of the votes entitled to
be cast by all stockholders 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.
The Delaware GCL provides that each director shall hold office for the term
for which he or she is elected and until his successor is elected and qualified,
unless removed from office in accordance with provisions of the certificate of
incorporation or bylaws. The Celutel Bylaws provide that a director may be
removed with or without cause by a majority vote of the stockholders at any
annual or special stockholders meeting.
RESTRICTIONS ON TAKING STOCKHOLDER ACTION. Under the Celutel Bylaws,
holders of a majority of the total voting power are entitled to call a special
meeting of stockholders. 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 stockholders
interested in effecting corporate action from calling a special meeting between
annual meetings.
Both the Celutel Certificate and the Century Articles provide that
stockholders may effect corporate action only at a duly called annual or special
meeting.
BYLAWS
Under the Century Articles, the Century Bylaws may be amended and new
bylaws may be adopted by the stockholders, upon the affirmative vote of the
holders of 80% of the total voting power and two-
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thirds of the votes entitled to be cast by all stockholders other than
Interested Shareholders (as defined 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 Celutel Bylaws,
the power to adopt, amend or repeal the Celutel Bylaws is vested in the board of
directors, subject to repeal or amendment by action of Celutel's stockholders.
VACANCIES
Under Louisiana Law, 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. Unlike the Delaware GCL, 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 become
incapacitated by illness or other infirmity and cannot perform his or her duties
for a period of six months or longer.
Pursuant to the Celutel Bylaws, any vacancy on the Board of Directors of
Celutel may be filled by the vote of the remaining directors.
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ELECTION OF DIRECTORS OF CELUTEL
GENERAL
At the Meeting, Celutel proposes to elect five Directors to hold office
until the earlier of (i) the consummation of the Merger or (ii) Celutel's next
annual meeting of stockholders and until their respective successors are elected
and qualified. In the event the Merger is consummated, such Directors will
resign concurrently with the Closing. It is intended that, unless otherwise
indicated, the shares of Celutel Common Stock and Celutel Preferred Stock
represented by proxies solicited by the Board of Directors will be voted for the
election as Directors of the five nominees hereinafter named, all of whom are
presently Directors of Celutel. If, for any reason, any of said nominees shall
become unavailable for election, which is not now anticipated, the proxies will
be voted for the remainder of those named and may be voted for a substitute
nominee designated by the Board of Directors. All nominees have indicated that
they are willing and able to serve as Directors if elected and, accordingly, the
Board of Directors does not have in mind any substitute.
The nominees for Director of Celutel, the age, principal occupation and
position with Celutel of each such person and the year in which each first
became a Director of Celutel are as follows:
<TABLE> <CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- ----------------------------------------------- ----------- ----------------------------------------------- -----------
<S> <C> <C> <C>
Frank S. Scarpa................................ 58 Chairman of the Board and President of Celutel 1987
Avy H. Stein................................... 38 Managing Director, Continental Equity Capital
Corporation and Continental Illinois Venture
Corporation 1991
John R. Willis................................. 44 President, Continental Equity Capital
Corporation and Continental Illinois Venture
Corporation 1991
Douglas Dittrick............................... 60 President, Douglas Communications II 1988
J. Walter Corcoran............................. 55 Independent Telecommunications Consultant 1989
</TABLE>
Under the terms of a Stockholders Agreement dated May 14, 1991 among CIVC
and Messrs. Scarpa, Stein, Willis and the other holders of Celutel Preferred
Stock, such persons have agreed that each stockholder will vote its or his
shares and take such other actions as are within its or his control so that the
authorized number of Directors of Celutel will be five persons, with two
representatives designated by CIVC, two representatives designated by Mr. Scarpa
and one representative jointly designated by CIVC and Mr. Scarpa to be elected
to the Board of Directors. At present, Messrs. Willis and Stein serve as the
Directors designated by CIVC, Messrs. Scarpa and Dittrick serve as the Directors
designated by Mr. Scarpa and Mr. Corcoran serves as the jointly designated
Director.
Mr. Scarpa has been the Chairman of the Board of Celutel since 1988 and
President of Celutel since November 1991. He is also a private investor with
interests in the telecommunications industry. From February 1983 through August
1987, Mr. Scarpa was an officer, Director and principal shareholder of American
Cellular Network Corp., the owner and operator of cellular telephone systems in
the middle Atlantic states. American Cellular Network Corp. was acquired by
Comcast Corporation in June 1988. For more than the past five years, Mr. Scarpa
also has had interests in the cable television industry throughout the eastern
United States and has been an officer and Director of numerous cable television
industry associations. Mr. Scarpa is the father of Valerie S. Hart, the Vice
President-Marketing and Secretary of Celutel.
Since September 1989, Mr. Stein has been a Managing Director of Continental
Equity Capital Corporation and Continental Illinois Venture Corporation,
investment funds affiliated with Continental Bank, N.A., Chicago, Illinois.
Prior thereto, from September 1988 to September 1989, he was employed
77
<PAGE>
by NL Industries Inc. as the special consultant to the chief executive officer
for acquisitions and dispositions.
Mr. Willis has been employed by Continental Bank, N.A., Chicago, Illinois
and its affiliates in various capacities since April 1974. Since December 28,
1989, he has been President of Continental Equity Capital Corporation and
Continental Illinois Venture Corporation. In 1988, he founded the Bank's
mezzanine finance group and prior thereto, commencing in 1986, he was Division
Manager, Corporate Finance.
Since July 1986, Mr. Dittrick has been the President of Douglas
Communications Corporation II, organized to acquire and operate communications
companies with emphasis in the area of cable television. Mr. Dittrick has been
involved in the cable television business for more than the past five years.
Prior to July 1986, Mr. Dittrick was the President and Chief Executive Officer
of Tribune Cable Communications, a cable television operating company which was
sold in 1986.
Since October 1993, Mr. Corcoran has been an independent telecommunications
consultant. Prior thereto, commencing in 1976, he was the President of Philips
Credit Corporation, the financing affiliate of North American Philips
Corporation and its Netherlands parent corporation, engaged primarily in lending
to the cable television and broadcast television industries.
None of Celutel's Directors are directors of any other corporation which is
subject to the periodic reporting requirements of the Exchange Act or is a
registered investment company under the Investment Company Act of 1940.
Celutel has agreed that each Director designated by CIVC and the Director
jointly designated by CIVC and Mr. Scarpa will be paid by Celutel the sum of
$10,000 per year, plus reimbursement of expenses incurred by each Director for
attending meetings. In addition, Celutel has agreed to pay the same compensation
to Mr. Dittrick.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand has served as Celutel's independent accountants since
1983 and has been selected to continue in such capacity for the current fiscal
year. It is anticipated that a representative from that firm will attend the
Meeting and be available to make a statement to stockholders or to answer
questions of stockholders.
LEGAL MATTERS
Certain legal matters in connection with the issuance of shares of Century
Stock pursuant to the Merger will be 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 post-retirement benefits other than pensions.
The consolidated balance sheets of Celutel as of April 30, 1993 and 1992,
and the related consolidated statements of operations, changes in shareholders'
deficit and cash flows for each of the years in the three-year period ended
April 30, 1993 have been incorporated by reference herein in
78
<PAGE>
reliance on the report of Coopers & Lybrand, independent certified public
accountants, given on the authority of such firm as experts in accounting and
auditing.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR 1994 ANNUAL MEETING
If the Merger is not adopted by the Celutel stockholders at the Meeting or
if for any reason the Merger is not consummated, then any proposals which
stockholders intend to present for a vote of stockholders at Celutel's 1994
annual meeting and which such stockholders desire to have included in Celutel's
proxy statement and form of proxy relating to that meeting must be sent to
Celutel's executive office and received by Celutel not later than September 13,
1994.
OTHER INFORMATION
Celutel's Annual Report to Stockholders for the year ended April 30, 1993,
including financial statements, is being mailed to stockholders herewith. Such
Annual Report includes Celutel's Annual Report on Form 10-KSB as amended.
Celutel's Quarterly Report on Form 10-QSB for the quarter ended October 31, 1993
is also being delivered herewith.
By Order of the Board of Directors,
VALERIE S. HART
Secretary
Dated: January , 1994
79
<PAGE>
APPENDIX I
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CENTURY TELEPHONE ENTERPRISES, INC.,
CELUTEL ACQUISITION CORP.,
CELUTEL, INC.
AND
THE PRINCIPAL STOCKHOLDERS OF CELUTEL, INC.
OCTOBER 8, 1993
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PAGE
---------
ARTICLE 1. DEFINITIONS............................................................................. A-1
1.1 Defined Terms........................................................................... A-11
1.2 Singular and Plural..................................................................... A-11
1.3 Capitalized Terms....................................................................... A-11
1.4 Dbu Calculations........................................................................ A-11
1.5 Parties................................................................................. A-11
ARTICLE 2. THE MERGER.............................................................................. A-12
2.1 Merger.................................................................................. A-12
2.2 Closing................................................................................. A-12
2.3 Effective Time of the Merger............................................................ A-12
2.4 Effects of the Merger................................................................... A-12
2.5 Certificate of Incorporation and By-laws................................................ A-12
2.6 Directors and Officers.................................................................. A-12
2.7 Conversion of Shares.................................................................... A-13
2.8 Pre-and Post-Closing Calculations and Price Adjustments................................. A-13
2.9 Delivery of Merger Consideration; Exchange of Stock Certificates........................ A-15
2.10 Non-Dilution............................................................................ A-16
2.11 Dissenting Shares....................................................................... A-17
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF CELUTEL............................................... A-17
3.1 Organization of Celutel and Corporate Subsidiaries...................................... A-17
3.2 Organization of Pascagoula.............................................................. A-17
3.3 Authorization and Enforceability........................................................ A-18
3.4 Capital Stock........................................................................... A-18
3.5 Partnership Interests................................................................... A-19
3.6 Personal Properties..................................................................... A-19
3.7 Organizational Documents, Books and Records, and Related Matters........................ A-19
3.8 Investments and Interests............................................................... A-19
3.9 Financial Statements.................................................................... A-19
3.10 Absence of Material Changes............................................................. A-20
3.11 Indebtedness............................................................................ A-22
3.12 Litigation and Claims................................................................... A-22
3.13 Real Estate and Leases.................................................................. A-23
3.14 Condition of Personal Properties and Real Estate........................................ A-23
3.15 Insurance............................................................................... A-23
3.16 Contracts............................................................................... A-23
3.17 Conflicts............................................................................... A-25
3.18 Permits, Tariffs and Cellular Operations................................................ A-25
3.19 Absence of Undisclosed Liabilities...................................................... A-26
3.20 Compliance With Laws.................................................................... A-26
3.21 Employee Benefit Plans.................................................................. A-26
3.22 Investment Company Act.................................................................. A-28
3.23 Remuneration, Severance Pay, and Other Benefits......................................... A-28
3.24 Labor Relations......................................................................... A-28
3.25 Product Liability Claims; Product Warranties............................................ A-28
3.26 Environmental Matters................................................................... A-28
3.27 Bank Accounts; Powers of Attorney....................................................... A-29
3.28 Taxes................................................................................... A-29
3.29 Securities Laws......................................................................... A-30
3.30 Intellectual Property................................................................... A-31
3.31 Interests in Customers and Suppliers.................................................... A-31
3.32 Inventories............................................................................. A-31
3.33 No Finder; Opinion of Financial Advisor................................................. A-31
</TABLE>
A-i
<PAGE>
<TABLE>
<S> <C> <C>
PAGE
---------
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF PRINCIPAL STOCKHOLDERS................................ A-32
4.1 Representations and Warranties CIVC..................................................... A-32
4.2 Representations and Warranties of Scarpa................................................ A-33
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF CENTURY............................................... A-34
5.1 Organization of Century................................................................. A-34
5.2 Organization of Sub..................................................................... A-35
5.3 Authorization........................................................................... A-35
5.4 Capital Stock........................................................................... A-35
5.5 No Finder............................................................................... A-35
5.6 Registration Statement.................................................................. A-35
5.7 Securities Laws......................................................................... A-35
5.8 Financial Statements.................................................................... A-36
5.9 Absence of Diluting Events.............................................................. A-36
5.10 Conflicts............................................................................... A-36
5.11 Organizational Documents................................................................ A-36
5.12 Compliance with Laws.................................................................... A-36
ARTICLE 6. PRE-CLOSING COVENANTS................................................................... A-37
6.1 Governmental Approvals.................................................................. A-37
6.2 Registration Statement and Proxy Statement; Stockholders Meeting; Comfort Letter........ A-37
6.3 Stock Exchange Filings.................................................................. A-38
6.4 Third Party Consents.................................................................... A-39
6.5 Cooperation and Best Efforts............................................................ A-39
6.6 Investigation of Business of Celutel and the Cellular Entities.......................... A-39
6.7 Preserve Accuracy of Representations and Warranties; Notification of Changes............ A-40
6.8 Conduct and Preservation of Business.................................................... A-41
6.9 Acquisition Proposals................................................................... A-41
6.10 Exchange of Information................................................................. A-42
6.11 Public Announcements.................................................................... A-42
6.12 Performance of Sub...................................................................... A-42
6.13 Acknowledgement, Release and Waiver of Rights Under Celutel Certificate of
Designation............................................................................. A-42
6.14 Settlement of Warrants.................................................................. A-42
6.15 Billing Services........................................................................ A-42
6.16 Construction of Cellular Facilities; FCC Actions........................................ A-43
6.17 Issuer Tender Offers.................................................................... A-43
6.18 Additional Purchases.................................................................... A-43
6.19 Securities Offerings.................................................................... A-43
6.20 Prepayment.............................................................................. A-43
6.21 Corporate Structure..................................................................... A-43
ARTICLE 7. CONDITIONS TO CLOSING................................................................... A-44
7.1 Conditions Applicable to All Parties.................................................... A-44
7.2 Additional Conditions Applicable to Obligations of Century and Sub...................... A-44
7.3 Additional Conditions Applicable to Obligations of Celutel.............................. A-47
ARTICLE 8. POST CLOSING COVENANTS.................................................................. A-48
8.1 Resales Under the Registration Statement................................................ A-48
8.2 Further Assurances...................................................................... A-50
8.3 Notification of Regulatory Authorities.................................................. A-50
8.4 Severance Payments...................................................................... A-50
8.5 Indemnification Agreements.............................................................. A-50
8.6 Biloxi Microwave Licenses............................................................... A-50
ARTICLE 9. TERMINATION............................................................................. A-50
9.1 Methods of Termination.................................................................. A-50
9.2 Effect of Termination................................................................... A-51
</TABLE>
A-ii
<PAGE>
<TABLE>
<S> <C> <C>
PAGE
---------
ARTICLE 10. INDEMNIFICATION......................................................................... A-51
10.1 Indemnification......................................................................... A-51
10.2 Letter of Credit........................................................................ A-52
10.3 Notice and Defense of Claims............................................................ A-53
10.4 Limitations............................................................................. A-54
10.5 Survival................................................................................ A-55
ARTICLE 11. STOCKHOLDERS' REPRESENTATIVE............................................................ A-56
11.1 Designation............................................................................. A-56
11.2 Authority............................................................................... A-56
11.3 Resignation............................................................................. A-56
11.4 Conflict................................................................................ A-56
11.5 Exculpation............................................................................. A-57
11.6 Acknowledgement......................................................................... A-57
11.7 Allocation of Payments.................................................................. A-57
ARTICLE 12. MISCELLANEOUS........................................................................... A-57
12.1 Notices................................................................................. A-57
12.2 Expenses................................................................................ A-60
12.3 Governing Law........................................................................... A-60
12.4 Partial Invalidity...................................................................... A-60
12.5 Successors and Assigns; Parties in Interest............................................. A-60
12.6 Counterparts............................................................................ A-60
12.7 Titles and Headings..................................................................... A-60
12.8 Entire Agreement........................................................................ A-60
12.9 Remedies................................................................................ A-61
12.10 No Waiver............................................................................... A-61
12.11 Amendment............................................................................... A-61
12.12 Litigation.............................................................................. A-61
12.13 References.............................................................................. A-61
</TABLE>
A-iii
<PAGE>
LIST OF SCHEDULES
<TABLE>
<S> <C>
Schedule 3.1 --Organization of Celutel and Corporate Subsidiaries
Schedule 3.4 --Capital Stock
Schedule 3.5 --Partnership Interests
Schedule 3.6 --Personal Properties
Schedule 3.7 --Organization Documents, Books and Records and Related Matters
Schedule 3.10 --Absence of Material Changes
Schedule 3.11 --Indebtedness
Schedule 3.12 --Litigation and Claims
Schedule 3.13 --Real Estate and Leases
Schedule 3.15 --Insurance
Schedule 3.16 --Contracts
Schedule 3.17 --Required Consents
Schedule 3.18 --Permits, Tariffs and Cellular Operations
Schedule 3.20 --Compliance with Laws
Schedule 3.21 --Employee Benefit Plans
Schedule 3.23 --Remuneration, Severance Pay, and Other Benefits
Schedule 3.27 --Bank Accounts; Powers of Attorney
Schedule 3.28 --Taxes
Schedule 3.29 --Securities Laws
Schedule 3.30 --Intellectual Property
Schedule 3.33 --Finders
</TABLE>
A-iv
<PAGE>
LIST OF EXHIBITS
<TABLE>
<S> <C>
EXHIBIT A Certificate of Merger
EXHIBIT B Capital Expenditure Budgets
</TABLE>
<TABLE>
<S> <C>
Exhibit B-1 Budget of Biloxi--Pascagoula
Exhibit B-2 Budget of Brownsville--McAllen
Exhibit B-3 Budget of Jackson
</TABLE>
<TABLE>
<S> <C>
EXHIBIT C Form of Customer Service Agreement
EXHIBIT D Opinions to be delivered to Century
</TABLE>
<TABLE>
<S> <C>
Exhibit D-1 Opinion of FCC Counsel
Exhibit D-2 Opinion of CIVC's Counsel
Exhibit D-3 Opinion of Scarpa's Counsel
Exhibit D-4 Opinion of Celutel's Co-Counsel
Exhibit D-5 Opinion of Celutel's Co-Counsel
</TABLE>
<TABLE>
<S> <C>
EXHIBIT E Form of Release
EXHIBIT F Form of Affiliates Agreement
EXHIBIT G Form of Termination Agreement
EXHIBIT H Opinion of Century's Counsel
</TABLE>
A-v
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement"), dated as of October
8, 1993, is by and among Century Telephone Enterprises, Inc., a Louisiana
corporation ("Century"), Celutel Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Century ("Sub"), and Celutel, Inc., a Delaware
corporation ("Celutel"), and is joined into by Continental Illinois Venture
Corporation, a Delaware corporation ("CIVC"), for purposes of Articles 10 and 12
and Sections 4.1, 6.1, 6.2(c), 6.2(d), 6.4, 6.5, 6.6 (a)(ii), 6.7, 6.9, 6.11,
6.13, 8.1(b), 8.2 and 11.6 in its capacity as a stockholder of Celutel, and for
purposes of Articles 10 and 11 and Section 2.8 in its capacity as the
Stockholders' Representative (as defined below), and is further joined into by
Frank S. Scarpa ("Scarpa") for purposes of Articles 10 and 12 and Sections 4.2,
6.1, 6.2(c), 6.2(d), 6.4, 6.5, 6.6 (a)(ii), 6.7, 6.9, 6.11, 6.13, 6.14(a), 6.15,
8.1(b), 8.2 and 11.6 in his capacity as a stockholder of Celutel.
WITNESSETH:
WHEREAS, Century, Celutel and Celutel Holdings, Inc., a Delaware
corporation and wholly-owned subsidiary of Celutel ("CHI"), have entered into a
Purchase Agreement dated as of April 21, 1993 (the "Century Purchase
Agreement"), pursuant to which Century agreed to acquire all of the interests
owned by Celutel and CHI in the non-wireline cellular telephone systems for the
Biloxi and Pascagoula MSA's (as defined below);
WHEREAS, the respective Boards of Directors of Century, Sub and Celutel
have subsequently determined that it is desirable and in the best interests of
their respective stockholders for Century to acquire all of the capital stock of
Celutel by merging Sub with and into Celutel (the "Merger") on the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, CIVC and Scarpa (collectively, the "Principal Stockholders"), who
as of the date hereof collectively beneficially own shares of capital stock of
Celutel entitling them to cast in excess of a majority of Celutel's total voting
power, deem it desirable and in the best interests of Celutel's stockholders to
consummate the Merger on the terms and subject to the conditions set forth in
this Agreement; and
WHEREAS, the Board of Directors of Celutel has determined that it is
desirable and in the best interests of the stockholders of Celutel to take all
appropriate steps to appoint CIVC as the representative of all other
stockholders of Celutel for the purposes described herein and in the LC Escrow
Agreement (as defined below);
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, Century, Sub, Celutel and the Principal
Stockholders hereby agree as follows:
ARTICLE 1.
DEFINITIONS
1.1 Defined Terms. For all purposes of this Agreement, except as otherwise
expressly provided herein, terms defined above in the preamble and recitals
shall have the meanings set forth therein and the following terms shall have the
meanings set forth below:
"Acquired Shares" shall have the meaning specified in Section 6.2.
"Acquisition Proposal" means any offer or proposal relating to, or any
indication of interest in, a merger, consolidation, share exchange or other
business combination nvolving Celutel or any
A-1
<PAGE>
Subsidiary, or the acquisition of all or a substantial equity interest in,
or all or a substantial portion of the assets of, Celutel or any Subsidiary
(including any acquisition of a substantial equity interest in any Cellular
Entity), other than the transactions contemplated by this Agreement.
"Additional Purchases" mean any purchases by Celutel or any Subsidiary
of additional equity interests in a Cellular Entity that are consummated
between the date hereof and November 1, 1993.
"Affiliate" means (unless otherwise provided herein), with respect to
any Person, any other Person that, directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, such Person.
"Aggregate Merger Consideration" means $144,625,794 plus (i) the
Supplemental Consideration, if any, and (ii) the Working Capital Surplus,
if any, minus (i) the Working Capital Deficit, if any, and (ii) the
Long-Term Indebtedness as of the Effective Time.
"Allocation Agreement" means the allocation agreement dated October 6,
1993 by and among each of the Non-Public Stockholders.
"Applicable Law" means any statute, law, rule, regulation or ordinance
or any judgment, order, writ, injunction, or decree of any Governmental
Entity to which a specified Person or property is subject.
"Average Century Stock Price" means the arithmetical average of the
per share closing prices of the Century Common Stock as reported in the
NYSE Composite Transactions section of The Wall Street Journal for each of
the ten trading days immediately preceding the third trading day prior to
the Closing Date.
"Balance Sheet" means the consolidated balance sheet of Celutel as of
July 31, 1993 included among the Celutel Financial Statements.
"Bank" shall have themeaning specified in Section 10.2.
"Biloxi" means Celutel of Biloxi, Inc., a Delaware corporation that is
licensed by the FCC to provide non-wireline Cellular Service in the Biloxi
MSA.
"Biloxi MSA" means the Biloxi-Gulfport, Mississippi (Market No. 173A)
metropolitan statistical area licensed by the FCC.
"Brownsville" means Brownsville Cellular Telephone Co., Inc., a
Delaware corporation that is licensed by the FCC to provide non-wireline
Cellular Service in the Brownsville MSA.
"Brownsville MSA" means the Brownsville-Harlingen, Texas (Market No.
162A) metropolitan statistical area licensed by the FCC.
"Budgets" shall have the meaning specified in Section 3.9(c).
"Calculation Certificate" shall have the meaning specified in Section
2.8(a).
"Ceiling Price" means $33.00, unless and until adjusted under Section
2.10.
"Cellular Service" means the provision of domestic public cellular
radio telecommunications service pursuant to authority granted by the FCC
under the Communications Act and the regulations promulgated thereunder.
"Cellular Entity" means each of Brownsville, McAllen, Jackson, Biloxi
and Pascagoula.
"Celutel" means Celutel Inc., a Delaware corporation, and, to the
extent the context requires, its corporate predecessor incorporated under
the laws of Arizona under the same name, which merged into it in connection
with the reincorporation merger consummated on July 19, 1988.
A-2
<PAGE>
"Celutel Certificate of Designation" means the certificate of
designation, preferences, rights and limitations of Preferred Stock setting
forth the relative rights and preferences of the Celutel Preferred Stock
that was filed by Celutel with the Delaware Secretary of State on May 13,
1991, as amended by the Certificate of Correction filed by Celutel with the
Delaware Secretary of State on December 23, 1991 (it being understood that
all references herein to the sections thereof shall be to the sections of
Exhibit A appended to such certificate).
"Celutel Common Stock" means shares of Class A common stock, $.20 par
value per share, of Celutel.
"Celutel Exchange Act Reports" means all Exchange Act Reports filed
with the SEC by Celutel.
"Celutel Financial Statements" means any consolidated balance sheet,
statement of operations, statement of changes in stockholders' deficit or
statement of cash flows contained in any Celutel Exchange Act Report,
whether audited or unaudited.
"Celutel Preferred Stock" means shares of 18% Senior Convertible
Preferred Stock, $.20 par value per share, of Celutel having the relative
rights and preferences specified in the Celutel Certificate of Designation.
"Celutel Share Equivalents" means, with respect to any record holder
of Celutel Stock as of any specified date, the sum of (i) the number of
shares of Celutel Common Stock held by such Person as of such date and (ii)
the number of shares of Celutel Common Stock into which the Celutel
Preferred Stock held of record by such Person (including all accrued and
unpaid stock dividends payable with respect to the Celutel Preferred Stock)
is convertible as of such date pursuant to Section 6A of the Celutel
Certificate of Designation.
"Celutel Stock" means the Celutel Common Stock and Celutel Preferred
Stock, referred to collectively.
"Celutel Stockholders" mean each record holder of Celutel Stock
outstanding immediately prior to the Effective Time (other than holders of
Dissenting Shares and other than shares that are held in the treasury of
Celutel or by any Subsidiary).
"Century Common Stock" means shares of common stock, $1.00 par value
per share, of Century, including any associated shareholder rights issued
under the Amended and Restated Rights Agreement dated as of November 17,
1986 by and between Century and the Rights Agent named therein, as amended.
"Century Exchange Act Reports" means all Exchange Act Reports filed
with the SEC by Century.
"Century Stock Price" means the Average Century Stock Price, provided
however, that (i) if the Average Century Stock Price is less than the Floor
Price, then the Century Stock Price will be deemed to equal the Floor
Price, and (ii) if the Average Century Stock Price is greater than the
Ceiling Price, then the Century Stock Price will be deemed to equal the
Ceiling Price.
"Certificate of Merger" means the certificate of merger to be filed on
the Closing Date by the Surviving Corporation with the Delaware Secretary
of State in accordance with Section 251(c) of the DGCL.
"CIVC Coinvestors" mean Avy H. Stein, John R. Willis and Burton E.
McGillivray.
"Closing" means the closing of the transactions contemplated by this
Agreement, to be scheduled and held in accordance with Section 2.2.
"Closing Certificate" means, with respect to any party hereto, any
closing certificate delivered by such party pursuant to Section 7.2(d) or
7.3(d) hereof.
A-3
<PAGE>
"Closing Date" means the date on which the Closing occurs, as
determined in accordance with Section 2.2.
"Closing Instruments" means, with respect to any party hereto, all of
the agreements, certificates (including Closing Certificates),
resignations, acknowledgements, releases, documents and other instruments
to be delivered by such party at or prior to the Closing pursuant to
Section 2.2 or Article 7.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect on the Closing Date.
"Communications Act" means the Communications Act of 1934, as amended.
"Contracts" means, with respect to any specified Person, any
contracts, agreements, leases, commitments or other understandings or
arrangements, oral or written, to which such Person or its properties are
legally bound, or under which such Person is legally obligated, whether on
an absolute or contingent basis.
"Corporate Subsidiary" means each Subsidiary other than Pascagoula.
"Current Assets" means the consolidated current assets of Celutel
within the meaning of GAAP, provided, however, that notwithstanding
anything to the contrary hereunder or under GAAP, the amount of Celutel's
consolidated accounts receivable to be used hereunder in calculating
"Current Assets" shall equal 85% of the gross amount of Celutel's
consolidated accounts receivable, excluding any reserves for doubtful
accounts established by Celutel in the ordinary course.
"Current Liabilities" means the consolidated current liabilities of
Celutel within the meaning of GAAP, provided, however, that under no
circumstances will Current Liabilities be deemed to include the obligations
of Celutel to make those payments to Scarpa and the Senior Officers
specified in Section 8.4 or the obligations of Jackson, Biloxi and McAllen
to make those payments specified in Section 6.15.
"Delaware Secretary of State" means the Secretary of State of the
State of Delaware.
"DGCL" means the Delaware General Corporation Law.
"Diluting Event" means (i) a dividend or other distribution upon or in
redemption of Century Common Stock payable in the form of shares of capital
stock of Century or any of its subsidiaries or in the form of any other
property (other than cash dividends paid in the ordinary course and at
times and in amounts consistent with past practice and not in excess of
$.50 per share per annum), (ii) a combination of outstanding shares of
Century Common Stock into a smaller number of shares of Century Common
Stock, or (iii) any reorganization, split, exchange or reclassification of
Century Common Stock, or any consolidation or merger of Century with
another corporation, or the sale of all or substantially all of its assets
to another corporation, or any other transaction effected in a manner such
that holders of outstanding Century Common Stock shall be entitled to
receive (either directly, or upon subsequent liquidation) stock, securities
or other property with respect to or in exchange for Century Common Stock.
"Disclosure Statement" means any registration statement, prospectus,
offering circular, notification form (including Form D), placement
memorandum or similar written report or communication filed with the SEC or
delivered to offerees under the Securities Act or any regulation
promulgated thereunder (including Regulation A, Regulation D and Regulation
S-B) in connection with any offering or sale of securities within the
meaning of the Securities Act.
"Dissenting Shares" mean, as of any specified date, any shares of
Celutel Stock held of record by Persons who have objected to the Merger and
complied with all provisions of Section 262 of the DGCL necessary to
perfect and maintain their appraisal rights thereunder.
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"DOJ" means the U.S. Department of Justice.
"Effective Time" shall have the meaning specified in Section 2.3.
"Employee Benefit Plans" mean each oral or written plan or agreement
that Celutel or any Subsidiary maintains, administers, participates in,
contributes to, or has any absolute or contingent liability with respect
to, that is (i) an "employee welfare benefit plan," as defined in Section
3(1) of ERISA ("Employee Welfare Benefit Plans"), (ii) an "employee pension
benefit plan," as defined in Section 3(2) of ERISA, but excluding any
"multiemployer plans" ("Employee Pension Benefit Plans"), (iii) a
"multiemployer plan," as defined in Section 4001(a)(3) and 3(37) of ERISA
("Multiemployer Plans"), (iv) a voluntary employees' beneficiary
association and related trusts ("VEBA's") or (v) a retirement or deferred
compensation plan, incentive compensation plan, profit sharing plan, stock
purchase plan, stock option plan, stock appreciation plan, restricted
stock, unemployment compensation plan, change in control plan, vacation
pay, sick pay, death benefit, severance pay, bonus or benefit arrangement,
medical, dental, disability, insurance or hospitalization program or any
other fringe benefit arrangement for any director, officer, employee,
consultant or agent, whether active or retired, and whether pursuant to
contract, plan or any other legally binding arrangement, custom or
understanding, that does not constitute an Employee Welfare Benefit Plan,
Employee Pension Benefit Plan, Multiemployer Plan or VEBA.
"Encumbrances" means liens, charges, pledges, options, mortgages,
deeds of trust, security interests, claims, transfer or other restrictions,
easements, title defects, and other encumbrances of every type and
description, whether choate or inchoate and whether imposed by law,
contract or otherwise (other than restrictions on the right to transfer any
security that arises under any federal or state securities law).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Act Report" means any report, schedule, form, statement or
other document filed with the SEC under the Exchange Act or the regulations
promulgated thereunder.
"FCC" means the Federal Communications Commission.
"FCC Licenses" mean, with respect to each Cellular Entity, (i) each
FCC cellular frequency Block "A" operating license held by such entity,
(ii) each FCC point-to-point microwave radio license held by such entity or
one of its Affiliates on its behalf, and (iii) each other Permit that has
been issued by the FCC to such entity.
"Fiduciary Determination" means any good faith determination by the
Board of Directors of Celutel, after considering the written advice of
outside counsel regarding the fiduciary duties of directors under Delaware
law, that the acceptance of any unsolicited, bona fide Acquisition Proposal
submitted to it is in the best interests of Celutel's stockholders and is
required pursuant to its fiduciary duties under Delaware law.
"Floor Price" means $27, unless and until adjusted under Section 2.10.
"FTC" means the Federal Trade Commission.
"GAAP" means generally accepted accounting principles applied on a
basis consistent with prior accounting periods (except, when used in
reference to unaudited financial statements, for the omission of notes
thereto that would otherwise be required by GAAP and except, when used in
reference to unaudited financial statements not subject to Rule 10-01 of
Regulation S-X promulgated by the SEC, for normal, recurring year-end audit
adjustments made in conformity with GAAP).
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"Governmental Entity" means any court or tribunal in any jurisdiction
(domestic or foreign) or any public, governmental, legislative or
regulatory body, agency, department, commission, board, bureau, or other
authority or instrumentality (domestic or foreign), including the FCC, MPSC
and TPUC.
"Gulf Coast Cellular Entities" mean Biloxi and Pascagoula.
"Gulf Coast MSA's" means the Biloxi MSA and Pascagoula MSA.
"Headquarters Leases" mean (i) the lease agreement dated October 17,
1991 by and between Celutel and Bestgate "900" Limited Partnership
("Bestgate"), as amended, (ii) the lease agreement dated October 17, 1991
by and between Celutel and Bestgate, as amended, and (iii) the lease
agreement dated September 12, 1991 by and between Carrot Communication Inc.
and Bestgate, as assigned to Celutel pursuant to the assignment of lease
dated May 15, 1992, pursuant to which Celutel leases Suites 400, 406 and
403, respectively, at 900 Bestgate Road, Annapolis, Maryland.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"HSR Notification" means the notification and report forms required to
be filed pursuant to the HSR Act.
"Indebtedness" means all obligations of Celutel or any Subsidiary
(whether for principal, interest, premium, fees or otherwise) arising under
(i) the PNC Loan Agreement or McCaw Note, (ii) any other indebtedness for
borrowed money or for the deferred purchase price of property or services
(including all notes payable and all obligations evidenced by bonds,
debentures, notes or other similar instruments, but excluding all
indebtedness for accounts payable other than those specified below and for
accrued expenses), (iii) obligations with respect to any installment sale
or conditional sale agreement or title retention agreement, (iv) unpaid
reimbursement obligations arising in connection with any guaranties or
sureties, including any performance, bid or other similar bonds, (v) unpaid
reimbursement obligations arising under any letters of credit, (vi) any
lease obligation that would be required to be capitalized in accordance
with GAAP, (vii) any obligations arising under advances or deposits of
funds, and (viii) all accounts payable in excess of $150,000 in the case of
any single creditor, provided, however, that "Indebtedness" shall not
include indebtedness between Celutel and any Subsidiary unless otherwise
provided herein.
"Independent Directors" mean Douglas Dittrick and J. Walter Corcoran.
"Intellectual Property" shall have the meaning specified in Section
3.30.
"IRS" means the U.S. Internal Revenue Service.
"Jackson" means Jackson Cellular Telephone Co., Inc., a Delaware
corporation that holds (i) the FCC license to provide non-wireline Cellular
Service in the Jackson MSA and (ii) FCC interim operating authority to
provide non-wireline Cellular Service in the RSA.
"Jackson MSA" means the Jackson, Mississippi (Market No. 106A)
metropolitan statistical area licensed by the FCC.
"LC Escrow Account" means the escrow account to be established
pursuant to the LC Escrow Agreement for the purposes described therein and
herein (including securing the Public Stockholders' reimbursement
obligations to the Bank if any draws are made under the Letter of Credit).
"LC Escrow Agent" means the escrow agent under the LC Escrow
Agreement.
"LC Escrow Agreement" means the Letter of Credit Escrow Agreement to
be entered into at Closing pursuant to Section 7.1(g).
"Letter of Credit" shall have the meaning set forth in Section 10.2.
"Letter of Transmittal" shall have the meaning specified in Section
2.9.
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"Long-Term Indebtedness" means all obligations of Celutel or any
Subsidiary (whether for principal, interest, premium, fees or otherwise)
arising under (i) the PNC Loan Agreement or the McCaw Note or (ii) any
other indebtedness for borrowed money other than (A) any such indebtedness
that is deemed to be a current liability of Celutel or any Subsidiary under
GAAP or (B) any such indebtedness of any Subsidiary to Celutel, of Celutel
to any Subsidiary, or of any Subsidiary to another Subsidiary.
"Material Adverse Effect" or "Material Adverse Change" means, when
used in reference to any entity or consolidated group of entities, a
material adverse effect on, or a material adverse change in, as the case
may be, the operations, cash flows, assets, business, property or condition
(financial or otherwise) of such entity or group, provided, however, that
(i) no effect or change with respect to any such entity or group relating
to changes in accounting practices mandated by statements or
interpretations adopted by the Financial Accounting Standards Board or any
similar organization shall be deemed to constitute a Material Adverse
Effect or a Material Adverse Change, (ii) no effect or change with respect
to any such entity or group relating to national, regional, state or local
economic conditions, to general telecommunication industry developments or
conditions (including developments or conditions relating to cellular and
other forms of wireless communications), to increased competition arising
out of events or conditions that are not subject to the control of such
entity or group, to changes in the Communications Act or other statutes,
laws, rules or regulations applicable to such entity or group, or to other
general economic or other conditions, facts or circumstances that are not
subject to the control of such entity or group, shall be deemed to
constitute, create or cause a Material Adverse Effect or a Material Adverse
Change, (iii) the phrases "Material Adverse Effect on Century", "Material
Adverse Change in Century", "Material Adverse Effect with respect to
Century" or "Material Adverse Change with respect to Century" or any
similar expression mean a Material Adverse Effect on, or a Material Adverse
Change in, as the case may be, Century and its subsidiaries taken as a
whole and (iv) no decrease in the trading price of the Century Common Stock
or Celutel Common Stock (regardless of the size of the decrease and
including those resulting from market breaks or other precipitous and
broad-based decreases in the trading prices of issuers listed on the
principal U.S. stock exchanges) shall, in and of itself, constitute a
Material Adverse Effect or a Material Adverse Change with respect to
Century or any Cellular Entity unless such decrease relates to, results
from or arises out of events or conditions (other than those described in
(ii) above) affecting the operations, cash flows, assets, business,
property or condition (financial or otherwise) of Century and its
subsidiaries taken as a whole or any of the Cellular Entities, as the case
may be.
"McAllen" means The McAllen Cellular Telephone Co., Inc., a Nevada
corporation that is licensed by the FCC to provide non-wireline Cellular
Service in the McAllen MSA.
"McAllen MSA" means the McAllen-Edinburg-Mission, Texas (Market No.
128A) metropolitan statistical area licensed by the FCC.
"McCaw Note" means the amended term promissory note dated October 3,
1990 made payable by Pascagoula Cellular Telephone Co., Inc. to the order
of Cellular Fund, Inc. in the original principal amount of $3,550,000.
"Merger Consideration" shall have the meaning specified in Section
2.9.
"MPSC" means the Mississippi Public Service Commission.
"MSAs" means each of the McAllen MSA, Brownsville MSA, Jackson MSA,
Pascagoula MSA and Biloxi MSA.
"Non-Gulf Coast Cellular Entities" mean McAllen MSA, Brownsville MSA
and Jackson MSA.
"Non-Gulf Coast MSAs" mean the McAllen, Brownsville and Jackson MSA's.
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"Non-Gulf Coast MSA Population Equivalents" means the sum of the
"population equivalents" of the Non-Gulf Coast MSA's, whereby the
"population equivalents" of each such MSA is derived by multiplying (i) the
percentage ownership interest held by Celutel and its Subsidiaries as of
November 1, 1993 with respect to the Cellular Entity holding the FCC non-
wireline cellular operating license for such MSA by (ii) the population
residing within such MSA, which, for purposes hereof, shall be deemed to
equal 279,597 for the Brownsville MSA, 419,283 for the McAllen MSA and
406,000 for the Jackson MSA.
"Non-Public Stockholders" mean the Preferred Stockholders and the
Senior Officers.
"NYSE" means The New York Stock Exchange, Inc.
"Options" mean, with respect to any corporation or partnership, any
options, warrants, rights, subscriptions, puts, calls, conversion rights,
rights of exchange, plans or any other agreements or commitments of any
character, whether absolute or contingent, providing for the purchase,
redemption, issuance or sale of any shares of capital stock or partnership
interests of such entity, or any securities or other instruments
convertible into or exchangeable for shares of such capital stock or
partnership interests or any other security, provided, however, that
neither the Warrants nor the rights of the Preferred Stockholders to
convert their Celutel Preferred Stock into Celutel Common Stock shall be
deemed to constitute Options hereunder.
"Organizational Documents" mean (i) with respect to any corporation,
its certificate of incorporation or articles of incorporation (including
any certificate of designations deemed to be a part thereof under
Applicable Law) and its bylaws, along with any stockholder agreements or
other similar instruments governing its internal affairs, and (ii) with
respect to any partnership, the partnership agreement under which the
partnership was organized, along with any partner agreement or other
organizational documents or similar instruments governing its internal
affairs.
"Pascagoula" means Pascagoula Cellular Partnership, a District of
Columbia general partnership that is licensed by the FCC to provide
non-wireline Cellular Service in the Pascagoula MSA.
"Pascagoula MSA" means the Pascagoula, Mississippi (Market No. 252A)
metropolitan statistical area licensed by the FCC.
"Permits" mean permits, licenses, franchises, certificates, consents,
approvals, and other authorizations issued or granted by Governmental
Entities, including all FCC Licenses, all State Licenses and all such other
authorizations issued or granted by the FCC, MPSC or TPUC.
"Permitted Encumbrance" means (i) liens for Taxes not yet due and
payable or the validity of which is being contested in good faith by
appropriate Proceedings disclosed hereunder and for which adequate reserves
have been set aside, (ii) statutory liens (including materialmen's,
mechanic's, repairmen's, landlord's, and other similar liens) arising in
connection with the ordinary course of business securing payments not yet
due and payable or, if due and payable, the validity of which is being
contested in good faith by appropriate Proceedings disclosed hereunder and
for which adequate reserves have been set aside, and (iii) such
imperfections of title or other Encumbrances that individually or
collectively do not have a Material Adverse Effect with respect to any
Cellular Entity.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
enterprise, unincorporated organization, Governmental Entity, or other
entity.
"PNC Bank" means PNC Bank, N.A. (the successor by merger to Provident
National Bank), a national banking association.
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"PNC Loan Agreement" means the loan agreement dated as of April 2,
1991 by and between PNC and Celutel, as amended.
"Preferred Stockholders" mean CIVC, the CIVC Coinvestors, Scarpa, the
Scarpa Family Trust, William Blair Venture Partners III, L.P., Harrison I.
Stearns, K&E Partners and PNC Capital Corporation (who collectively hold
all of the Celutel Preferred Stock as of the date hereof).
"Pro Rata Share Equivalent Interest" means, with respect to any
Celutel Stockholder, the quotient determined by dividing the Celutel Share
Equivalents held by such Person immediately prior to the Effective Time by
the aggregate number of Celutel Share Equivalents held by all record
holders of Celutel Stock as of such time (including all Dissenting Shares
but excluding any shares of Celutel Stock held in the treasury of Celutel
or by any Subsidiary).
"Proceedings" means all proceedings, actions and suits that have been
instituted by or before any arbitrator or Governmental Entity.
"Proxy Statement" means the proxy statement and prospectus that will
form a part of the Registration Statement and which will constitute a proxy
statement of Celutel with respect to the Stockholders Meeting and a
prospectus of Century with respect to the issuance of Century Common Stock
in connection with the Merger, along with all related materials and all
amendments and supplements thereto, if any.
"Public Stockholders" mean each Celutel Stockholder other than the
Non-Public Stockholders.
"Public Stockholder Holdback Amount" shall have the meaning specified
in Section 2.8(a).
"Public Stockholder Holdback Deduction" shall have the meaning
specified in Section 2.9(c).
"reasonable best efforts" means the taking of all steps that are
reasonable for the causation or prevention of an event or condition that
would reasonably have been taken in similar circumstances by a prudent
business person for the advancement or protection of his own economic
interest, in light of the consequences of the failure to cause or to
prevent the occurrence of such event or condition.
"Registration Statement" means the registration statement of Century
on Form S-4 that will be prepared and filed pursuant to the Securities Act
in accordance with the terms and conditions specified in Section 6.2 and
which will include the Proxy Statement, along with all amendments and
supplements thereto, if any.
"Required Consents" means the consents specified on Schedule 3.17 that
are required to be received from Persons other than Governmental Entities
in order to consummate the transactions contemplated hereunder.
"Reselling Stockholders" shall have the meaning specified in Section
6.2.
"RSA" means the Mississippi 5 Rural Service Area (Market No. 497A)
licensed by the FCC.
"Scarpa Employment Agreement" means the Employment Agreement dated
November 11, 1988 by and between Celutel and Scarpa, which will be
terminated as of the Closing pursuant to the Scarpa Termination Agreement.
"Scarpa Family Trust" means the trust created by Scarpa pursuant to
the trust instrument dated December 31, 1992.
"Scarpa Termination Agreement" means the agreement terminating the
Scarpa Employment Agreement to be entered into at the Closing pursuant to
Section 7.2(s).
"SEC" means the U.S. Securities and Exchange Commission.
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"Securities Act" means the Securities Act of 1933, as amended.
"Senior Officers" means Richard J. Donnelly, David A. Warren and
Valerie S. Hart.
"State Licenses" mean, with respect to each Cellular Entity, each
certificate of convenience and necessity or similar Permit that has been
issued to such entity by the public service commission or public utility
commission of any state.
"Stock Certificate" means any certificate that immediately prior to
the Effective Time represented issued and outstanding shares of Celutel
Stock.
"Stockholders Meeting" means the annual or special meeting of Celutel
stockholders (including all adjournments thereof) to be called, convened
and held in accordance with the terms and conditions of Section 6.2 in
order to, among other things, consider and vote upon the adoption of this
Agreement.
"Stockholders' Representative" means CIVC, acting in its capacity as
the representative of the Celutel Stockholders for the purposes set forth
herein and in the LC Escrow Agreement.
"Subsidiary" means each Cellular Entity and any other corporation of
which a majority of the total voting power of its outstanding voting
securities, or any other partnership, limited liability company, joint
venture, or other entity of which a majority of the partnership interests
or other similar equity interests thereof, is owned, directly or
indirectly, by Celutel.
"Supplemental Consideration" means the lesser of (i) $1,716,751 or
(ii) the difference, if any, between (A) the Non-Gulf Coast MSA Population
Equivalents multiplied by $130.10 and (B) $108,625,794, provided, however,
that if Celutel or any Subsidiary effects Additional Purchases hereinafter
that result in the amount payable under the preceding clause being capped
at $1,716,751, the Supplemental Consideration shall be increased by the
lesser of (i) $200,000 or (ii) the aggregate amount of consideration paid
by Celutel or any Subsidiary in connection with the Additional Purchases in
excess of the portion of such payments made in connection with purchasing
that number of additional Non-Gulf Coast MSA Population Equivalents that,
when multiplied by $130.10, caused the $1,716,751 cap to be applicable
hereunder.
"Surviving Corporation" means Celutel at and after the Effective Time.
"Tax Returns" means all returns, declarations, reports, statements or
other documents required to be filed in respect of Taxes.
"Taxes" means all federal, state, local, foreign and other net income,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
windfall profits, customs, duties or other taxes, fees, assessments or
charges of any kind whatever, together with any interest and any penalties,
additions to tax or additional amounts with respect thereto.
"Threatened Proceedings" mean all investigations and inquiries by
Governmental Entities and all threats made by any Person to institute
Proceedings.
"to the best knowledge" (or similar references to knowledge) means,
with respect to any corporation, the actual knowledge of the executive
officers of such corporation following a reasonable investigation by such
executive officers into the truth and accuracy of the statement qualified
by such reference, provided, however, that nothing herein shall obligate
such executive officers to contact any third parties in connection with
such investigation or to contact any employee of such corporation or its
subsidiaries other than the officer, manager or employee who has primary
responsibility for the subject matter of the statement so qualified and any
other employee or employees suggested by such officer, manager or employee.
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"TPUC" means the Public Utility Commission of Texas.
"Transaction Agreements" mean any agreement pursuant to which Celutel
or any Subsidiary purchased, sold, exchanged, transferred or otherwise
acquired or disposed of any direct or indirect equity interest in any
Person, but only if Celutel or any Subsidiary remains obligated thereunder
to indemnify any Person or make any other payments, to perform any services
or other agreements, or to otherwise take or refrain from taking any
actions.
"Unfair Labor Practice" means any unfair labor practice, unlawful
employment practice or unlawful discrimination.
"Warrants" mean the (i) Class A Stock Purchase Warrants dated January
5, 1988 and May 17, 1988 that entitle Scarpa to purchase up to 1,000,000
and 744,843 shares of Celutel Common Stock, respectively, at respective per
share prices of $5.00 and $5.50 (represented by Warrant Nos. W-1991-5 and
W-1991-6) and (ii) the Warrants to Purchase Common Stock dated April 26,
1989, May 30, 1988 and May 30, 1988 that entitle Forrest L. Metz to
purchase up to 25,000 shares of Celutel Common Stock per warrant at
respective per share prices of $7.00, $8.00 and $15.30, each as extended
pursuant to warrant extension agreements dated November 1, 1991.
"Working Capital" means the Current Assets as of the Effective Time
less the Current Liabilities as of the Effective Time, whether such number
is positive or negative.
"Working Capital Deficit" means the amount, if any, by which the
Current Liabilities exceed the Current Assets as of the Effective Time.
"Working Capital Surplus" means the amount, if any, by which the
Current Assets exceed the Current Liabilities as of the Effective Time.
1.2 Singular and Plural. Defined terms in this Agreement shall also mean in
the singular number the plural, and in the plural number the singular.
1.3 Capitalized Terms. In addition to such terms as are defined in the
preamble and recitals to this Agreement and in Section 1.1, any other
capitalized term appearing herein shall have the meaning ascribed to it in the
Article or Section in which it is defined.
1.4 Dbu Calculations. Any reference herein to the 32 Dbu contour of a cell
site or cellular system shall mean the 32 Dbu contour calculated under the
formula prescribed by the FCC in FCC Docket No. 90-6.
1.5 Parties. Any reference herein to the parties to this Agreement shall be
deemed to include CIVC and Scarpa, in each case to the extent specified in the
preamble hereto.
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ARTICLE 2.
THE MERGER
2.1 Merger. At the Effective Time, in accordance with the terms and
conditions of this Agreement and the DGCL, Sub shall be merged with and into
Celutel, the separate existence of Sub shall cease, and Celutel shall be the
Surviving Corporation and shall succeed to and assume all the rights and
obligations of Sub in accordance with the DGCL.
2.2 Closing. (a) The closing of the Merger will take place at the offices
of Jones, Walker, Waechter, Poitevent, Carrere & Denegre, 201 St. Charles
Avenue, New Orleans, Louisiana, at 10:00 a.m. on a date to be mutually agreed
upon between the parties, which shall be no later than the tenth business day
following the date upon which the last to occur of the conditions to the
obligations of the parties set forth in Sections 7.1(a), 7.2(g) or 7.3(g) is
fulfilled or duly waived, or, if no date has been agreed to, on any date
specified by one party to the others upon five days' written notice following
satisfaction of the conditions to the obligations of the parties set forth in
Sections 7.1(a), 7.2(g) or 7.3(g), provided, however, that in no event will any
party be obligated to consummate the Merger unless all other closing conditions
set forth in Article 7 that are applicable to such party shall have been
fulfilled or duly waived as provided in Article 7 on or prior to the Closing
Date.
(b) Subject to the satisfaction or waiver of each of the conditions set
forth in Article 7, at the Closing (i) the Closing Instruments, opinions and
other documents required by Article 7 shall be delivered, (ii) the appropriate
officers of the Surviving Corporation shall execute and acknowledge the
Certificate of Merger and (iii) the parties shall take such other action as is
required to consummate the transactions described in this Agreement and the
Certificate of Merger.
2.3 Effective Time of the Merger. As soon as practicable on or after the
Closing Date, the parties shall file a duly executed copy of the Certificate of
Merger substantially in the form of Exhibit A hereto and shall make all other
filings or recordings required under the DGCL. The Merger shall become effective
at 7:00 p.m. Delaware time on the date the Certificate of Merger is duly filed
with the Delaware Secretary of State (the "Effective Time").
2.4 Effects of the Merger. The Merger shall have the effects set forth in
Section 259 of the DGCL.
2.5 Certificate of Incorporation and By-laws. (a) Except as otherwise
provided in the Certificate of Merger, the Certificate of Incorporation of
Celutel, as amended and in effect immediately prior to the Effective Time, shall
be the Certificate of Incorporation of the Surviving Corporation after the
Effective Time unless and until amended in accordance with its terms and as
provided by Applicable Law.
(b) The By-laws of Celutel, as amended and in effect immediately prior to
the Effective Time, shall be the By-laws of the Surviving Corporation after the
Effective Time unless and until amended in accordance with the terms of the
Organizational Documents of the Surviving Corporation and as provided by
Applicable Law.
2.6 Directors and Officers. The directors and officers of Sub immediately
prior to the Effective Time shall serve as the directors and officers of the
Surviving Corporation after the Effective Time, each to hold office in
accordance with the Organizational Documents of the Surviving Corporation 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 Section 2.6.
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2.7 Conversion of Shares. (a) As of the Effective Time, by virtue of the
Merger and without any further action on the part of Century, Sub, Celutel, the
Surviving Corporation or any holder of any of the following securities:
(i) all shares of Celutel Stock that are held in the treasury of
Celutel or by any Subsidiary shall be cancelled;
(ii) all shares of Celutel Stock issued and outstanding (including
accrued and unpaid stock dividends payable with respect to the Celutel
Preferred Stock) immediately prior to the Effective Time (other than shares
of Celutel Stock to be cancelled pursuant to paragraph (a)(i) or Dissenting
Shares) shall be converted into (A) an amount of cash equal to 50% of the
Aggregate Merger Consideration (the "Aggregate Cash Consideration") and (B)
such number of shares of Century Common Stock equal to the quotient
determined by dividing 50% of the Aggregate Merger Consideration by the
Century Stock Price (the "Aggregate Stock Consideration"); and
(iii) each issued and outstanding share of common stock, $.01 par
value per share, of Sub shall be converted into one share of common stock,
$.20 par value per share, of the Surviving Corporation.
(b) Subject to the adjustments, holdbacks and other terms and conditions
set forth in Sections 2.8 and 2.9 and the terms and conditions of the Allocation
Agreement, upon conversion of the shares of Celutel Stock into the Aggregate
Merger Consideration in the manner described in paragraph (a)(ii) above, each
Celutel Stockholder shall have the right to receive (i) a cash payment (without
interest) equal to the Aggregate Cash Consideration multiplied by such Person's
Pro Rata Share Equivalent Interest, (ii) a certificate representing such whole
number of shares of Century Common Stock as is derived by multiplying the number
of shares of Century Common Stock comprising the Aggregate Stock Consideration
by such Person's Pro Rata Share Equivalent Interest and (iii) in lieu of the
issuance of a fractional share of Century Common Stock hereunder, a cash payment
(without interest) equal to the fair market value of such fraction of a share of
Century Common Stock to which such holder would otherwise be entitled but for
this provision. For purposes of calculating the fractional share payment
specified in (iii) above, the fair market value of any such fraction of a share
of Century Common Stock shall equal the Century Stock Price multiplied by such
fraction.
2.8 Pre-and Post-Closing Calculations and Price Adjustments. (a) At least
two business days prior to the Closing, Celutel shall deliver to Century a
certificate (the "Calculation Certificate") setting forth (i) the amount to be
owed by Celutel and the Subsidiaries as of the Effective Time for all Long-Term
Indebtedness, (ii) Celutel's good faith estimate of Working Capital as of the
Effective Time, (iii) the amount of any Supplemental Consideration, along with a
schedule reflecting how such amount was calculated, (iv) a true and complete
list of the amount of cash and number of shares of Century Common Stock that
each Non-Public Stockholder will be entitled to receive at the Effective Time
pursuant to this Agreement (after giving effect to the terms and conditions of
Section 2.7(b) and the Allocation Agreement) and (v) the portion of the
Aggregate Cash Consideration to be delivered to the LC Escrow Agent under
Section 2.9(b)(i) (the "Public Stockholder Holdback Amount"), the name and
address of the LC Escrow Agent, and the account number of the LC Escrow Account.
Notwithstanding anything herein to the contrary, in preparing the Calculation
Certificate, Celutel shall accrue or otherwise reduce the amount of Working
Capital by (i) the aggregate fees and expenses of legal counsel, accountants and
financial advisors that Celutel or any Subsidiary will pay prior to the
Effective Time or that Celutel estimates will be incurred by Celutel or any
Subsidiary through the Effective Time in connection with the transactions
contemplated hereunder, and (ii) the unpaid amount of those obligations listed
in items (ii) and (vii) on Schedule 3.23.
(b) On the Closing Date Celutel will re-certify (after making any necessary
updates or corrections) all of the information set forth in the Calculation
Certificate (including any schedules thereto), and Celutel and Century shall
jointly calculate the Aggregate Merger Consideration as of the Effective Time
based on such re-certified information. Subject solely to the rights of Century
under paragraphs
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(c) and (e) below, the amount of Long-Term Indebtedness and Supplemental
Consideration used in connection with calculating the Aggregate Merger
Consideration on the Closing Date will be final, binding and conclusive with
respect to all parties hereto and their respective stockholders, and shall not
be subject to judicial review.
(c) After the Closing the parties shall take the following actions to
adjust the Aggregate Merger Consideration payable hereunder. Within 30 days
after the Closing Date, Century shall (i) prepare (with the assistance of
Richard J. Donnelly) and deliver to the Stockholders' Representative a
consolidated statement of Working Capital of Celutel (the "Working Capital
Statement"), which shall set forth the Current Assets and Current Liabilities of
Celutel as of the Effective Time, and (ii) prepare and deliver to the
Stockholders' Representative a written statement specifying whether Century
agrees with the amounts of Long-Term Indebtedness and Supplemental Consideration
used in connection with calculating the Aggregate Merger Consideration at
Closing, and, if not, a statement of the amounts that Century believes should
have been so used (the "Supplemental Statement"). Upon its receipt of the
Working Capital Statement and Supplemental Statement (collectively, the
"Adjustment Statements"), the Stockholders' Representative shall have 30 days to
notify Century in writing of any objections that it may have to such statements.
If no written objection is raised by the Stockholders' Representative within
such 30-day period, the Adjustment Statements shall conclusively be deemed to
have been agreed upon by the parties and shall be final, binding and conclusive
with respect to all parties hereto and their respective stockholders, and shall
not be subject to judicial review. If, on the other hand, the Stockholders'
Representative gives timely notice of its objections to the Adjustment
Statements, the Stockholders' Representative and Century shall attempt to
resolve any disputed matters by negotiating in good faith and attempting to
agree in writing as to the actual amount of Working Capital, Long-Term
Indebtedness and Supplemental Consideration, and the amount of any payments owed
by any party under paragraph (e). If Century and the Stockholders'
Representative are unable to agree within 15 days from the date of delivery of
the Stockholders' Representative's written objection, then Century and the
Stockholders' Representative shall submit any disputed matters to a nationally
recognized accounting firm mutually acceptable to both Century and the
Stockholders' Representative. If Century and the Stockholders' Representative
are unable to agree on a nationally recognized accounting firm within 10 days
following the expiration of such 15-day period, then each party shall select a
nationally recognized accounting firm (which shall not be any certified public
accounting firm retained within the past two years by Century or CIVC to audit
its financial statements), and the two firms selected shall together select a
third nationally recognized accounting firm to resolve the dispute. If the two
accounting firms selected by the parties are unable to agree within 30 days on a
third accounting firm to resolve the dispute, then either Century or the
Stockholders' Representative may commence court proceedings to name a nationally
recognized accounting firm to resolve the dispute. The accounting firm selected
hereunder to resolve the dispute shall make a final determination of the actual
amount of the disputed matters, which will be provided in writing to each party,
and its resolution shall be final, conclusive and binding on all parties to this
Agreement and their respective stockholders, and shall not be subject to
judicial review. Notwithstanding anything herein to the contrary, no
recalculation or redetermination of Long-Term Indebtedness or Supplemental
Consideration shall result in any increase in the Aggregate Merger Consideration
unless Century otherwise agrees in writing.
(d) After the date on which Century furnishes the Stockholders'
Representative with the Adjustment Statements, Century shall afford the
Stockholders' Representative and its agents, employees and representatives with
full access at all reasonable times to (i) all accounting books and records of
Celutel and the Subsidiaries relating to all relevant accounting periods prior
to the Closing Date, (ii) all work papers of Century, Celutel and their
accountants and accounting personnel relating to their preparation of the
Adjustment Statements and (iii) Century's and Celutel's accountants and
accounting personnel and other personnel who participated in the preparation of
the Adjustment Statements (including Richard J. Donnelly) and their notes and
work papers, in each case until the resolution of all matters relating to the
determination of the actual amount of Aggregate Merger Consideration as of the
Effective Time and the amount of any payments arising under paragraph (e).
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(e) Within five business days of any final, binding and conclusive
determination of the actual amount of Working Capital, Long-Term Indebtedness
and Supplemental Consideration as of the Effective Time (whether through
non-objection, agreement, or otherwise), Century and the Stockholders'
Representative shall recalculate the Aggregate Merger Consideration based upon
the amounts so determined. If the amount of Aggregate Merger Consideration as so
determined is less than the amount determined at Closing, the Stockholders'
Representative shall promptly (i) instruct each Non-Public Stockholder to pay to
Century the portion of such difference (without interest) that such stockholder
is obligated to pay based upon the procedures specified in Section 11.7 and (ii)
direct the LC Escrow Agent to pay to Century the portion of such difference
(without interest) that the Public Stockholders are obligated to pay based upon
the procedures specified in Section 11.7, and the Stockholders' Representative
shall use its reasonable best efforts to assist Century in timely collecting all
such payments. If, on the other hand, the amount of Aggregate Merger
Consideration as so determined is more than the amount determined at Closing,
then Century shall promptly pay the amount of such excess (without interest) by
making wire transfers of immediately available funds or delivering checks to (i)
each Non-Public Stockholder in an amount equal to the portion of such excess to
which such stockholder is entitled based upon the procedures specified in
Section 11.7 and (ii) the LC Escrow Agent in an amount equal to the portion of
such excess to which the Public Stockholders are entitled based upon the
procedures specified in Section 11.7.
2.9 Delivery of Merger Consideration; Exchange of Stock
Certificates. (a) Prior to the date upon which the Proxy Statement is mailed to
the stockholders of Celutel, Century shall (i) appoint Society Shareholder
Services, Inc., Dallas, Texas, which serves as the transfer agent with respect
to the Century Common Stock, or any other exchange agent reasonably satisfactory
to Celutel, to act as the exchange agent hereunder (the "Exchange Agent") and
(ii) prepare a letter of transmittal, in form and substance reasonably
satisfactory to Celutel ("Letter of Transmittal"), to be used by the Celutel
Stockholders to exchange their Stock Certificates for the consideration
specified in this Article 2. Century shall cause the Exchange Agent to pay such
consideration to each Celutel Stockholder in accordance with the terms and
conditions specified herein and in the Letter of Transmittal.
(b) On the Closing Date Century shall (i) pay to the LC Escrow Agent cash
in the amount of the Public Stockholder Holdback Amount specified in the
Calculation Certificate (as re-certified at Closing), (ii) pay, or cause the
Exchange Agent to pay, to each Non-Public Stockholder who has duly tendered his
Stock Certificates in accordance herewith and with the Letter of Transmittal all
consideration specified in the Calculation Certificate (as re-certified at
Closing) and (iii) cause the Exchange Agent to commence the mailing of the
consideration specified in Section 2.9(c) to each Public Stockholder who has
duly tendered his Stock Certificates in accordance herewith and with the Letter
of Transmittal.
(c) Subject to the terms of the Allocation Agreement, from and after the
Effective Time each Celutel Stockholder shall be entitled, upon the surrender of
his Stock Certificate or Certificates to the Exchange Agent, accompanied by a
properly completed and executed Letter of Transmittal, to receive in exchange
therefor on the terms and subject to the conditions set forth herein and in the
Letter of Transmittal (i) a check payable in the sum of the amounts specified in
Section 2.7(b), without interest, less, in the case of each Public Stockholder,
such stockholder's Pro Rata Share Equivalent Interest of the Public Stockholder
Holdback Amount (such pro rata interest in such amount being hereinafter
referred to as the "Public Stockholder Holdback Deduction") and (ii) a
certificate or certificates representing that whole number of shares of Century
Common Stock into which the shares of Celutel Stock represented by the Stock
Certificate so surrendered shall have been converted pursuant to Section 2.7(b)
(along with the contingent right to receive any remaining portion of the Public
Stockholder Holdback Deduction upon termination of, and in accordance with, the
LC Escrow Agreement). Hereinafter the term "Merger Consideration" shall mean the
aggregate amount of consideration payable to each respective Celutel Stockholder
prior to giving effect to any Public Stockholder Holdback Deduction (but after
making all other allocations and adjustments specified in this Article 2).
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(d) The Letter of Transmittal shall set forth customary terms and
conditions upon which the exchanges described in paragraph (c) above will be
made. Without limiting the generality of the foregoing, the Letter of
Transmittal will provide that (i) if any check or certificate for shares of
Century Common Stock is to be issued in the name of any Person other than that
in which a surrendered Stock Certificate is then registered, such surrender
shall be accompanied by payment of any applicable transfer Taxes and such
documents reasonably deemed necessary or appropriate by Century, (ii) if a
former holder of Celutel Stock claims that a Stock Certificate has been lost,
stolen or destroyed, the Exchange Agent shall deliver to such holder the Merger
Consideration only upon receipt of appropriate evidence of ownership of such
Celutel Stock, and appropriate indemnification (and, if requested by Century, a
bond), in each case reasonably satisfactory to Century, and (iii) the execution
and delivery of the Letter of Transmittal by any Celutel Stockholder will
constitute such stockholders' written appointment of the Stockholders'
Representative as his agent and attorney-in-fact for all purposes specified
herein and in the LC Escrow Agreement. A Letter of Transmittal shall be mailed
to each record stockholder of Celutel in connection with the mailing of the
Proxy Statement.
(e) From and after the Effective Time and until surrendered and exchanged
as provided in this Section, each Stock Certificate (excluding Stock
Certificates previously representing shares of Celutel Stock held in the
treasury of Celutel or by any Subsidiary and excluding Stock Certificates
representing Dissenting Shares) shall be deemed for all purposes, except as
hereinafter provided, to evidence that whole number of shares of Century Common
Stock and the right to receive that amount of cash (subject to any Public
Stockholder Holdback Deductions) into which the shares of Celutel Stock
represented by the Stock Certificate so surrendered have been converted under
this Article 2 (along with the contingent right to receive any remaining portion
of the Public Stockholder Holdback Deduction upon termination of, and in
accordance with, the LC Escrow Agreement). Unless and until any such Stock
Certificate shall be so surrendered, the holder of such Stock Certificate shall
not have any right to receive any dividends paid or other distributions made to
the holders of record of Century Common Stock after the Effective Time. Subject
to Applicable Law, upon surrender of any such Stock Certificate, the
surrendering holder of record thereof shall receive all dividends and other
distributions, with respect to the total number of shares of Century Common
Stock into which his Celutel Stock was converted, that have been paid or made
with respect to shares of Century Common Stock outstanding as of a record date
after the Effective Time, but without interest thereon.
(f) If any former stockholder of Celutel fails to duly deliver a Letter of
Transmittal within 15 months of the Effective Time, all cash payments,
dividends, distributions and stock certificates otherwise payable to such former
stockholder by the Exchange Agent or the LC Escrow Agent shall be returned to
Century, after which each such former stockholder shall look, subject to
applicable escheat or other Applicable Laws, to Century as general creditors
only for payment thereof.
(g) The Merger Consideration to be issued and paid upon surrender of Stock
Certificates in accordance with the terms of this Section shall be deemed to
have been issued in full satisfaction of all rights pertaining to the shares of
Celutel Stock theretofore represented thereby, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Celutel Stock that were outstanding immediately
prior to the Effective Time.
2.10 Non-Dilution. If, at any time after the date hereof and prior to the
Effective Time, Century effects a Diluting Event, then as a condition of such
Diluting Event, lawful, appropriate, equitable and adequate adjustments (as
mutually determined by Celutel and Century prior to the Effective Time, subject
to any rights of the Celutel Stockholders to indemnification under Article 10
for any inaccuracy of the representations and warranties of Century in Section
5.9) shall be made to the Century Stock Price, Average Century Stock Price,
Ceiling Price and Floor Price, or to the terms of Section 2.7, as appropriate,
whereby the Celutel Stockholders shall thereafter be entitled to receive (under
the same terms otherwise applicable to their receipt of the Century Common
Stock), in lieu of or in addition to, as the case may be, the consideration
specified in Section 2.7, such shares of stock, securities or other property as
may be issued or payable with respect to or in exchange for that number of
shares of
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Century Common Stock to which Celutel's stockholders were so entitled under
Section 2.7, and in any such case appropriate, equitable and adequate
adjustments shall also be made to such resulting consideration in like manner in
connection with any subsequent Diluting Events. It is the intention of the
parties that the foregoing shall have the effect of entitling the Celutel
Stockholders to receive upon the Effective Time such stock, securities and other
property (other than cash dividends paid in the ordinary course and at times and
in amounts consistent with past practice and not in excess of $.50 per share per
annum) as the Celutel Stockholders would have received had they held the Century
Common Stock (or any replacement or additional stock, securities or property, as
applicable) on the record date of such Diluting Event.
2.11 Dissenting Shares. Notwithstanding anything to the contrary herein,
Dissenting Shares shall not be converted as of the Effective Time into a right
to receive the Merger Consideration, but, instead, shall entitle the holder of
such shares to such rights as may be available under Section 262 of the DGCL,
provided, however, that if after the Effective Time such holder fails to perfect
or withdraws or otherwise loses his right to appraisal, the shares of Celutel
Stock owned by such holder immediately prior to the Effective Time shall be
treated as if they had been converted as of the Effective Time into the right to
receive the Merger Consideration, without interest. Prior to the Effective Time,
Celutel shall give Century prompt notice of any demands received by Celutel for
appraisal of shares of Celutel Stock, and Century shall have the right to
participate in all negotiations and proceedings with respect to such demands.
Prior to the Effective Time, Celutel shall not, except with the prior written
consent of Century, make any payment with respect to, or settle, any such
demands. After the Effective Time, Century shall pay, or cause the Surviving
Corporation to pay, any amounts that may become payable to the holders of
Dissenting Shares under Section 262 of the DGCL.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF CELUTEL
Celutel hereby makes the following representations and warranties to
Century and Sub as of the date hereof:
3.1 Organization of Celutel and Corporate Subsidiaries. Celutel is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Set forth on Schedule 3.1 hereto is a list of each of
the Corporate Subsidiaries (which constitutes all of the Subsidiaries other than
Pascagoula). Each Corporate Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation (as set forth on such schedule). Each of Celutel and the Corporate
Subsidiaries has full corporate power and authority to carry on the business in
which it is engaged and to own, lease and operate its properties. Each of
Celutel and the Corporate Subsidiaries has duly qualified and is authorized to
do business and is in good standing as a foreign corporation in each
jurisdiction listed on Schedule 3.1, which constitute all jurisdictions in which
the character or location of its properties or the nature of its activities
makes such qualification necessary, except where the failure to so qualify or
become authorized would not have a Material Adverse Effect with respect to any
Cellular Entity.
3.2 Organization of Pascagoula. Pascagoula is a general partnership duly
organized and existing under the laws of the District of Columbia. The State of
Mississippi requires no filing of a foreign general partnership in order to do
business in Mississippi, and Pascagoula is not required by the nature of its
activities or the character or location of its properties to be qualified to
transact business as a foreign partnership in any other state or jurisdiction.
Pascagoula is not required to make any filing with the District of Columbia to
maintain its existence and good standing, nor has it failed to file any
application, report or certificate required under such law.
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3.3 Authorization and Enforceability. (a) Celutel has full corporate power
and authority to execute and deliver this Agreement and each Closing Instrument
to be executed and delivered by it and, subject to the adoption of this
Agreement by the stockholders of Celutel in accordance with the DGCL and
Celutel's Organizational Documents, to consummate the transactions contemplated
hereby and under such Closing Instruments. The execution, delivery and
performance by Celutel of this Agreement and each Closing Instrument to be
executed and delivered by it has been duly and unanimously authorized by
Celutel's Board of Directors, and no other corporate proceedings (other than the
adoption of this Agreement by the stockholders of Celutel in accordance with the
DGCL and Celutel's Organizational Documents) are necessary to authorize
Celutel's execution, delivery or performance of this Agreement or such Closing
Instruments.
(b) This Agreement has been duly executed and delivered by Celutel and
constitutes, and each Closing Instrument, when executed and delivered by
Celutel, will be duly executed and delivered by Celutel and will constitute, a
valid and legally binding obligation of Celutel, enforceable against Celutel in
accordance with its respective terms, except that such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium,
and similar laws affecting creditors' rights generally and (ii) equitable
principles that may limit the availability of certain equitable remedies (such
as specific performance) in certain instances.
3.4 Capital Stock. (a) The authorized capital stock of Celutel consists
exclusively of (i) 35,000,000 shares of Celutel Common Stock, of which 3,516,188
are issued and outstanding and none are held in Celutel's treasury, (ii)
2,636,363 shares of Class B Common Stock, $.20 par value per share, none of
which is issued, outstanding or held in Celutel's treasury, and (iii) 50,000
shares of Celutel Preferred Stock, of which 2,670 shares (excluding accrued and
unpaid stock dividends payable with respect thereto) are issued and outstanding
and held by the record owners in the amounts specified on Schedule 3.4, and none
is held in Celutel's treasury.
(b) The authorized capital stock of the Cellular Entities (other than
Pascagoula) consists exclusively of:
(i) 7,500,000 shares of common stock, $.01 par value per share, of
Biloxi, of which 2,129,475.1781 shares are issued and outstanding, none of
which are held in Biloxi's treasury, and 1,806,116.5344, or 84.8151%, of
which are owned by Celutel;
(ii) 50,000 shares of authorized common stock, $.01 par value per
share, of Brownsville, of which 24,965.05 shares are issued and
outstanding, none of which are held in Brownsville's treasury, and
18,841.2002, or 75.4703%, of which are owned by Celutel;
(iii) 25,000 shares of authorized common stock, no par value per
share, of McAllen, of which 193.1664 shares are issued and outstanding,
none of which are held in McAllen's treasury, and 126.466, or 65.4700%, of
which are owned by Celutel; and
(iv) 25,000 shares of authorized common stock, $.01 par value per
share, of Jackson, of which 15,652.122 shares are issued and outstanding,
none of which are held in Jackson's treasury, and 13,470.9853, or 86.0649%,
of which are owned by Celutel.
(c) Schedule 3.4 sets forth the capital structure of each other Corporate
Subsidiary in the same manner presented above in paral of the issued and
outstanding shares of capital stock of each such other Corporate Subsidiary are,
directly or indirectly through one or more Subsidiaries, owned by Celutel.
(d) All shares of capital stock indicated as being directly or indirectly
owned by Celutel in paragraphs (b) and (c) are owned beneficially and of record
by Celutel or a Subsidiary free and clear of any Encumbrances other than those
arising in connection with pledges under the PNC Loan Agreement.
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(e) All issued and outstanding shares of capital stock of Celutel and the
Corporate Subsidiaries have been duly authorized and validly issued, are fully
paid and nonassessable and are free and clear of any preemptive or similar
rights. Neither Celutel nor any Corporate Subsidiary has outstanding, or is
subject to, any Options. Except as indicated in paragraphs (a) or (b) above or
Schedule 3.4, there are no equity equivalents in, interests in the ownership or
earnings of, or other similar rights binding upon, Celutel or the Corporate
Subsidiaries.
3.5 Partnership Interests. The partnership interests of Pascagoula consist
exclusively of (i) a .5205% general partnership interest owned by Celutel, (ii)
a 52.5795% general partnership interest owned by Pascagoula Cellular Services,
Inc., an indirect wholly-owned subsidiary of Celutel ("PCSI"), (iii) a 29.4729%
general partnership interest owned by CHI and (iv) 17.4271% in general
partnership interests owned by various third parties. Except as set forth on
Schedule 3.5, (i) the owners of Pascagoula partnership interests are not subject
to any scheduled or contemplated capital call or other claim for monetary
payment, (ii) all Pascagoula partnership interests purchased from Pascagoula
have been fully paid for by each owner thereof, (iii) all Pascagoula partnership
interests owned by Celutel and the Subsidiaries are free of all Encumbrances,
other than those arising in connection with pledges under the McCaw Note, (iv)
Pascagoula is not subject to any outstanding Options, (v) other than as provided
for in the partnership agreement pursuant to which Pascagoula was organized,
there are no partnership equivalents in, interests in the ownership or earnings
of, or other similar rights binding upon, Pascagoula, and (vi) no partner of
Pascagoula has failed to make any capital call.
3.6 Personal Properties. Except as set forth on Schedule 3.6 hereto,
Celutel and each of the Subsidiaries have good, valid and marketable title to,
or a valid leasehold interest in, all of its properties and assets (real and
personal, tangible and intangible), including all properties and assets
reflected in the Balance Sheet (or which would be reflected thereon if not fully
depreciated or amortized), in each case subject to no Encumbrances of any kind
whatsoever, except for Permitted Encumbrances. Celutel and each of the
Subsidiaries validly own or lease all properties and assets necessary for the
continued conduct of its business in the ordinary course.
3.7 Organizational Documents, Books and Records, and Related
Matters. (a) Celutel has delivered to Century true, correct and complete copies
of (i) each Organizational Document governing Celutel and each of the
Subsidiaries, together with all amendments thereto, as certified by the
Secretary of State of their respective corporate domiciles or by their
respective corporate secretaries, as appropriate, and (ii) except as provided on
Schedule 3.7, minutes of all meetings of the Boards of Directors, stockholders
or partners of Celutel and each of the Subsidiaries. All books and records of
Celutel and the Subsidiaries, and all files, data and other materials relating
to their businesses, have been prepared and maintained in accordance with sound
business practices.
(b) The Conversion Price specified in Section 6 of the Celutel Certificate
of Designation is, and will remain at all times through Closing, $5.
(c) The affirmative vote of the holders of a majority of the outstanding
total voting power of the holders of the Celutel Stock is the only vote of the
holders of any class or series of Celutel's capital stock that is required under
Celutel's Organizational Documents or the DGCL to approve this Agreement and the
transactions described herein.
3.8 Investments and Interests. Except for the Subsidiaries listed on
Schedule 3.1, and otherwise described in Section 3.5, neither Celutel nor any
Subsidiary owns or has the right or obligation to acquire, directly or
indirectly, any capital stock or other equity or proprietary interest in any
Person.
3.9 Financial Statements. (a) The Celutel Financial Statements included in
Celutel's annual report on Form 10-K for the fiscal year ended April 30, 1993
filed with the SEC and in any quarterly reports on Form 10-Q subsequently filed
with the SEC (i) reflect only actual bona fide transactions,
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(ii) have been prepared from the books and records of Celutel and the
Subsidiaries in accordance with GAAP, and (iii) fairly present in all material
respects Celutel's consolidated financial position as of the respective dates
thereof in accordance with GAAP and its consolidated results of operations and
cash flows for the periods then ended in accordance with GAAP, except, in the
case of unaudited interim financial statements included therein, as otherwise
permitted by Rule 10-01 of Regulation S-X promulgated by the SEC. All unaudited
interim financial statements included among the Celutel Financial Statements
reflect all adjustments (which include only normal recurring adjustments made in
conformity with GAAP) that are necessary for a fair statement of the
consolidated results of operation of Celutel and its Subsidiaries for the
periods presented therein.
(b) For each Cellular Entity, Celutel has delivered true and complete
copies of (i) all balance sheets and statements of operations, retained earnings
and cash flows of each such entity for each of its prior two fiscal years, all
of which have been audited in accordance with generally accepted auditing
standards and (ii) all quarterly interim financial statements prepared by each
such entity since the end of its prior completed fiscal year. All such financial
statements (i) reflect only actual bona fide transactions, (ii) have been
prepared from the books and records of such entity in accordance with GAAP and
(iii) fairly present in all material respects the entity's financial position as
of the respective dates thereof in accordance with GAAP and its results of
operations and cash flows for the periods then ended in accordance with GAAP.
Except for normal, recurring year-end audit adjustments made in conformity with
GAAP, all unaudited interim financial statements of the Cellular Entities
delivered hereunder reflect all adjustments that are necessary to fairly state
in all material respects the results of operations of each Cellular Entity for
the periods presented therein.
(c) Attached hereto as Exhibits B-1 through B-3 are true and complete
copies of the capital expenditure budgets for fiscal year 1994 for (i) the MSAs
served by Biloxi and Pascagoula, presented on a consolidated basis, (ii) the
MSAs served by Brownsville and McAllen, presented on a consolidated basis, and
(iii) the MSA and the RSA served by Jackson (collectively, the "Budgets"), all
of which have been prepared in good faith by Celutel. Notwithstanding the
foregoing, Celutel does not make any representation or warranty that the actual
capital expenditures for fiscal year 1994 will not exceed the amounts budgeted,
or any other representation or warranty regarding such Budgets (other than that
they were prepared in good faith by Celutel).
3.10 Absence of Material Changes. Since July 31, 1993 and except as set
forth on Schedule 3.10 hereto, neither Celutel nor any Subsidiary has:
(a) amended any of its Organizational Documents;
(b) undergone any change in its financial condition, assets,
properties, liabilities, business or operations, other than changes in the
ordinary course of business, none of which individually or in the aggregate
has resulted in a Material Adverse Effect with respect to any Cellular
Entity;
(c) suffered any damage, destruction or loss (whether or not covered
by insurance), or condemnation or other taking that has resulted in a
Material Adverse Effect with respect to any Cellular Entity;
(d) subjected any shares of capital stock or partnership interests
owned by it to any Encumbrance of any kind whatsoever, or subjected any of
its other properties or assets to any Encumbrance other than Permitted
Encumbrances;
(e) guaranteed any Indebtedness or obligations of any other Person;
created, incurred or assumed any Indebtedness (or increased prior
Indebtedness) or otherwise become liable for the obligations of any other
Person (except for draws upon the credit facility provided for in the PNC
Loan Agreement that are consistent with past practice, the incurrence of
accounts payable in the ordinary course of business consistent with past
practice and any other obligations that were incurred in the ordinary
course of business consistent with past practice and that are not material
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individually or in the aggregate); prepaid, amended or altered the payment
obligations with respect to any Indebtedness, other than prepayments of
Long-Term Indebtedness and payments of accounts payable; or made any loans,
advances or capital contributions to, or investments in, any other Person
(other than to and among Subsidiaries and customary travel advances to
employees);
(f) sold, transferred, assigned or otherwise disposed of any direct or
indirect equity interest in any Cellular Entity or any Intellectual
Property; leased any office space; or acquired, sold, assigned, leased,
transferred or otherwise disposed of, directly or indirectly, any other
assets, except for any such transactions in the ordinary course of business
consistent with past practice and except for any other such transactions
that individually or in the aggregate are not material to its business;
(g) received written notice of any Proceeding, Threatened Proceeding,
dispute, claim, event or condition of any character (including but not
limited to regulatory and administrative notices) that could reasonably be
expected to have a Material Adverse Effect with respect to any Cellular
Entity;
(h) made any change in its accounting methods, principles or
practices, except for any change required by reason of a concurrent change
in GAAP and notice of which is given in writing to Century;
(i) received written notice that any group, organization or union has
attempted or intends to organize any of its employees or that any group of
employees has attempted or intends to institute any labor slowdown,
picketing, stoppage or similar disturbance;
(j) issued any shares of capital stock, partnership interests, Options
or other securities, except for any issuances arising in connection with
the payment of regular quarterly stock dividends payable with respect to
the Celutel Preferred Stock or issuances arising in connection with any
conversion of the Celutel Preferred Stock into Celutel Common Stock; split,
combined or reclassified any shares of its capital stock; declared, set
aside, or paid any dividend, payment to partners or other distribution
(whether in cash, stock or property or any combination thereof), except for
regular quarterly stock dividends payable with respect to the Celutel
Preferred Stock; repurchased, redeemed or otherwise acquired any of its
capital stock, partnership interests or any other securities; or adopted a
plan of liquidation, dissolution, restructuring, recapitalization or other
reorganization;
(k) entered into, adopted or (except as may be required by law)
amended or terminated any Employee Benefit Plan or other arrangement for
the benefit or welfare of any current or former director, officer or
employee; increased in any manner the compensation or other remuneration of
any director, officer or employee, except for any increases in the wages or
salaries of its employees (not including officers or directors) that are
made in the ordinary course of business consistent with past practice and
that do not increase the aggregate compensation paid to all of its
employees (not including officers or directors) in excess of 5% per annum
(calculated without giving effect to bonuses paid in the ordinary course of
business consistent with past practice and without giving effect to
increases in aggregate compensation caused by increases in staffing levels
since July 31, 1993); paid to any current or former director, officer or
employee any amount not required by any Employee Benefit Plan; or granted
or paid any bonus, severance payment, termination payment or change in
control payment, other than the payments specified on Schedule 3.23 and
other than bonuses payable to its employees (not including officers or
directors) made in the ordinary course of business consistent with past
practice;
(l) cancelled or materially reduced the coverage under any insurance
or indemnity Contract;
(m) entered into any networking contracts with Celular de Telefonia,
S.A. de C.V. (CEDETEL) or its Affiliates or otherwise become obligated
under any Contract outside the
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ordinary course of business consistent with past practice or amended,
modified or terminated any Contract listed on any Schedule hereto, other
than as contemplated hereunder;
(n) waived, released, granted or transferred any rights of value or
settled any Proceeding or Threatened Proceeding involving claims in excess
of $75,000, except for any waivers, releases, grants, transfers or
settlements that have no effect on Celutel's consolidated financial
position other than reducing Current Assets or increasing Current
Liabilities or that have been approved in writing by any executive officer
of Century;
(o) amended any Tax Return, made any tax election or settled or
compromised any Tax liability;
(p) failed to staff its operations at levels comparable with past
practice;
(q) materially delayed payment of any of its accounts payable or other
liability beyond the date when such liability would have been paid in the
ordinary course of business consistent with past practice;
(r) received written notice of any actual or threatened termination,
cancellation or limitation of, or any modification in, its business
relationship with any customer or group of customers whose payments to such
entity individually or in the aggregate are material to its operations, or
with any vendor, agent, representative, or consultant, or group thereof,
whose sales of services to such entity individually or in the aggregate are
material to its operations;
(s) otherwise failed to operate its business in the ordinary course
consistent with prior practices so as to preserve its business organization
and to preserve the good will of its customers, suppliers and others with
whom it has business relations; or
(t) authorized, agreed or became committed to do or to take any of the
actions referred to in this Section 3.10.
3.11 Indebtedness. Schedule 3.11 hereof sets forth all Indebtedness of
Celutel and each Subsidiary to any Person (including its Affiliates) as of
August 31, 1993 (except to the extent a different date is otherwise set forth
thereon with respect to any specific Indebtedness). Except as disclosed on
Schedule 3.11, all Indebtedness is prepayable at any time at the option of the
entity indebted thereunder, without premium or penalty. Neither Celutel nor any
Subsidiary has taken any action or omitted to take any action, and no event has
occurred, that constitutes (with or without the giving of notice or the passage
of time or both) a material default under, or gives rise (with or without the
giving of notice or the passage of time or both) to any right of termination,
cancellation, or acceleration under, any Contract creating, or note or other
instrument evidencing, any Indebtedness.
3.12 Litigation and Claims. (a) Schedule 3.12 sets forth a list of each
Proceeding in which Celutel or any Subsidiary is a party. Except as specifically
disclosed on Schedule 3.12, there are no judgments, orders, injunctions, decrees
or awards binding upon Celutel or any Subsidiary, or their respective assets,
and there are no Proceedings or, to Celutel's best knowledge, Threatened
Proceedings asserted against Celutel or any Subsidiary, or their respective
assets, in each case that could reasonably be expected to have a Material
Adverse Effect with respect to any Cellular Entity. Schedule 3.12 sets forth
each reserve established by Celutel or any Subsidiary with respect to its
liability or potential liability arising under any Proceeding or Threatened
Proceeding listed thereon.
(b) There are no Proceedings or, to Celutel's best knowledge, Threatened
Proceedings asserted against Celutel or any Subsidiary, or their respective
assets, that, individually or in the aggregate, could reasonably be expected to
(i) impair in any material respect the ability of Celutel to perform its
obligations under this Agreement or (ii) prevent the consummation of any of the
transactions described
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in this Agreement, nor is there any judgment, decree, injunction, rule or order
of any Governmental Entity or arbitrator that could reasonably be expected to
have any such effect.
3.13 Real Estate and Leases. Schedule 3.13 hereto sets forth a complete
list of all real properties and structures thereon owned in whole or in part by
Celutel or any Subsidiary, or leased by Celutel or any Subsidiary, and includes
the name of the record title holder thereof. Celutel or a Subsidiary owns or
validly leases all of the real property reflected on the Balance Sheets (or
which would be reflected thereon if not fully depreciated or amortized) and all
real properties used in the conduct of its business. Title to all real property
owned by Celutel or any Subsidiary is, in each case, good and marketable and
free and clear of any Encumbrances, except for Permitted Encumbrances or any
Encumbrance arising under indentures, security interests, mortgages or deeds of
trust listed on Schedule 3.13. All such real property has access to adequate
water, electric, gas and sewerage services and all other utility services
necessary for the conduct of the business of Celutel and the Subsidiaries, and,
with respect to each, Celutel or the appropriate Subsidiary has adequate rights
of ingress and egress for operation of business in the ordinary course. There
are no Proceedings or, to Celutel's best knowledge, Threatened Proceedings
relating to condemnation, eminent domain or similar matters that would preclude
or impair the use of any such property by Celutel or any Subsidiary for the
purposes for which it is currently used.
3.14 Condition of Personal Properties and Real Estate. All buildings,
equipment and other assets (including all switches, cell sites, cell enhancers,
radios, towers, generators and microwave systems) owned or leased by Celutel or
any Subsidiary (i) are in good operating condition and do not require any
maintenance or repairs, except for ordinary, routine maintenance and repairs
that arise in the ordinary course of business and that in the aggregate are not
material in nature or cost, (ii) are suitable for the purposes for which they
are currently being used and are sufficient for the continued conduct of
business after the Closing in substantially the same manner as conducted prior
thereto and (iii) conform in all material respects with all Applicable Laws
(including all zoning laws) and Permits.
3.15 Insurance. Schedule 3.15 hereto sets forth a complete list and brief
description of all policies and binders of insurance insuring Celutel or any
Subsidiary and its properties and businesses. All such policies and binders of
insurance are in full force and the premiums thereon have been duly and timely
paid. Neither Celutel nor any Subsidiary is in material default with respect to
any provision contained in any such policy or binder, nor has there been any
failure to give notice or to present any claim relating to Celutel or any
Subsidiary or under any such policy or binder in a timely fashion or in the
manner or detail required by the policy or binder, except for failures that
would not reasonably be expected to result in a Material Adverse Effect with
respect to any Cellular Entity. No notice of cancellation or nonrenewal with
respect to any such policy or binder has been received by Celutel or any
Subsidiary. Celutel has delivered to Century correct and complete copies of (i)
certificates of insurance pertaining to and a policy digest of all such policies
and binders, (ii) the most recent inspection reports, if any, received from the
insurance underwriters as to the condition of the insured properties and (iii)
all such policies and binders.
3.16 Contracts. (a) Except as set forth in Schedule 3.16, neither Celutel
nor any Subsidiary is a party to, or is bound by, obligated under or subject to
the terms of, any:
(i) Transaction Agreement;
(ii) Contract for the lease or sublease of any real or personal
property from or to any Person (including any Affiliate of Celutel),
excluding any Contract or group of related Contracts for the lease or
sublease of similar kinds of personal property from or to any such Persons
involving aggregate annual rentals of less than $75,000;
(iii) Contract with any Person (including any Affiliate of Celutel)
wherein it provides or receives services relating to customer billing, data
processing or accounting, or which relates to the
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switching or reselling of Cellular Services or the sharing of any switch
used in connection with providing Cellular Services;
(iv) management or consulting Contract with any Person (including any
Affiliate of Celutel), whether it is the party performing or receiving the
benefit of the services performed thereunder, including any Contracts
relating to the management or operation of any cellular system owed by the
Cellular Entities;
(v) Contract for the purchase or sale of raw materials, commodities,
merchandise, utilities, supplies, or other materials or personal property,
or for the furnishing or receipt of services, that calls for performance
over a period of more than 90 days and involves more than the sum of
$75,000;
(vi) agency, distributor, dealer, representative, sales, marketing or
advertising Contract that is not terminable by it without penalty on notice
of 60 days or less;
(vii) Contract to lend or advance funds to, make any investment in, or
guarantee the Indebtedness or obligations of, any Person (including any
Affiliate of Celutel and any customers, suppliers, lenders, officers,
directors, employees, stockholders, or others having business relations
with Celutel or any Subsidiary);
(viii) Contract (not including a by-law provision by which the
Surviving Corporation will be bound) obligating Celutel or any Subsidiary
to indemnify any current or former director, officer, employee, agent or
fiduciary;
(ix) collective bargaining agreement, employment agreement,
nondisclosure agreement, assignment agreement, noncompetition agreement, or
any other Contract with any director, officer or employee of Celutel or any
Subsidiary, other than the Scarpa Employment Agreement and the Employee
Benefit Plans;
(x) Contract relating to capital expenditures which involves a payment
or payments in excess of $75,000;
(xi) Contract limiting its freedom to engage in any line of business
or to compete with any other Person;
(xii) Contract 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 to refrain from any such sale,
disposition, business combination or share exchange, other than this
Agreement or the Century Purchase Agreement; or
(xiii) Contract not entered into in the ordinary course of business
that involves a payment or payments of $75,000 or more and is not
cancelable without penalty within 60 days.
(b) True, correct and complete copies of all Contracts identified in
Schedule 3.16 have heretofore been delivered to Century. Except as set forth in
Schedule 3.16 (and subject to the agreements set forth therein under the heading
"Texas Agreements"), (i) none of the Contracts or commitments listed in Schedule
3.11, 3.16, or 3.30 or any other Schedule hereto (the "Subject Contracts") will
expire, be terminated or be subject to any modification as a result of the
consummation of the transactions contemplated by this Agreement, (ii) neither
Celutel nor any Subsidiary is either in default in any material respect under
the terms of any Subject Contract, and no event has occurred which, with the
passage of time or giving of notice, or both, would constitute such a default by
Celutel or any Subsidiary, and (iii) to Celutel's best knowledge, no other party
to any Subject Contract is in default in any material respect thereunder, and no
such event has occurred with respect to any such party. No purchase order or
commitment of Celutel or any Subsidiary not listed on Schedule 3.16 is in excess
of its ordinary business requirements.
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3.17 Conflicts. (a) Assuming the stockholders of Celutel duly adopt this
Agreement at the Stockholders Meeting, the execution, delivery, and performance
by Celutel of this Agreement and each Closing Instrument to be executed and
delivered by Celutel does not and will not (i) conflict with or result in a
violation of any provision of the Organizational Documents of Celutel or any
Subsidiary, (ii) assuming receipt of all Required Consents specified on Schedule
3.17, conflict with or result in a violation of any provision of, or constitute
(with or without the giving of notice or the passage of time or both) a default
under, or give rise (with or without the giving of notice or the passage of time
or both) to any right of termination, cancellation, or acceleration under, any
bond, debenture, note, mortgage, indenture, lease, Contract, or other instrument
or obligation to which Celutel or any Subsidiary is a party or by which Celutel
or any Subsidiary or any of their respective properties may be bound, (iii)
result in the creation or imposition of any Encumbrance upon the properties of
Celutel or any Subsidiary or (iv) assuming compliance with the matters referred
to in Sections 6.1 through 6.3, violate any Applicable Law (including any state
takeover or similar law or regulation) binding upon Celutel or any Subsidiary,
except for, in the case of clauses (ii) and (iii), any such conflicts,
violations, defaults, rights or Encumbrances that individually or in the
aggregate would not materially interfere, interrupt, or detract from the ability
of Celutel and the Subsidiaries, taken as a whole, to conduct their businesses,
impair the ability of Celutel to perform its obligations hereunder, or prevent
the consummation of the transactions contemplated hereunder.
(b) Without limiting the generality of the foregoing, none of the
Organizational Documents or Contracts of the Cellular Entities grant rights of
"first refusal" or similar rights to the stockholders or partners thereof upon
the transfer or change in control of shares of capital stock or partnership
interests of such entities or their Affiliates, or include any similar
provisions that otherwise restrict any such transfer or change in control in any
manner.
(c) No consent, notice, approval, order, or authorization of, or
declaration, filing, or registration with, any Governmental Entity is required
to be obtained or made by Celutel or any Subsidiary in connection with the
execution, delivery or performance by Celutel and the Principal Stockholders of
this Agreement or their consummation of the transactions contemplated hereby,
other than (i) the filing by the Surviving Corporation of the Certificate of
Merger with the Delaware Secretary of State in accordance with the DGCL or (ii)
as contemplated by Sections 6.1 through 6.3.
3.18 Permits, Tariffs and Cellular Operations. (a) Schedule 3.18 identifies
separately for Celutel and each Subsidiary all FCC Licenses, State Licenses and
other Permits that have been issued to Celutel and each Subsidiary (other than
those listed on Schedule 3.1), which represent all federal, state or local
Permits necessary for Celutel and each Subsidiary to provide Cellular Service in
the MSAs and to otherwise own or lease and operate its properties and to conduct
its business as now conducted. Except as disclosed in Schedule 3.18, the present
use by Celutel and each Subsidiary of its properties and the conduct of its
business do not violate any Permits. Except as disclosed in Schedule 3.18, all
such Permits are in full force and effect, have been legally and validly issued,
and will continue in full force and effect after the Closing Date without the
consent, approval or act of, or the making of any filing with, any Governmental
Entity or other party, subject to the receipt of the approval and the completion
of the filings described in Sections 6.1(a) and (c) and 8.3 hereof,
respectively. Except as disclosed on Schedule 3.18, neither Celutel nor any
Subsidiary is in default under the terms of any such Permit and neither Celutel
nor any Subsidiary has received written notice of any default thereunder. None
of the Governmental Entities that have issued the Permits has notified Celutel
or any Subsidiary in writing of its intent to modify, revoke, terminate or fail
to renew any such Permit now or in the future, and, to Celutel's best knowledge,
no such action has been threatened.
(b) Without limiting the generality of paragraph (a) above, except as
disclosed on Schedule 3.18 each Cellular Entity is the sole holder of the FCC
cellular frequency block "A" operating license ("Operating License") for the
respective MSA in which it provides Cellular Service and holds such Operating
License free and clear of all Encumbrances. The cellular base stations owned by
and licensed to the Cellular Entities provide, in each instance, 32 Dbu contour
coverage to the entire area of each
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respective MSA, except for the unserved areas identified on the 32 Dbu contour
maps of the Cellular Entities previously delivered by Celutel to Century, all of
which are true, complete and accurate in all material respects ("Unserved
Areas"). Except as disclosed on Schedule 3.18, Celutel or the appropriate
Cellular Entity has filed all unserved area applications and taken all such
other steps that are necessary to participate in the FCC lotteries to be held
for the purpose of granting licenses to serve Unserved Areas in excess of 50
square miles. The expiration of the five-year "fill-in" period specified in 47
C.F.R. 22.903 will occur on June 5, 1994 for the Pascagoula MSA.
(c) Except as disclosed in Schedule 3.18, Celutel or the applicable
Cellular Entity has duly and timely filed all applications, reports or other
instruments and taken all other actions that are necessary to secure the
Cellular Entities' enjoyment to the fullest extent permitted by law of all
rights as a provider of Cellular Service in the MSA's, including without
limitation duly and timely filing with the FCC all applications necessary to
construct and operate cellular base station facilities in the MSAs ("Base
Station Applications"). Each cellular base station facility operated by the
Cellular Entities has been constructed in all material respects in accordance
with the Base Station Applications. The FCC has not notified Celutel or any
Subsidiary of its intent to revoke or transfer to another operator any Operating
License upon the expiration of its initial ten-year term, and, to Celutel's best
knowledge, no such action has been threatened.
(d) Celutel has previously delivered to Century true, correct and complete
copies of the tariffs containing, to the extent included therein, service
regulations, rates and charges for radio common carrier services applicable on
the date hereof, together with all FCC records and applicable state
certifications. No action to change, alter, rescind or make obsolete any of such
tariffs, rates or charges is pending or, to Celutel's best knowledge, is
threatened or under consideration other than Proceedings in the ordinary course
of business and those of general applicability to the cellular industry.
(e) As of July 31, 1993 the Cellular Entities had, and as of the Closing
Date the Cellular Entities will have, an aggregate of at least 22,267 active
cellular customers, in each case excluding those customers whose accounts have
not been paid in full prior to the 90th day following the date of the respective
invoices for services rendered.
3.19 Absence of Undisclosed Liabilities. Neither Celutel nor any of the
Subsidiaries has any outstanding claims, liabilities or obligations of any
nature, whether accrued, unaccrued, absolute, contingent, asserted, unasserted,
matured, unmatured, known, unknown or otherwise, other than (i) those reflected
in the Balance Sheet (including any footnotes thereto), (ii) those that arise
out of any matter specifically disclosed in any other Section of or Schedule to
this Article 3, (iii) those that have arisen in the ordinary course of business
since July 31, 1993 and (iv) those that, either individually or in the
aggregate, would not reasonably be expected to result in a Material Adverse
Effect with respect to any Cellular Entity.
3.20 Compliance With Laws. Without limiting the scope of any representation
or warranty made in this Article 3 concerning compliance with laws, Celutel and
the Subsidiaries are and during the last three years have been in compliance in
all material respects with the Communications Act and all other Applicable Laws,
except as disclosed on Schedules 3.18, 3.20 and 3.29. At no time during the last
three years has Celutel or any of the Subsidiaries been notified orally or in
writing by any Governmental Entity that it has been the subject of any federal,
state or local criminal investigation, or that it has materially violated any
Applicable Law (including those described in other Sections of this Article 3).
3.21 Employee Benefit Plans. (a) Schedule 3.21 contains a true, correct and
complete list of each Employee Benefit Plan of Celutel and the Subsidiaries.
Prior to the date hereof, Celutel and the Principal Stockholders have delivered
to Century correct and complete copies of all relevant documents pertaining to
the Employee Benefit Plans of Celutel and the Subsidiaries, including (i) the
plan documents and related trusts and summary plan descriptions, (ii) the most
recent determination letters received from the IRS, (iii) all Form 5500 annual
reports filed with respect to plan years after 1987,
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(iv) all filings pursuant to Labor Regulations 2520.104-23 with respect to plan
years after 1987, and (v) any related insurance contracts with respect to the
plans.
(b) With respect to the Employee Benefit Plans, except as set forth on
Schedule 3.21:
(i) Each such plan and each related trust or insurance contract is in
material compliance with all applicable provisions of ERISA and the Code;
(ii) Each Employee Benefit Plan listed on Schedule 3.21 that is
intended to be, or normally would be, qualified under Section 401(a) of the
Code is so qualified in form and operation, and each trust forming a part
thereof is exempt from tax pursuant to Section 501(a) of the Code;
(iii) All contributions due and owing for each Employee Benefit Plan
for the plan year most recently ended and for all prior years have been
made or reserved for;
(iv) There are no accumulated funding deficiencies as defined in
Section 412 of the Code (whether or not waived) with respect to any
Employee Benefit Plan. Neither Celutel nor any Subsidiary, nor any
affiliate thereof, has incurred any material liability under Title IV of
ERISA arising in connection with the termination of, or a complete or
partial withdrawal from, any Employee Benefit Plan covered or previously
covered by Title IV of ERISA. Celutel and the Subsidiaries, and all
affiliates thereof, have paid and discharged promptly when due all
liabilities and obligations with respect to any Employee Benefit Plan
arising under ERISA or the Code of a character which if unpaid or
unperformed could reasonably be expected to result in the imposition of an
Encumbrance against any of the assets of Celutel, any Subsidiary, or any
affiliate thereof;
(v) Nothing done or omitted to be done and no transaction or holding
of any asset under or in connection with any Employee Benefit Plan has or
will cause, directly or indirectly, Celutel or any Subsidiary, or any
affiliate thereof, to incur any liability under Title I of ERISA or any
liability for any tax pursuant to Section 4975 of the Code;
(vi) Neither Celutel, any Subsidiary, nor any affiliate thereof has
ever maintained or contributed to a Multiemployer Plan or to an Employee
Benefit Plan subject to Title IV of ERISA or subject to the minimum funding
standards of ERISA and the Code, and none of the Employee Benefit Plans is
a plan to which more than one employer makes contributions, within the
meaning of Sections 4063 and 4064 of ERISA;
(vii) Except as set forth on Schedule 3.21 neither Celutel, any
Subsidiary, nor any affiliate thereof, has ever maintained or contributed
to or been required to contribute to any Employee Welfare Benefit Plan
providing medical, health, or life insurance or other welfare type benefits
for current or future retired or terminated employees, their spouses, or
their dependent other than in accordance with Section 4980B of the Code;
(viii) All required reports and descriptions, including Form 5500
annual reports, summary annual reports, summary plan descriptions, and
reports required by Labor Department Regulation Section 2520.104-23 have
been filed or distributed appropriately with respect to the Employee
Benefit Plans. The requirements of Part 6 of Subtitle B of Title I of ERISA
and of Section 4980B of the Code have been met with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit Plan; and
(ix) No reportable event, as such term is defined in Section 4043(B)
of ERISA, has occurred with respect to any of such Plans which are subject
to Section 4043(B) or ERISA other than those which might arise solely as a
result of the transactions contemplated by this Agreement.
(c) For purposes of this Section only, an "affiliate" of a Person means any
other Person which, together with such Person, would be treated as a single
employer under Section 414 of the Code, provided that in no event will CIVC be
considered an affiliate of Celutel for purposes of this Section and no member of
CIVC's control group (as defined in Section 414 of the Code) shall be considered
an affiliate of Celutel, other than Celutel and its Subsidiaries.
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3.22 Investment Company Act. Celutel is not an "investment company" as
defined under the Investment Company Act of 1940, as amended, and the
regulations promulgated thereunder.
3.23 Remuneration, Severance Pay, and Other Benefits. (a) Schedule 3.23
sets forth a true, correct and complete list of each of the officers and
directors of Celutel and each Subsidiary. Celutel has delivered to Century a
true, correct and complete list of each employee of Celutel and each Subsidiary,
together with a list of the total cash compensation paid to each such person for
1992 (showing bonuses separately), along with the current wages or annualized
salary of each such person for 1993.
(b) Schedule 3.23 sets forth a true, complete and correct list of (i) each
director, officer or employee of Celutel or any Subsidiary who, as a result of
any of the transactions described in this Agreement, is or will become entitled
to receive any amount (whether in cash, property, securities or otherwise) under
any employment, severance, change in control, or termination Contract, or under
any other compensation arrangement or Employee Benefit Plan, and (ii) the amount
to which each such person is or will become so entitled. Except as set forth on
Schedule 3.23 and except as otherwise provided in Section 8.4, neither Celutel
nor any Subsidiary has or will have any payment or other obligation to any
current or former director, officer, employee or Affiliate of Celutel or any
Subsidiary by virtue of the transactions described in this Agreement, and
neither the consummation of the transactions contemplated hereunder nor the
occurrence of any event thereafter will increase, or accelerate the time of
payment or vesting of, any amounts payable to any current or former director,
officer, employee or Affiliate of Celutel or any Subsidiary under any Employee
Benefit Plan or otherwise.
3.24 Labor Relations. Neither Celutel nor any Subsidiary has engaged in any
Unfair Labor Practice and there are no Unfair Labor Practice charges or similar
grievances pending or, to Celutel's best knowledge, threatened in writing
against Celutel or any Subsidiary before the National Labor Relations Board or
otherwise. There are no pending or, to Celutel's best knowledge, threatened
grievances against Celutel or any Subsidiary by the Communications Workers of
America labor union or any other labor union, and there are no labor slowdowns,
picketing, stoppages or similar disturbances pending or, to Celutel's best
knowledge, threatened in writing against Celutel or any Subsidiary.
3.25 Product Liability Claims; Product Warranties. There are no product
liability claims pending or, to Celutel's best knowledge, threatened against
Celutel or any Subsidiary. Except as set forth in the form of customer service
agreement utilized by each of the Cellular Entities (which are identical except
for the name and address of each such entity printed thereon), a true, correct
and complete copy of which is attached hereto as Exhibit C, Celutel and the
Subsidiaries have not given or offered any warranty covering any class or group
of products or services sold or distributed by Celutel or any Subsidiary.
3.26 Environmental Matters. (a) Celutel and each Subsidiary possess all
Permits that are required under federal, state and local laws and regulations
relating to pollution or the protection of the environment, including all laws
and regulations governing the generation, use, collection, treatment, storage,
transportation, recovery, removal, discharge or disposal of all hazardous
substances or wastes, as such laws and regulations are constituted on the date
hereof (collectively, "Environmental Laws"), except for Permits the failure of
which to possess would not reasonably be expected to result in a Material
Adverse Effect with respect to any Cellular Entity. Celutel and each Subsidiary
are in compliance with all Environmental Laws, including all laws and
regulations imposing record-keeping, maintenance, testing, storage,
transportation, use, generation, collection, treatment, recovery, removal,
discharge, disposal, inspection, registration, notification and reporting
requirements with respect to such hazardous substances, hazardous wastes or any
other materials, except for any failures to comply that would not reasonably be
expected to result in a Material Adverse Effect with respect to any Cellular
Entity. For purposes of this Section 3.26, "hazardous substances" and "hazardous
wastes" are materials defined as "hazardous substances", "hazardous wastes," or
"hazardous constituents" in (i) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C.
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Sections 9601-9675, as amended by the Superfund Amendments and Reauthorization
Act of 1986, and any amendments thereto and regulations thereunder, all as
constituted on the date hereof, (ii) the Resource Conservation and Recovery Act
of 1976, 42 U.S.C. Sections 6901-6992, as amended by the Hazardous and Solid
Waste Amendments of 1984, and any amendments thereto and regulations thereunder,
all as constituted on the date hereof, or (iii) any other Environmental Law,
including, without limitation, those that specifically regulate the use of
gasoline, diesel fuel or other petroleum hydrocarbons.
(b) Neither Celutel nor any Subsidiary is subject to any Proceedings
pursuant to, nor has received any written notice of any violations of, any
Environmental Law since January 1, 1990.
(c) At no time has either Celutel or any Subsidiary caused hazardous wastes
or hazardous substances (or any asbestos, poly-chlorinated biphenyls, urea
formaldehyde, fuel oil or other petroleum compounds) to be treated, stored,
disposed of, released, discharged or deposited on, under or at premises owned,
occupied, or operated by Celutel or any Subsidiary, which materials require
clean-up, removal, response, remediation or other obligations of or by Celutel
or any Subsidiary under any Environmental Law, the cost of which to complete
would reasonably be expected to have a Material Adverse Effect with respect to
any Cellular Entity.
(d) There are no disposal sites for hazardous substances or hazardous
wastes located on or under the real estate owned by Celutel or any Subsidiary
or, to Celutel's best knowledge, operated by Celutel or any Subsidiary, and
neither Celutel nor any Subsidiary has disposed of any hazardous substances or
hazardous wastes on or under the real estate owned or operated by Celutel or any
Subsidiary. Neither Celutel nor any Subsidiary has ever disposed of any
hazardous substances or hazardous wastes off-site, or retained any Person to
handle, transport or dispose of any hazardous substances or hazardous wastes
either on-site or off-site.
3.27 Bank Accounts; Powers of Attorney. Schedule 3.27 hereto contains a
correct and complete list of all (i) accounts or deposits of Celutel and each
Subsidiary with banks or other financial institutions and a description of the
nature and purpose of such account or deposit, (ii) safe deposit boxes of
Celutel and each Subsidiary, (iii) persons authorized to sign or otherwise act
with respect to Celutel or any Subsidiary, and (iv) powers of attorney for
Celutel and each of the Subsidiaries.
3.28 Taxes. Except as otherwise set forth in Schedule 3.28:
(a) Each Tax Return required to be filed by or with respect to Celutel
or any Subsidiary has been properly completed and timely filed. As of the
time of filing, each such Tax Return correctly reflected the facts
regarding the income, business, assets, operations, activities, status or
other matters of Celutel and the Subsidiaries or any other information
required to be shown thereon. No extension of time within which to file any
Tax Return has been filed, requested or granted.
(b) All Taxes owed by either Celutel or any Subsidiary (whether or not
shown on any Tax Return) have been paid in full. Since January 1, 1990, no
written claim has been made by an authority in a jurisdiction where either
Celutel or any Subsidiary does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no Encumbrances on any
of the assets of Celutel or the Subsidiaries that arose in connection with
any failure (or alleged failure) to pay any Tax when due. The unpaid Taxes
of Celutel and of each Subsidiary (i) do not, as of July 31, 1993, exceed
the reserve for Tax liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set
forth on the face of the Balance Sheet (rather than in any notes thereto)
and (ii) do not exceed that reserve as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of
each of Celutel and the Subsidiaries in filing their Tax Returns. Celutel
and each Subsidiary have withheld from their employees (and timely paid to
the appropriate Governmental Entity) proper and accurate amounts for all
periods in compliance with all Tax withholding provisions of Applicable
Laws
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(including income, social security and employment Tax withholding for all
forms of compensation subject thereto).
(c) No audit, examination, investigation or other Proceeding is
presently being conducted or threatened by the IRS or any other taxing
authority; no Tax deficiencies or additional liabilities of any sort have
been proposed by any Governmental Entity or representative thereof against
either Celutel or any Subsidiary; and no agreement for extensions of time
for assessment of any amounts of Tax has been entered into by Celutel or
any Subsidiary. Schedule 3.28 lists all federal, state, and local income
Tax Returns filed with respect to Celutel or any Subsidiary for taxable
periods ended on or after April 30, 1990, indicates those Tax Returns that
have been audited, and indicates those Tax Returns that currently are the
subject of audit. Celutel has delivered true, correct and complete copies
of each Tax Return listed on Schedule 3.28.
(d) No deferred gains or losses allocable to Celutel or any Subsidiary
will be recognized by virtue of consummating the Merger.
(e) Neither Celutel nor any Subsidiary is a party to any tax
allocation, tax indemnity, tax payment or tax sharing Contract.
(f) Neither Celutel nor any Subsidiary (i) has been a member of an
affiliated group filing a consolidated federal income Tax Return (other
than a group, the common parent of which was Celutel) or (ii) has any
liability for the Taxes of any Person (other than either Celutel or any
Subsidiary) 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.
3.29 Securities Laws. (a) Except as disclosed on Schedule 3.29, Celutel has
duly and timely filed all Exchange Act Reports required to be filed by it since
April 30, 1989. As of their respective dates, the Celutel Exchange Act Reports
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations of the SEC promulgated thereunder applicable to such
reports, and none of the Celutel Exchange Act Reports contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(b) Since January 1, 1988, neither Celutel nor any Subsidiary has offered
or sold securities in violation of the Securities Act or the regulations
promulgated thereunder. All such offers or sales of securities have been
registered under the Securities Act or were exempt from the registration
requirements thereof. Schedule 3.29 sets forth a true and complete list of each
offer or sales of securities made by each Cellular Entity since January 1, 1988,
the gross proceeds thereof, and a list of each Disclosure Statement filed with
the SEC or distributed to offerees in connection therewith. Without limiting the
generality of the foregoing, no Disclosure Statement prepared or distributed by
Celutel or any of the Subsidiaries included, as of its respective issuance date,
any untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The proceeds of each offering made
by Celutel or any Subsidiary have been used in the manner described in the
Disclosure Statement prepared and distributed in connection with such offering,
and there was a valid corporate purpose for each such offering.
(c) None of the information furnished in writing or to be furnished in
writing to Century by Celutel or the Principal Stockholders, or any Affiliate,
officer, employee or representative thereof, specifically for use in the Proxy
Statement will contain, as of the date of the Proxy Statement, the date of the
Stockholders Meeting or the Closing Date, any untrue statement of a material
fact or will 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 under which they were made, not misleading.
(d) There are no "affiliates" of Celutel (within the meaning of such term
as used in Rule 145(c) promulgated under the Securities Act) who hold shares of
Celutel Stock, other than the Principal
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Stockholders, the Senior Officers, the Scarpa Family Trust, Avy H. Stein, John
R. Willis and Douglas Dittrick, each of whom may be deemed to be an "affiliate"
of Celutel (within such meaning).
3.30 Intellectual Property. (a) Schedule 3.30 sets forth a true, correct
and complete list of all (i) trademarks, service marks, trade dress, trade names
and corporate names and registrations and applications for registration thereof,
(ii) patents, patent applications, patent disclosures and inventions,
(iii) copyrights and registrations and applications for registration thereof,
and (iv) computer software, data and documentation (collectively, "Intellectual
Property") that is owned, used or licensed (as licensor or licensee) by Celutel
or any Subsidiary. Schedule 3.30 indicates, for all Intellectual Property set
forth thereon, which such property is owned by Celutel or any Subsidiary and
which is owned by other Persons, and separately lists each Contract pursuant to
which Celutel or any Subsidiary has granted, or been granted, any licenses and
other similar rights with respect to any Intellectual Property, together with a
short description of the subject matter on such licenses. Celutel and each
Subsidiary own all right, title and interest in and to, or have the right to use
pursuant to a valid and binding license agreement, all Intellectual Property
specified on Schedule 3.30, which is the only Intellectual Property necessary to
operate the businesses of such entity as presently conducted and in accordance
with past practices. No loss or expiration of any Intellectual Property is
pending or, to Celutel's best knowledge, reasonably foreseeable other than
expirations by operation of law. Celutel and the Subsidiaries have taken all
necessary and desirable actions in their reasonable discretion to maintain and
protect the Intellectual Property that they own and use. Celutel has no
knowledge that the owners of any Intellectual Property licensed to Celutel or
any Subsidiary have not taken all necessary and desirable actions to maintain
and protect the Intellectual Property which is subject to such license.
(b) Since January 1, 1990, Celutel has not received written notice of a
claim of any Person pertaining to the Intellectual Property or the rights of
Celutel and the Subsidiaries thereunder, and no Proceedings are pending or, to
Celutel's best knowledge, threatened that challenge the rights of Celutel or any
Subsidiary in respect thereof or that claim that any other Person is infringing
upon such Intellectual Property, and none of the Intellectual Property or, as
the case may be, the rights granted to Celutel or any Subsidiary in respect
thereof, infringes on the rights of any Person or, to Celutel's best knowledge,
is being infringed upon by any Person, and none is subject to any outstanding
order, decree, judgment, stipulation, injunction, restriction or agreement
restricting the scope of the use by Celutel or any Subsidiary.
(c) Since January 1, 1990, neither Celutel nor any Subsidiary has made use
of any Intellectual Property other than the rights under the Intellectual
Property listed on Schedule 3.30.
3.31 Interests in Customers and Suppliers. Except as set forth in the
Celutel Exchange Act Reports, neither Celutel, any Subsidiary or the Principal
Stockholders, nor any officers, directors or Affiliates thereof, possess any
direct or indirect material financial interest in, or is a director or officer
of, any Person who has a material relationship with Celutel or any Subsidiary,
as a customer, supplier, agent, advisor, consultant, representative, lessor,
lessee, lender, licensor, or competitor.
3.32 Inventories. The inventories of Celutel and the Subsidiaries are (i)
not known to be obsolete, (ii) in good, merchantable and useable condition,
(iii) reflected in the Balance Sheet in accordance with GAAP, (iv) reflected in
the books and records of Celutel and the Subsidiaries at the lower of cost or
market value and (v) in quantities that are not excessive, and are adequate in
light of present circumstances.
3.33 No Finder; Opinion of Financial Advisor. (a) Neither Celutel nor any
Subsidiary has paid or become obligated, or will upon Closing become obligated,
to pay any fee or commission to any broker, finder or intermediary for or on
account of the transactions contemplated hereby, other than payments to Lazard
Freres & Co. and Daniels & Associates of fees and expenses in the amounts
estimated on Schedule 3.33, which shall be paid by Celutel and for which neither
Century nor Sub shall have any liability with respect thereto.
(b) The Board of Directors of Celutel has received the opinion of Lazard
Freres & Co. to the effect that the Merger Consideration to be paid to the
Public Stockholders (other than, if applicable, Century and its Affiliates) is
fair, from a financial point of view, to such stockholders.
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ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
OF THE PRINCIPAL STOCKHOLDERS
4.1 Representations and Warranties of CIVC. CIVC hereby makes the following
representations and warranties to Century and Sub as of the date hereof:
(a) CIVC has full corporate power and authority to execute and deliver
this Agreement and each Closing Instrument to be executed and delivered by
it and, subject to the adoption of this Agreement by the stockholders of
Celutel in accordance with the DGCL and Celutel's Organizational Documents,
to perform its obligations hereunder and under such Closing Instruments.
The execution, delivery and performance by CIVC of this Agreement and each
Closing Instrument to be executed and delivered by it have been duly
authorized by CIVC's Board of Directors and no other corporate proceedings
are necessary to authorize CIVC's execution, delivery or performance of
this Agreement or such Closing Instruments.
(b) This Agreement has been duly executed and delivered by CIVC and
constitutes, and each Closing Instrument, when executed and delivered by
CIVC, will be duly executed and delivered by CIVC and will constitute, a
valid and legally binding obligation of CIVC, enforceable against CIVC in
accordance with its respective terms, except that such enforceability may
be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium, and similar laws affecting creditors' rights generally and (ii)
equitable principles that may limit the availability of certain equitable
remedies (such as specific performance) in certain instances.
(c) Assuming the stockholders of Celutel duly adopt this Agreement at
the Stockholders Meeting, the execution, delivery, and performance by CIVC
of this Agreement and each Closing Instrument to be executed and delivered
by CIVC does not and will not (i) conflict with or result in a violation of
any provision of the Organizational Documents of CIVC, (ii) conflict with
or result in a violation of any provisions of, or constitute (with or
without the giving of notice or the passage of time or both) a default
under, or give rise (with or without the giving of notice or the passage of
time or both) to any right of termination, cancellation, or acceleration
under, any bond, debenture, note, mortgage, indenture, lease, Contract, or
other instrument or obligation to which CIVC is a party or by which CIVC or
any of its properties may be bound, (iii) result in the creation or
imposition of any Encumbrance upon the properties of CIVC, or (iv) assuming
compliance with the matters referred to in Sections 6.1 through 6.3,
violate any Applicable Law (including any state takeover or similar law or
regulation) binding upon CIVC, except for, in the case of clauses (ii),
(iii) and (iv), any such conflicts, violations, defaults, rights or
Encumbrances that individually or in the aggregate would not materially
impair the ability of CIVC to perform its obligations hereunder (including
its obligations under Article 10) or prevent the consummation of the
transactions contemplated hereunder.
(d) No consent, notice, approval, order, or authorization of, or
declaration, filing, or registration with, any Governmental Entity is
required to be obtained or made by CIVC in connection with its execution,
delivery or performance of this Agreement or its consummation of the
transactions contemplated hereby, other than as contemplated hereunder,
except for consents, notices, approvals, orders, authorizations,
declarations, filings and registrations the failure of which to obtain or
make would not individually or in the aggregate materially impair the
ability of CIVC to perform its obligations hereunder (including its
obligations under Article 10) or prevent the consummation of the
transactions contemplated hereunder.
(e) There are no Proceedings or, to CIVC's best knowledge, Threatened
Proceedings asserted against CIVC that, individually or in the aggregate,
could reasonably be expected to (i) impair in any material respect the
ability of CIVC to perform its obligations under this Agreement or
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(ii) prevent the consummation of any of the transactions described in this
Agreement, nor is there any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator having, or which will have, any such
effect.
(f) CIVC is neither a party to nor is bound by (i) any stockholder
agreement, voting trust, proxy or similar arrangement restricting or
governing CIVC's rights to vote or dispose of its shares of Celutel Stock,
other than the Stockholders Agreement dated May 14, 1991 to be terminated
in accordance with Section 7.2(t), (ii) any loan or advance to Celutel or
any Subsidiary or any Contract relating to the making of any such loan or
advance, (iii) any loan, commitment or Contract obligating CIVC to repay
any amounts to Celutel or any Subsidiary, or (iv) any guarantee or other
contingent liability in respect of any Indebtedness or any other debt,
liability or obligation of Celutel or any Subsidiary.
(g) Except as set forth in the Celutel Exchange Act Reports, neither
CIVC nor any "associate" (as such term is defined by Rule 405 promulgated
under the Securities Act) of CIVC (i) holds any Options with respect to the
capital stock of Celutel or any Subsidiary, (ii) has any material interest
in any Contract or property (real or personal), tangible or intangible,
used in or pertaining to the business of Celutel or any Subsidiary, or
(iii) since January 1, 1990, has otherwise had any relationship or entered
into any transaction or series of transactions with Celutel or any
Subsidiary, in each case that was required to be disclosed under Item 404
of Regulation S-K promulgated by the SEC.
4.2 Representations and Warranties of Scarpa. Scarpa hereby makes the
following representations and warranties to Century and Sub as of the date
hereof:
(a) Scarpa has the full legal right, power, capacity and authority to
execute, deliver and perform this Agreement and all Closing Instruments to
be executed and delivered by him hereunder, in each case without the
consent or joinder of any other Person.
(b) This Agreement has been duly executed and delivered by Scarpa and
constitutes, and each Closing Instrument, when executed and delivered by
Scarpa, will be duly executed and delivered by Scarpa and will constitute,
a valid and legally binding obligation of Scarpa, enforceable against
Scarpa in accordance with its respective terms, except that such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws affecting creditors' rights
generally and (ii) equitable principles that may limit the availability of
certain equitable remedies (such as specific performance) in certain
instances.
(c) Assuming the stockholders of Celutel duly adopt this Agreement at
the Stockholders Meeting, the execution, delivery, and performance by
Scarpa of this Agreement and each Closing Instrument to be executed and
delivered by Scarpa does not and will not (i) conflict with or result in a
violation of any provisions of, or constitute (with or without the giving
of notice or the passage of time or both) a default under, or give rise
(with or without the giving of notice or the passage of time or both) to
any right of termination, cancellation, or acceleration under, any bond,
debenture, note, mortgage, indenture, lease, Contract, or other instrument
or obligation to which Scarpa is a party or by which Scarpa or any of his
properties may be bound, (ii) result in the creation of imposition of any
Encumbrance upon the properties of Scarpa or (iii) assuming compliance with
the matters referred to in Section 6.1 through 6.3, violate any Applicable
Law (including any state takeover or similar law or regulation) binding
upon Scarpa, in each case except for any such conflicts, violations,
defaults, rights or Encumbrances that individually or in the aggregate
would not materially impair the ability of Scarpa to perform his
obligations hereunder (including his obligations under Article 10) or
prevent the consummation of the transactions contemplated hereunder.
(d) No consent, notice, approval, order, or authorization of, or
declaration, filing, or registration with, any Governmental Entity is
required to be obtained or made by Scarpa in connection
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with his execution, delivery or performance of this Agreement or his
consummation of the transactions contemplated hereby, other than as
contemplated hereunder, except for consents, notices, approvals, orders,
authorizations, declarations, filings and registrations the failure of
which to obtain or make individually or in the aggregate would not
materially impair the ability of Scarpa to perform his obligations
hereunder (including his obligations under Article 10) or prevent the
consummation of the transactions contemplated hereunder.
(e) There are no Proceedings or, to Scarpa's best knowledge,
Threatened Proceedings asserted against Scarpa that, individually or in the
aggregate, could reasonably be expected to (i) impair in any material
respect the ability of Scarpa to perform his obligations under this
Agreement or (ii) prevent the consummation of any of the transactions
described in this Agreement, nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator having, or which
will have, any such effect.
(f) Scarpa is neither a party to nor is bound by (i) any stockholder
agreement, voting trust, proxy or similar arrangement restricting or
governing Scarpa's rights to vote or dispose of his shares of Celutel
Stock, other than the Stockholders Agreement dated May 14, 1991 to be
terminated in accordance with Section 7.2(t), (ii) any loan or advance to
Celutel or any Subsidiary or any Contract relating to the making of any
such loan or advance, (iii) any loan, commitment or Contract obligating
Scarpa to repay any amounts to Celutel or any Subsidiary, or (iv) any
guarantee or other contingent liability in respect of any Indebtedness or
any other debt, liability or obligation of Celutel or any Subsidiary.
(g) Except as set forth in the Celutel Exchange Act Reports, neither
Scarpa nor any "associate" (as such term is defined by Rule 405 promulgated
under the Securities Act) of Scarpa (i) holds any Options with respect to
the capital stock of Celutel or any Subsidiary, (ii) has any material
interest in any Contract or property (real or personal), tangible or
intangible, used in or pertaining to the business of Celutel or any
Subsidiary, (iii) since January 1, 1990, has otherwise had any relationship
or entered into any transaction or series of transactions with Celutel or
any Subsidiary that was required to be disclosed under Item 404 of
Regulation S-K promulgated by the SEC, or (iv) beneficially owns any
capital stock or partnership interests in any Cellular Entity.
(h) All information set forth on Schedule 3.23 relating to Scarpa is
true, correct and complete. Scarpa hereby confirms that he has made a final
and irrevocable determination regarding the amounts payable to each Senior
Officer under the stay bonus plan adopted by the Board of Directors of
Celutel on March 5, 1992, as set forth on Schedule 3.23.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF CENTURY
Century and Sub hereby make the following representations and warranties to
Celutel and its stockholders as of the date hereof:
5.1 Organization of Century. Century is a corporation duly organized,
validly existing and in good standing under the laws of the State of Louisiana
and has full corporate power and authority to carry on the business in which it
is engaged and to own, lease and operate its properties. Century and its
subsidiaries have qualified and are authorized to do business and are in good
standing as foreign corporations in each jurisdiction in which the character or
location of its properties or the nature of its activities makes such
qualification necessary, except where the failure to so qualify would not have a
Material Adverse Effect with respect to Century.
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5.2 Organization of Sub. Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Sub has
not engaged in any business or incurred any liabilities since it was
incorporated, except as contemplated by this Agreement.
5.3 Authorization. Each of Century and Sub has full corporate power and
authority to execute and deliver this Agreement and each Closing Instrument to
be executed and delivered by it and to consummate the transactions contemplated
hereby. The execution, delivery and performance by each of Century and Sub of
this Agreement and each Closing Instrument to be executed and delivered by it
have been duly authorized by the respective Boards of Directors of Century and
Sub (or a duly authorized committee thereof) and by Century, in its capacity as
sole stockholder of Sub, and no other corporate proceedings on the part of
Century or Sub are necessary to authorize the execution, delivery and
performance by them of this Agreement or any such Closing Instrument. This
Agreement has been duly executed and delivered by Century and Sub and
constitutes, and each Closing Instrument, when executed and delivered by
Century, will be duly executed and delivered by Century and will constitute, a
valid and legally binding obligation of Century and Sub enforceable against them
in accordance with their respective terms, except that such enforceability may
be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights generally and (ii) equitable
principles that may limit the availability of certain equitable remedies (such
as specific performance) in certain instances.
5.4 Capital Stock. Century has authorized capital consisting of (i)
100,000,000 shares of Century Common Stock, of which 51,261,965 shares (and
associated rights) are issued and outstanding, and (ii) 2,000,000 shares of
Preferred Stock, $25.00 par value per share, of which 4,260 shares of Preferred
Stock, Series A, and 13,902 shares of Preferred Stock, Series H, are issued and
outstanding. All issued and outstanding shares of capital stock of Century have
been duly authorized and validly issued, and are fully paid, nonassessable and
free of any preemptive or similar rights. Except as described in the Century
Exchange Act Reports, Century is not subject to any outstanding Options. Except
as indicated above or in the Century Exchange Act Reports, there are no equity
equivalents in, interests in the ownership or earnings of, or other similar
rights binding upon Century. The Century Common Stock to be delivered pursuant
to Article 2, when issued and delivered in accordance with the terms hereof,
will be duly authorized, validly issued, fully paid, nonassessable, and free of
any preemptive or similar rights. The authorized capital stock of Sub consists
of 1,000 shares of common stock, $.01 par value per share, of which 100 shares
are outstanding and held directly by Century.
5.5 No Finder. Neither Century, Sub nor any party acting on behalf of
Century or Sub has paid or become obligated, or will upon Closing become
obligated, to pay any fee or commission to any broker, finder or intermediary
for or on account of the transactions contemplated herein.
5.6 Registration Statement. The Registration Statement will, when filed,
comply as to form in all material respects with the Securities Act and all
regulations promulgated thereunder. The Registration Statement, as of the time
it becomes effective, the date of the Stockholders Meeting and the Closing Date,
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements contained therein, in light of the circumstances under which they are
made, not misleading. The representations and warranties contained in this
Section 5.6 shall not apply to statements or omissions in the Registration
Statement based upon information furnished in writing to Century by Celutel, the
Reselling Stockholders, or any representative or Affiliate thereof, specifically
for use in the Registration Statement.
5.7 Securities Laws. (a) Century has duly and timely filed all Exchange Act
Reports required to be filed by it since January 1, 1989. As of their respective
dates, the Century Exchange Act Reports complied in all material respects with
the requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to such reports, and none of the Century
Exchange Act Reports contained any untrue statement of a material fact or
omitted to state a material
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fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) Since January 1, 1988, neither Century nor any of its subsidiaries has
offered or sold securities in violation of the Securities Act or the regulations
promulgated thereunder. All such offers or sales of securities have been
registered under the Securities Act or were exempt from the registration
requirements thereof.
5.8 Financial Statements. The consolidated balance sheets, statements of
income, statements of stockholders' equity or statements of cash flows, whether
audited or unaudited, included in Century's annual report on Form 10-K for the
fiscal year ended December 31, 1992 filed with the SEC and in any quarterly
reports on Form 10-Q subsequently filed with the SEC ("Century Financial
Statements") (i) reflect only actual bona fide transactions, (ii) have been
prepared from the books and records of Century in accordance with GAAP and (iii)
fairly present in all material respects Century's consolidated financial
position as of the respective dates thereof in accordance with GAAP and its
consolidated results of operations and cash flows for the periods then ended in
accordance with GAAP, except, in the case of unaudited financial statements
included therein, as otherwise permitted by Rule 10-01 of Regulation S-X
promulgated by the SEC. All unaudited interim financial statements included
among the Century Financial Statements reflect all adjustments (which include
only normal recurring adjustments made in conformity with GAAP) that are
necessary for a fair statement of the consolidated results of operations of
Century and its subsidiaries for the periods presented therein.
5.9 Absence of Diluting Events. Century did not effect any Diluting Event
between August 18, 1993 and the date of this Agreement. As of the Effective
Time, no Diluting Event shall have occurred after the date of this Agreement,
other than any Diluting Events as to which Celutel and Century shall have
mutually determined lawful, appropriate, equitable and adequate adjustments
under Section 2.10.
5.10 Conflicts. (a) The execution, delivery, and performance by Century of
this Agreement and each Closing Instrument to be executed and delivered by
Century does not and will not (i) conflict with or result in a violation of any
provision of the Organizational Documents of Century, (ii) conflict with or
result in a violation of any provision of, or constitute (with or without the
giving of notice or the passage of time or both) a default under, or give rise
(with or without the giving of notice or the passage of time or both) to any
right of termination, cancellation, or acceleration under, any bond, debenture,
note, mortgage, indenture, lease, Contract, or other instrument or obligation to
which Century is a party or by which Century or any of its properties may be
bound, (iii) result in the creation or imposition of any Encumbrance upon the
properties of Century or (iv) assuming compliance with the matters referred to
in Sections 6.1 through 6.3, violate any Applicable Law (including any state
takeover or similar law or regulation) binding upon Century, except for, in the
case of clauses (ii) and (iii), any such conflicts, violations, defaults, rights
or Encumbrances that individually or in the aggregate would not materially
interfere, interrupt, or detract from the ability of Century to conduct its
business, impair the ability of Century to perform its obligations hereunder, or
prevent the consummation of the transactions contemplated hereunder.
(b) No consent, notice, approval, order, or authorization of, or
declaration, filing, or registration with, any Governmental Entity is required
to be obtained or made by Century in connection with the execution, delivery or
performance by Century of this Agreement or their consummation of the
transactions contemplated hereby, other than (i) the filing by the Surviving
Corporation of the Certificate of Merger with the Delaware Secretary of State in
accordance with the DGCL or (ii) as contemplated by Sections 6.1 through 6.3.
5.11 Organizational Documents. Century has delivered (or will within 10
days hereof deliver) to Celutel true, correct and complete copies of each
Organizational Document governing Century, as certified by the Secretary of
State of Louisiana or Century's secretary, as appropriate.
5.12 Compliance with Laws. Century and its subsidiaries are and during the
last three years have been in compliance in all material respects with all
Applicable Laws.
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ARTICLE 6.
PRE-CLOSING COVENANTS
The parties covenant to take the following actions between the date hereof
and the Effective Time:
6.1 Governmental Approvals. (a) The parties hereto shall cooperate in good
faith and take all actions necessary or appropriate to expeditiously and
diligently prosecute to a favorable conclusion the joint applications filed on
August 31, 1993 on FCC Form 490 seeking the FCC's approval of the change in
control of each FCC License listed on Schedule 3.18 and shall use their
reasonable best efforts to retain the authority previously granted by the FCC to
effect the change in control pursuant to the Century Purchase Agreement of each
FCC License held by the Gulf Coast Cellular Entities.
(b) The parties hereto shall cooperate in good faith and take all actions
necessary or appropriate to expeditiously and diligently prosecute to a
favorable conclusion the HSR Notifications filed in connection herewith on
October 1, 1993 with the FTC and the DOJ pursuant to the HSR Act.
(c) The parties hereto shall cooperate in good faith and take all actions
necessary or appropriate to expeditiously and diligently prosecute to a
favorable conclusion the joint petition seeking the approval of the MPSC to the
Merger filed on September 20, 1993, and shall use their reasonable best efforts
to retain the authority previously granted by the MPSC to effect the change in
control pursuant to the Century Purchase Agreement of each State License held by
the Gulf Coast Cellular Entities.
(d) Each party agrees to promptly provide the other parties with copies of
all written communications, letters, reports or other documents delivered to or
received from Governmental Entities in connection with the filings contemplated
by this Section, and copies of any written memorandum relating to discussions
with such Governmental Entities with respect to such filings.
6.2 Registration Statement and Proxy Statement; Stockholders Meeting;
Comfort Letter. (a) As promptly as practicable after the date hereof, Century
shall prepare and file with the SEC the Registration Statement on Form S-4 to
register (i) the issuance and sale of Century Common Stock to be issued under
Article 2 hereof (the "Initial Sale") and (ii) the resale (the "Resales") by the
Non-Public Stockholders (the "Reselling Stockholders"), at any time prior to the
second anniversary of the Closing Date, of the Century Common Stock to be
acquired by such stockholders hereunder (the "Acquired Shares") so as to enable
each Reselling Stockholder to freely sell its Acquired Shares (subject to such
stockholder complying with its obligations under Section 8.1(b) hereof and the
affiliates agreement to be executed by it pursuant to Section 7.2(q)). Century
agrees that the Registration Statement, when declared effective under the
Securities Act and as of the date of the Stockholders Meeting and the Closing
Date, shall, subject to Celutel's compliance with paragraph (b), contain all
information required under the Securities Act and the regulations promulgated
thereunder to register the Initial Sale and, subject to its receipt of
information relating to the Reselling Stockholders pursuant to Item 507 of
Regulation S-K and to any updating of information under Section 8.1 hereof,
shall contain all such information required under such act and such regulations
to register the Resales. Century shall use its reasonable best efforts to have
the Registration Statement declared effective under the Securities Act as
promptly as practicable after the filing thereof.
(b) As promptly as practicable after the date hereof, Celutel shall
prepare, and as promptly as practicable after the effectiveness of the
Registration Statement, Celutel shall mail to its stockholders, the Proxy
Statement with respect to the Stockholders Meeting. Celutel agrees that the
Proxy Statement, as of the date of the Proxy Statement, the date of the
Stockholders Meeting and the Closing Date, shall contain (i) all information
required under Regulation 14A promulgated under the Exchange Act (subject to
Century's obligations to provide information relating to Century and its
Affiliates), (ii) the fairness opinion referred to in Section 7.1(f) and (iii)
subject to its rights to make a Fiduciary Determination, the recommendation of
Celutel's Board of Directors that stockholders of Celutel vote in favor of the
adoption of this Agreement.
(c) Prior to filing the Registration Statement, Proxy Statement or any
related materials, or any amendment or supplement thereto, the parties hereto
shall exchange drafts of all such documents
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proposed to be filed and permit the other parties (and any Persons who may be
deemed to be underwriters or controlling persons thereof) the opportunity to
comment thereon and participate in the preparation of the Registration Statement
and Proxy Statement. Century shall notify Celutel promptly of the receipt of any
comments on, or any requests for amendments or supplements to, the Registration
Statement or the Proxy Statement by the SEC, and Century shall supply Celutel
with copies of all correspondence between it and its representatives, on the one
hand, and the SEC or members of its staff, on the other, with respect to the
Registration Statement or the Proxy Statement. Century, after consultation with
Celutel, shall use its reasonable best efforts to respond promptly to any
comments made by the SEC with respect to the Registration Statement, and
Celutel, after consultation with Century, shall use its reasonable best efforts
to respond promptly to any comments made by the SEC with respect to the Proxy
Statement. Century agrees promptly to correct or supplement any information
relating to Century or its subsidiaries contained in the Registration Statement
if and to the extent that such information shall have become false or misleading
in any material respect. Each of Celutel and the Principal Stockholders agrees
promptly to correct or supplement any information provided by it in writing
specifically for use in the Registration Statement if and to the extent that
such information shall have become false or misleading in any material respect,
and further agree to use their reasonable best efforts to (i) cause each
Reselling Stockholder that is not a party hereto to provide all information
relating to such stockholder required pursuant to Item 507 of Regulation S-K and
(ii) promptly correct or supplement any such information provided by such
stockholder in writing specifically for use in the Registration Statement if and
to the extent that such information shall have become false or misleading in any
material respect. Century further agrees to take all steps necessary to cause
the Registration Statement as so corrected to be filed with the SEC, as and to
the extent required by the Securities Act and the regulations promulgated
thereunder, and Celutel further agrees to take all steps necessary to cause the
Proxy Statement as so corrected to be filed with the SEC and to be disseminated
to holders of shares of Celutel Stock, in each case as and to the extent
required by the Exchange Act and the regulations promulgated thereunder.
(d) Celutel shall take all action necessary in accordance with the DGCL and
its Organizational Documents to duly call, give notice of, convene and hold the
Stockholders Meeting as promptly as practicable after the date on which the
Registration Statement shall be declared effective (subject to all notice
requirements of the DGCL, Celutel's Organizational Documents and Instruction
A(2) to Form S-4 of the SEC) to consider and vote upon the adoption of this
Agreement. Unless between the date hereof and the date of the Stockholders
Meeting there shall have been a Material Adverse Change with respect to Century,
each of CIVC and Scarpa shall vote in favor of this Agreement at the
Stockholders Meeting, and shall cause each of its Affiliates that it controls
who hold voting rights with respect to the Celutel Stock to similarly vote in
favor of this Agreement.
(e) Celutel shall use its reasonable best efforts to cause to be delivered
to Century a letter of its independent public accountants, dated within two
business days before the date on which the Registration Statement shall become
effective and addressed to Century, in form and substance reasonably
satisfactory to Century and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement.
(f) Century shall use its reasonable best efforts to register or qualify
the Initial Sale under any applicable securities or "blue sky" laws, provided,
however, that Century will not be required to (i) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this subparagraph or (ii) subject itself to taxation in any such
jurisdiction. Within 30 days of the date hereof, Celutel shall furnish or cause
its transfer agent to furnish a list of all jurisdictions in which the
stockholders of Celutel reside of record.
6.3 Stock Exchange Filings. (a) Century shall use its reasonable best
efforts to list on the NYSE, subject to official notice of issuance, the shares
of Century Common Stock to be issued to the stockholders of Celutel pursuant to
this Agreement, effective on or before the Closing Date.
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(b) Celutel shall use its reasonable best efforts to file all notices and
take all such other actions as may be required to delist the Celutel Common
Stock from the American Stock Exchange as of or prior to the Effective Time.
6.4 Third Party Consents. Celutel shall use its reasonable best efforts to
obtain the Required Consents and each party hereto shall use its reasonable best
efforts to obtain any other necessary and appropriate consents, approvals,
orders, authorizations, filings and registrations from Persons other than
Governmental Entities that are necessary to enable Century, Sub, Celutel and the
Principal Stockholders to effect the Merger as contemplated by this Agreement
and to otherwise consummate the transactions contemplated hereby.
6.5 Cooperation and Best Efforts. Each party shall cooperate with each
other party hereto and use its reasonable best efforts to (i) satisfy all
requirements prescribed by Applicable Law or the Permits for, and all conditions
set forth in this Agreement to, the consummation of the Merger and (ii) effect
the Merger in accordance with this Agreement at the earliest practicable date.
6.6 Investigation of Business of Celutel and the Cellular
Entities. (a) Celutel and the Principal Stockholders shall afford, and shall
cause the Subsidiaries to afford, to the officers, employees and authorized
representatives of Century and Sub (including their independent public
accountants, environmental consultants and attorneys) complete access during
normal business hours to (i) the offices, operations, properties, customers,
suppliers, lenders, lessors, licensors, auditors and business and financial
records (including computer files, retrieval programs and similar documentation,
and including all Permits and all FCC, MPSC and TPUC records) of Celutel and the
Subsidiaries, (ii) the business and financial records of CIVC pertaining to
Celutel and the Subsidiaries and (iii) the respective employees of Celutel, the
Subsidiaries and CIVC, in each case to the extent Century or Sub shall deem
necessary or desirable, and shall furnish to Century, Sub or their respective
authorized representatives such additional information concerning the respective
operations, properties and business of Celutel and the Subsidiaries as shall be
reasonably requested, including all such information as shall be necessary to
enable Century, Sub or their authorized representatives to verify the accuracy
of the representations and warranties contained in Article 3, to verify the
accuracy of any financial statements of Celutel or any Subsidiary and to
determine whether the conditions set forth in Article 7 have been satisfied.
Notwithstanding anything to the contrary herein, Century and Sub agree that (i)
such investigation shall be conducted in such manner as not to interfere
unreasonably with the operation of the businesses of Celutel or any of the
Subsidiaries and (ii) if the delivery of copies of any documents or other
information hereunder would cause a waiver of any attorney-client privilege,
Century shall be entitled to receive such copies only upon its execution and
delivery of a reasonably satisfactory confidentiality and common interests
agreement. No investigation made by Century, Sub or their respective authorized
representatives hereunder shall affect the representations and warranties of
Celutel and the Principal Stockholders hereunder, subject to Section 10.4(c).
(b) Century and Sub shall hold, and will cause their Affiliates, employees,
officers, directors, agents and representatives to hold, any non-public and
proprietary information obtained in connection with its review in accordance
with paragraph (a) in the strictest secrecy and confidence (unless such
information thereafter becomes generally available to the public through no
fault of any of them, is otherwise available to them on a non-confidential basis
from another source, or has been developed independently by them without
violating any of their obligations hereunder). Century and Sub shall use, and
cause their Affiliates to use, all such information solely for the purpose of
consummating the transactions contemplated by this Agreement pursuant to the
terms of this Agreement. In the event the transactions contemplated by this
Agreement are not consummated for any reason pursuant to the terms of this
Agreement, Century and Sub shall return, and cause their Affiliates to return,
any copies or summaries of all such information in their possession, and shall
destroy, or cause their Affiliates to destroy, all copies of any notes,
analyses, compilations, studies, calculations or other documents prepared by it
or for its internal use that include or are derived from the non-public and
proprietary information provided hereunder, provided, however, that neither
Century nor Sub shall have any obligations under this sentence with respect to
any information pertaining to the Gulf Coast Cellular
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Entities and related Subsidiaries obtained in connection with consummating the
Century Purchase Agreement, all of which shall be held subject to the terms of
such agreement.
(c) If and to the extent necessary for the preparation of the fairness
opinion specified in Section 7.1(f), Century shall afford to Celutel's financial
advisors complete access during normal business hours to the executive officers
of Century, provided that such advisors first execute a confidentiality
agreement satisfactory to Century and its counsel and conduct such investigation
in a manner as not to interfere unreasonably with the schedules of Century's
executive officers.
6.7 Preserve Accuracy of Representations and Warranties; Notification of
Changes. (a) Celutel shall not, and shall cause its Affiliates that it controls
not to, commit or omit to do any act that could reasonably be expected to result
in a Material Adverse Effect with respect to any Cellular Entity and each of
Celutel and the Principal Stockholders shall not, and shall cause their
respective Affiliates that they control not to, commit or omit to do any act
that (i) would cause a breach of any agreement, commitment or covenant made by
it in this Agreement or (ii) would cause any representation or warranty made by
it in this Agreement (including, with respect to Celutel, the representations
and warranties made by it in Section 3.10) to become untrue, as if each such
representation and warranty were continuously made from and after the date
hereof. Each of Celutel and the Principal Stockholders shall promptly notify
Century in writing of (i) any event or condition (including any Proceeding or
Threatened Proceeding) that could adversely affect its ability to perform any of
its agreements, commitments or covenants contained herein and (ii) any event or
condition (including any Proceeding or Threatened Proceeding) that causes any
representation or warranty made by it in this Agreement to become untrue, as if
each such representation and warranty were continuously made from and after the
date hereof, and Celutel shall promptly notify Century in writing (i) of any
event or condition (including any Proceeding or Threatened Proceeding) that
could reasonably be expected to result in a Material Adverse Effect with respect
to any Cellular Entity or (ii) if it or any of its representatives discovers any
facts during the course of its due diligence review that causes Celutel to
believe that any of the representations and warranties made by Century are not
correct in all material respects.
(b) Century and Sub shall not, and shall cause their respective Affiliates
not to, commit or omit to do any act that (i) could reasonably be expected to
result in a Material Adverse Effect with respect to Century, (ii) would cause a
breach of any agreement, commitment or covenant of Century or Sub contained in
this Agreement or (iii) would cause the representations and warranties of
Century or Sub contained in this Agreement to become untrue, as if each such
representation and warranty were continuously made from and after the date
hereof. Century shall promptly notify Celutel in writing (i) of any event or
condition (including any Proceeding or Threatened Proceeding) that could
adversely affect the ability of Century or Sub to perform any of their
respective agreements, commitments or covenants contained herein, (ii) of any
event or condition (including any Proceeding or Threatened Proceeding) that
causes any representation or warranty of Century or Sub contained in this
Agreement to become untrue, as if each such representation and warranty were
continuously made from and after the date hereof, (iii) of any event or
condition (including any Proceeding or Threatened Proceeding) that could
reasonably be expected to result in a Material Adverse Effect with respect to
Century, or (iv) if it or any of its representatives discovers any facts during
the course of its due diligence review that causes Century to believe that any
of the representations and warranties made by Celutel or the Principal
Stockholders are not correct in all material respects.
(c) The delivery of any notice pursuant to this Section shall not be deemed
to (i) modify the representations or warranties contained herein, (ii) modify
the conditions set forth in Article 7, or (iii) limit or otherwise affect the
remedies of the parties available hereunder, provided, however, that if the
Closing shall occur, then all matters disclosed pursuant to this Section at or
prior to the Closing shall be deemed to be waived and no party shall be entitled
to make a claim thereon pursuant to the terms of this Agreement.
(d) Each party hereto agrees that, with respect to the representations and
warranties of such party contained in this Agreement, such party shall have the
continuing obligation until the Closing to supplement or amend promptly the
Schedules hereto with respect to any matter hereafter arising or
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discovered that, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules or in a new
Schedule. For all purposes of this Agreement, including without limitation for
purposes of determining whether the conditions set forth in Article 7 have been
fulfilled, the Schedules hereto shall be deemed to include only that information
contained therein on the date of this Agreement and shall be deemed to exclude
all information contained in any supplement or amendment thereto, provided,
however, that if the Closing shall occur, then all matters disclosed pursuant to
any such supplement or amendment or other notice at or prior to the Closing
shall be deemed to be waived and deemed included as part of the Schedules, and
no party shall be entitled to make a claim thereon pursuant to the terms of this
Agreement.
6.8 Conduct and Preservation of Business. (a) Except as otherwise
contemplated hereby, Celutel shall, and shall cause each Subsidiary to, (i)
conduct its operations according to its ordinary course of business consistent
with past practice and in compliance with all Applicable Laws and Permits, (ii)
use its reasonable best efforts to preserve, maintain and protect its
properties, and (iii) use its reasonable best efforts to preserve its business
organization, to maintain each Permit, to keep available the services of its
officers and employees and to maintain its existing relationships with partners,
suppliers, contractors, customers, lessors, lessees, lenders, licensors, agents
and others having business relationships with it. Without limiting the
generality of the foregoing, Celutel shall, and shall cause the Subsidiaries to,
(i) continue to market and advertise their respective services and products in
accordance with past practices, (ii) use its reasonable best efforts to
expeditiously and diligently resolve all Proceedings, Threatened Proceedings and
other claims (including each of those described in the Schedules) as soon as
reasonably practicable, provided that it consults with Century prior to settling
any such matter, (iii) construct all cell sites currently under construction in
accordance with sound business practices and (iv) otherwise make all capital
improvements in accordance with the Budgets.
(b) Except as otherwise contemplated hereby, Century shall, and shall cause
each of its subsidiaries to, conduct its operations according to its ordinary
course of business consistent with past practice, use its reasonable best
efforts to preserve, maintain and protect its properties, and use its reasonable
best efforts to preserve intact its business organization, to keep available the
services of its officers and employees and to maintain its existing business
relationships.
6.9 Acquisition Proposals. For a period commencing on the execution date
hereof and ending on the earlier of the termination of this Agreement or the
Closing, except to the extent that the Board of Directors of Celutel makes a
Fiduciary Determination (i) Celutel agrees that it shall not, and shall cause
each of the Subsidiaries 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 Proposal,
and Celutel will 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, Celutel, any
Subsidiary, Scarpa, CIVC or any of their respective Affiliates, and shall
instruct the directors, officers, employees, representatives, financial advisors
and agents of Celutel and the Subsidiaries to refrain from doing any of the
above, and (ii) each of Scarpa and CIVC agrees that it shall not, and shall
cause each of its Affiliates that it controls 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 Proposal, and each will 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,
Celutel, any Subsidiary, Scarpa, CIVC or any of their respective Affiliates, and
CIVC shall instruct its directors, officers, employees, representatives,
financial advisors, agents and Affiliates that it controls to refrain from doing
any of the above. Each of Celutel and the Principal Stockholders shall, and
shall cause its respective financial advisors and Affiliates that it controls
to, immediately cease and terminate any existing or prior existing activities,
discussions, or negotiations with any Persons conducted heretofore with respect
to any Acquisition Proposal and shall promptly request each such Person who has
heretofore entered into a confidentiality agreement in connection with an
Acquisition Proposal to return to Celutel all confidential information
heretofore furnished to such Person by or on behalf of Celutel or any
Subsidiary.
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Subject to Section 9.2(b), nothing herein shall prohibit or restrict the Board
of Directors of Celutel, CIVC or Scarpa from taking any action otherwise
prohibited by this Section 6.9 to the extent the Board of Directors of Celutel
makes a Fiduciary Determination.
6.10 Exchange of Information. For a period commencing on the execution date
hereof and ending on the earlier of the termination of this Agreement or the
Closing, (i) Century shall promptly deliver to Celutel, and Celutel shall
promptly deliver to Century, a copy of each of their respective Exchange Act
Reports filed by them with the SEC, (ii) Celutel shall deliver to Century,
within five days after they are prepared, true and complete copies of all
monthly consolidated financial statements of Celutel prepared in the ordinary
course, and (iii) Celutel shall cause each Cellular Entity to deliver to
Century, within five days after they are prepared, true and complete copies of
all monthly financial statements of such entity prepared in the ordinary course.
6.11 Public Announcements. Century and Sub on the one hand, and Celutel and
the Principal Stockholders, on the other, shall consult with each other before
issuing, and provide each other with a reasonable opportunity to review and
comment upon, any press release or other public statement with respect to this
Agreement or the transactions contemplated hereby, and shall not issue any such
press release or public statement prior to such consultation except where, in
the reasonable judgment of the disclosing party upon the advice of outside
counsel, disclosure is otherwise required by Applicable Law, court or regulatory
process or obligations pursuant to any listing agreement with any national
securities exchange, provided, however, that in such event the disclosing party
uses its reasonable best efforts to provide the other parties with a reasonable
opportunity to review and comment upon such disclosure before it is made.
6.12 Performance of Sub. Century shall cause Sub to comply with all of its
obligations hereunder and, subject to the terms and conditions hereof, to
consummate the Merger as contemplated herein.
6.13 Acknowledgement, Release and Waiver of Rights Under Celutel
Certificate of Designation. The Principal Stockholders agree that, at the
Closing, they will duly execute and deliver to Century a release and
acknowledgement in the form attached hereto as Exhibit E.
6.14 Settlement of Warrants. (a) Prior to the date the Proxy Statement is
delivered to Celutel's Stockholders, Scarpa shall have settled, or agreed in
writing to settle, each issued and outstanding Warrant held by him by either (i)
exercising such Warrant, (ii) selling such Warrant to Celutel in exchange for
such number of shares of Celutel Common Stock as is determined by dividing the
value of such Warrant, as determined by the Board of Directors, by the per share
value of the Celutel Common Stock, as determined by the average per share
closing price of such stock on the American Stock Exchange for such period
selected by the Board of Directors, or (iii) waiving all rights under such
Warrant pursuant to a written termination instrument.
(b) Prior to the date the Proxy Statement is delivered to Celutel's
Stockholders, Celutel shall use its reasonable best efforts to settle each
issued and outstanding Warrant held by Forrest L. Metz by (i) causing Mr. Metz
to sell, or agree to sell, such Warrant to Celutel in exchange for a cash
payment equal to the value of such Warrant, as determined by the Board of
Directors, or (ii) any of the other means specified in paragraph (a) above.
6.15 Billing Services. Celutel and Scarpa shall take all actions necessary
to duly amend the billing services agreements dated January 2, 1992 between
Celltech Cellular Information System, Inc. ("CCIS") and each of Jackson, Biloxi
and McAllen to provide that the price specified in each of these three
agreements may not be increased and that each of these three agreements will be
terminable on the earlier of (i) the first anniversary of the Closing Date, (ii)
the receipt by Century or any of its Affiliates of a notice from CCIS to the
effect that CCIS intends to upgrade its software in a manner that would
interfere materially with the production of Century's bills, convert its
software to alternate uses or otherwise discontinue providing billing services
in a manner substantially similar to past practices, or (iii) CCIS' failure for
two consecutive months to provide accurate bill production turnaround within six
days of its receipt of switch tapes, excluding any failures caused by events not
within the control of CCIS, it being understood and acknowledged by all parties
hereto that each of Jackson, Biloxi and
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McAllen will be obligated under such amendments to make payments of up to
$525,000 in the aggregate in exchange therefor.
6.16 Construction of Cellular Facilities; FCC Actions. (a) Prior to the
Closing Date, Celutel shall cause Pascagoula to (i) construct, in accordance
with the terms and conditions of the Construction Contract dated April 20, 1993
by and among Century Cellunet, Inc., Biloxi and Pascagoula, an additional
cellular base station at or near Wade, Mississippi, which cellular base station,
together with other cellular base stations owned by and licensed to Pascagoula,
shall provide 32 Dbu contour coverage to the entire area of the Pascagoula MSA
except for such coverage gaps that are less than 50 square miles, and (ii) file
with the FCC an FCC Form 489 notification to report that such cellular base
station has been constructed and placed into commercial service.
(b) Prior to the Closing Date, Celutel shall cooperate with Century in
determining the advisability of filing Phase II unserved area applications with
the FCC under 47 C.F.R. 22.924 or seeking waivers of the application of such
rule to areas unserved by the Cellular Entities.
6.17 Issuer Tender Offers. During the ten trading days immediately
preceding the third trading day prior to the Closing Date, Century shall refrain
from announcing or consummating any open market purchase of Century Common Stock
or any issuer tender offer, provided, however, that nothing herein shall prevent
or restrict the trustee of Century's qualified employee benefit plans from
making open market purchases of Century Common Stock in the ordinary course
consistent with past practice.
6.18 Additional Purchases. (a) If between the date hereof and the Closing
Date Celutel or any Subsidiary proposes to effect any Additional Purchases,
Celutel shall, or shall cause the appropriate Subsidiary to, (i) disclose in
writing to the seller the transactions contemplated hereunder, all in form and
substance reasonably satisfactory to Century and its counsel, (ii) provide
Century and its counsel with a reasonable opportunity to review and comment upon
drafts of the agreement that Celutel or its Subsidiary proposes to enter into
and (iii) refrain from making any untrue statement of a material fact or to omit
to state a material fact necessary in order to make the statements made, in
light of the circumstances under which they were made, not misleading. Without
the prior written consent of Century, Celutel will not, and will cause the
Subsidiaries not to, enter into any agreement to acquire any equity interest in
any Person other than the Cellular Entities.
(b) Within five business days of the consummation of any Additional
Purchase, Celutel shall notify Century of the aggregate amount of consideration
paid by Celutel or any Subsidiary in connection therewith.
6.19 Securities Offerings. Notwithstanding any other provision of Section
6.8(a) or any other Section hereof, Celutel shall not, and shall cause its
Subsidiaries not to, commence or consummate, without the prior written consent
of Century, any offering of securities (within the meaning of the Securities Act
and the regulations promulgated thereunder) to any Person, including any
offering by a Cellular Entity to its existing shareholders or partners, whether
pursuant to a capital call, rights offering or otherwise.
6.20 Prepayment. If and to the extent that Century elects to prepay any
Indebtedness on the Closing Date, Celutel shall cooperate and assist in
connection with obtaining all required prepayment letters and in taking all
other steps as may be necessary to effect such prepayment and to release any
Encumbrances arising thereunder.
6.21 Corporate Structure. Upon Century's reasonable request, Celutel agrees
to consult with Century regarding the feasibility and advisability of
simplifying the corporate structure of Celutel and its Subsidiaries through
short-form mergers or other means.
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ARTICLE 7.
CONDITIONS TO CLOSING
7.1 Conditions Applicable to All Parties. The obligations of Celutel,
Century, and Sub to effect the Merger are subject to the satisfaction (or
written waiver by Century and Celutel) on or prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been duly adopted
at the Stockholders Meeting by the affirmative vote of the holders of a
majority of the outstanding voting power of Celutel.
(b) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and shall not be subject to any
stop order or Proceedings seeking a stop order.
(c) NYSE Listing. The Century Common Stock to be issued in connection
with the Merger shall have been approved for listing, upon notice of
issuance, by the NYSE.
(d) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger or any of the other transactions described
in this Agreement shall be in effect, provided, however, that any party
asserting the foregoing as a condition to its obligation to consummate the
Merger shall have used its reasonable best efforts to prevent the entry of
any such injunction or order and to appeal as promptly as possible any such
injunction or order.
(e) No Litigation. There shall not be pending any Proceeding by any
Governmental Entity or any other Person before any court or other
Governmental Entity that has a reasonable likelihood of success, seeking to
restrain, enjoin, prohibit or otherwise make illegal the consummation of
the Merger or any of the other transactions contemplated by this Agreement.
(f) Fairness Opinion. The Board of Directors of Celutel shall have
received a written opinion of Lazard Freres & Co., dated the date of the
Proxy Statement, to the effect that the Merger Consideration to be received
by the Public Stockholders is fair, from a financial point of view, to such
stockholders.
(g) LC Escrow Agreement. An LC Escrow Agreement, containing terms and
conditions substantially similar to those contemplated hereunder, shall
have been duly executed and delivered by the Stockholders' Representative
and the LC Escrow Agent.
7.2 Additional Conditions Applicable to Obligations of Century and Sub. The
obligations of Century and Sub to effect the Merger are further subject to the
satisfaction (or written waiver by Century) on or prior to the Closing Date of
the following conditions:
(a) Representations and Warranties. The representations and warranties
of Celutel and the Principal Stockholders set forth in this Agreement shall
be true and correct in all material respects on and as of the Closing Date
as though made on and as of such date, except for changes specifically
contemplated and permitted by this Agreement.
(b) No Material Adverse Change. Between the date hereof and the
Closing, there shall have been no Material Adverse Change with respect to
any Cellular Entity.
(c) Performance of Obligations. Celutel and the Principal Stockholders
shall have performed in all material respects all obligations required to
be performed by Celutel and the Principal Stockholders, respectively, under
this Agreement at or prior to the Closing Date.
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(d) Officers' Certificate. Celutel shall have duly executed and
delivered to Century a certificate, dated the Closing Date, representing
and certifying, in such detail as Century may reasonably request, that (i)
the conditions set forth in this Section 7.2 have been fulfilled and that
neither Celutel nor the Principal Stockholders are in breach of this
Agreement and (ii) all information set forth in the Calculation Certificate
delivered by Celutel under Section 2.8(a) (excluding any good faith
estimate of Working Capital included therein) was true and complete on the
date thereof and remains true and complete as of the Effective Time.
(e) Opinions of Counsel. Century shall have received favorable
opinions, each dated the Closing Date and in form and substance
satisfactory to Century and its counsel, of (i) Kirkland & Ellis, FCC
counsel to Celutel and the Cellular Entities, to the effects set forth in
Exhibit D-1, (ii) an opinion of Kirkland & Ellis, counsel to CIVC, to the
effects set forth in Exhibit D-2, (iii) an opinion of Piper & Marbury,
counsel to Scarpa, to the effects set forth in Exhibit D-3, (iv) an opinion
of Kirkland & Ellis, co-counsel to Celutel (or Morris, Nichols, Arsht &
Tunnell or any other local counsel acceptable to Century in its sole
discretion), to the effects set forth in Exhibit D-4 and (v) an opinion of
William S. Clarke, P.A., co-counsel to Celutel, to the effects set forth in
Exhibit D-5. To the extent any of the foregoing opinions concern the laws
of any jurisdiction other than those in which the counsel issuing the
opinion is licensed to practice, such counsel may rely upon the opinion of
legal counsel, who shall be reasonably satisfactory to Century and its
counsel, licensed to practice in such other jurisdiction. Any opinion
relied upon by such counsel, which shall be in form and substance
satisfactory to Century and its counsel, shall be delivered together with
the opinion of such counsel, which shall state that such counsel believes
that its reliance thereon is justified.
(f) Corporate Action. Celutel shall have 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 the Board of Directors and stockholders of Celutel approving
this Agreement and such resolutions shall be in form and substance
reasonably satisfactory to counsel for Century.
(g) Necessary Governmental Approvals. The parties shall have (i)
received final and nonappealable orders in full force and effect from the
FCC approving the change in control of each FCC License listed on Schedule
3.18 and each other transaction contemplated hereby, (ii) received
confirmation or notice that all waiting periods under the HSR Act with
respect to the Merger shall have terminated or expired, with no outstanding
requests for additional information to be supplied in connection with the
HSR Notifications and no outstanding notice from either the FTC or DOJ that
further action will be taken by either of them with respect to the Merger,
(iii) received the approval of the MPSC of the change in control of each
State License listed on Schedule 3.18 and (iv) received the approval,
consent or authorization of, or completed any filings or notifications
with, any other Governmental Entity that are required by law to consummate
the transactions contemplated hereby or are necessary to prevent a Material
Adverse Effect with respect to any Cellular Entity, and the terms of all
such orders, consents, approvals or authorizations of the FCC, MPSC or any
other Governmental Entity shall permit the Merger to be consummated without
imposing any material adverse conditions with respect thereto or upon the
operations of any of the Cellular Entities.
(h) Necessary Third-Party Consents. Celutel shall have received all
the Required Consents and all other consents, in form and substance
reasonably satisfactory to Century and its counsel, to the transactions
contemplated hereby from all parties to all Contracts, notes, bonds,
debentures, mortgages, indentures and other instruments or obligations to
which Celutel or any Subsidiary is a party or by which it is affected and
which requires such consent prior to the Effective Time or are necessary to
prevent the occurrence of a Material Adverse Effect with respect to any
Cellular Entity.
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(i) Good Standing Certificates. Celutel shall have delivered to
Century (i) a long-form certificate from the Delaware Secretary of State to
the effect that Celutel and each Cellular Entity incorporated under the
laws of Delaware is in good standing in Delaware and has paid all franchise
taxes due under the laws of Delaware and (ii) a similar certificate from
the Secretary of State of Nevada to the effect that McAllen is in good
standing and has paid all franchise taxes, and all such certificates shall
be dated within ten days of the Closing.
(j) Appraisal Rights. Immediately prior to the Effective Time, the
aggregate Pro Rata Share Equivalent Interest held by all holders of
Dissenting Shares shall not exceed 5%.
(k) Settlement of Warrants. Each Warrant shall have been irrevocably
settled in full in the manner specified in Section 6.14, and Century shall
have received each cancelled Warrant and true and complete copies of all
notices, purchase forms, sales agreements, termination agreements or other
instruments that were executed and delivered by either the holder of the
Warrant or Celutel in connection with such settlement, all of which shall
be acceptable in form and substance to Century and its counsel.
(1) Letter of Credit. The Letter of Credit contemplated by Section
10.2 shall have been duly executed and delivered to Century, and shall
contain the terms and conditions specified in Section 10.2 and shall
otherwise be acceptable to Century in its sole discretion.
(m) Headquarters Leases. Pursuant to a duly executed and delivered
sublease agreement or similar instrument in form and substance reasonably
satisfactory to Century, Scarpa shall have assumed the obligation to pay
not less than 25% of the aggregate rent owed under the Headquarters Leases
through the respective termination dates thereof, and shall have obtained
all lessor consents, in form and substance satisfactory to Century,
necessary to effect such transactions.
(n) Billing Service Agreements. Each billing service agreement
specified in Section 6.15 shall have been duly amended in the manner
specified therein, and Century shall have received true and complete copies
of all instruments effecting such amendments, each of which shall be
reasonably acceptable in form and substance to Century and its counsel.
(o) Escrow Agreement. An Escrow Agreement, containing terms and
conditions substantially similar to those contemplated by Section 10.2,
shall have been duly executed and delivered by the Stockholders'
Representative and the Escrow Agent.
(p) Releases. Each Non-Public Stockholder shall have duly executed and
delivered to Century a release and acknowledgement in the form attached
hereto as Exhibit E.
(q) Affiliates Agreement and Other Instruments. Each Person who may be
deemed an "affiliate" of Celutel (within the meaning of such term as used
in Rule 145(c) promulgated under the Securities Act) and who holds shares
of Celutel Stock shall have duly executed and delivered to Century an
affiliates agreement in the form attached hereto as Exhibit F and each
Reselling Stockholder (other than the Principal Stockholders) shall have
duly executed and delivered a joinder or similar instrument pursuant to
which it agrees to be bound by the provisions of Section 8.1(b) hereof, all
of which shall be reasonably acceptable in form and substance to Century
and its counsel.
(r) Resignations. Century shall have received letters from each
director and officer of Celutel and each Corporate Subsidiary, pursuant to
which each such person shall (i) resign from all positions held with
Celutel or any Corporate Subsidiary effective as of or prior to the Closing
Date and (ii) release Celutel and its Subsidiaries from all claims against
it or its assets, whether arising under contract, the securities law, tort
law, equitable principles or otherwise, and whether arising out of such
person's association with Celutel or any Subsidiary as an officer,
director,
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employee or otherwise (except for claims pursuant to the indemnification
agreements and obligations described in Section 8.5).
(s) Termination of Scarpa Employment Agreement. An agreement
terminating the Scarpa Employment Agreement shall have been duly executed
and delivered by Scarpa and Celutel in the form attached hereto as Exhibit
G.
(t) Termination of Recapitalization Agreements. CIVC, the CIVC
Coinvestors and Celutel shall have duly executed and delivered to Century a
termination agreement, in form and substance reasonably satisfactory to
Century and its counsel, pursuant to which each party thereto agrees to
terminate, and to relinquish all rights and interests arising under, each
of the following agreements among such parties: (i) the Purchase Agreement,
dated December 28, 1990, as amended, (ii) the Registration Agreement, dated
May 14, 1991, including any amendments thereto, and (iii) the Stockholders
Agreement, dated May 14, 1991, including any amendments thereto, provided,
however, that nothing in such termination agreement shall require CIVC to
waive any indemnification rights against Celutel arising under such
Purchase Agreement that relate to breaches of Celutel's representations and
warranties concerning Celutel's compliance with Environmental Laws (as of
the dates made) or to breaches of Celutel's covenants concerning its
compliance with Environmental Laws (between May 14, 1991 and the Closing
Date).
(u) Celutel Minute Books and Miscellaneous Documents. Century shall
have received all minute books and stock record books relating to Celutel
and each Subsidiary, and copies of any other documents that Century may
reasonably request.
7.3 Additional Conditions Applicable to Obligations of Celutel. The
obligation of Celutel to effect the Merger is further subject to the
satisfaction (or written waiver by Celutel) on or prior to the Closing Date of
the following conditions:
(a) Representations and Warranties. The representations and warranties
of Century and Sub set forth in this Agreement shall be true and correct in
all material respects on and as of the Closing Date as though made on and
as of such date, except for changes specifically contemplated and permitted
by this Agreement.
(b) No Material Adverse Change. Between the date of the Stockholders
Meeting and the Closing, there shall have been no Material Adverse Change
with respect to Century.
(c) Performance of Obligations of Century and Sub. Century and Sub
shall have performed in all material respects all obligations required to
be performed by them under this Agreement at or prior to the Closing Date.
(d) Certificate. Century shall have duly executed and delivered to the
Principal Stockholders a certificate, dated the Closing Date, representing
and certifying, in such detail as the Principal Stockholders may reasonably
request, that the conditions set forth in this Section 7.3 have been
fulfilled and neither Century nor Sub is in breach of this Agreement.
(e) Opinion of Counsel. Celutel shall have received an opinion dated
the Closing Date of Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
special counsel to Century and Sub, substantially to the effect of Exhibit
H.
(f) Corporate Action. Century shall have taken all corporate action
necessary to approve the transactions contemplated by this Agreement, and
there shall have been furnished to Celutel certified copies of resolutions
adopted by the Board of Directors of Century approving this Agreement and
the Merger, and copies of resolutions adopted by Century, in its capacity
as sole stockholder of Sub, adopting this Agreement, and such resolutions
shall be in form and substance reasonably satisfactory to counsel for
Celutel.
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(g) Necessary Governmental Approvals. The parties shall have (i)
received orders in full force and effect from the FCC approving the change
in control of each FCC License listed on Schedule 3.18 and each other
transaction contemplated hereby, (ii) received confirmation or notice that
all waiting periods under the HSR Act with respect to the Merger shall have
terminated or expired, with no outstanding requests for additional
information to be supplied in connection with the HSR Notifications and no
outstanding notice from either the FTC or DOJ that further action will be
taken by either of them with respect to the Merger, (iii) received the
approval of the MPSC of the change in control of each State License listed
on Schedule 3.18 and (iv) received the approval, consent or authorization
of, or completed any filings or notifications with, any other Governmental
Entity that are required by law to consummate the transactions contemplated
hereby or are necessary to prevent a Material Adverse Effect with respect
to Century, and the terms of all such orders, consents, approvals or
authorizations of the FCC, MPSC or any other Governmental Entity shall
permit the Merger to be consummated without imposing any material adverse
conditions with respect thereto or upon the operations of Century.
(h) Consents. Century shall have received all consents, in form and
substance satisfactory to Celutel and its counsel, to the transactions
contemplated hereby from all parties to all contracts, notes, bonds,
debentures, mortgages, indentures and other instruments or obligations to
which Century or any of its subsidiaries is a party or by which it is
affected and which require such consent prior to the Effective Time.
(i) Good Standing Certificates. Each of Century and Sub shall have
delivered to Celutel certificates, dated within ten days of the Closing,
from the Secretary of State of Louisiana to the effect that Century is in
good standing in Louisiana and from the Secretary of State of Delaware to
the effect that Sub is in good standing in Delaware.
(j) Termination of Scarpa Employment Agreement. The joinder to the
Scarpa Termination Agreement shall have been duly executed and delivered by
Century.
ARTICLE 8.
POST CLOSING COVENANTS
Century and the Principal Stockholders (with respect to Sections 8.1(b) and
8.2 only) covenant to take the following actions after the Effective Time:
8.1 Resales Under the Registration Statement. (a) Century agrees to take
all actions (including preparing and filing with the SEC amendments and
supplements to the Registration Statement and the prospectus forming a part
thereof) as may be necessary to keep the Registration Statement effective for a
period of not less than two years from the Closing Date and comply with the
provisions of the Securities Act and all applicable rules and regulations
promulgated thereunder in order to permit the Reselling Stockholders during such
period to resell or otherwise dispose of all of their respective Acquired Shares
in accordance with the intended method or methods of disposition set forth in
the Registration Statement, provided that, before filing any such amendment or
supplement, Century will furnish the Reselling Stockholders with copies of all
such documents proposed to be filed, which shall be subject to the reasonable
approval of counsel designated by the Reselling Stockholders.
(b) Each Reselling Stockholder agrees (or will agree as of the Closing
pursuant to Section 7.2(q)) not to resell its Acquired Shares pursuant to the
Registration Statement unless it has delivered at least two business days prior
to the proposed date of sale written notice to Century (i) notifying Century of
the approximate number of Acquired Shares proposed to be sold and the proposed
date or dates thereof and (ii) certifying that such Reselling Stockholder has
taken, or will prior to such sale take, all steps necessary to comply with the
federal securities laws applicable to such Reselling Stockholder, including
without limitation the prospectus delivery requirement of the Securities Act.
Notwithstanding anything
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to the contrary herein, each Reselling Stockholder shall be free, following the
delivery of the notice required by the preceding sentence, to resell any number
of Acquired Shares, provided such resale is not effected after the latest date
indicated in such notice. Following any such resale, the Reselling Stockholder
shall notify Century of the number of Acquired Shares sold and the date thereof.
Notwithstanding anything to the contrary herein, no Reselling Stockholder shall
use the Registration Statement in connection with any disposition of Acquired
Shares at any time during which the information concerning such stockholder
included in the Registration Statement pursuant to Item 507 of Regulation S-K
includes any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Nothing in this
Section 8.1 shall be deemed to require any Reselling Stockholder to give notice
to Century of any sale or proposed sales of Acquired Shares pursuant to Rule 145
promulgated under the Securities Act, an exemption from the registration
requirements of the Securities Act or any other means (other than pursuant to
the Registration Statement).
(c) Century agrees to take all other steps to ensure that the Reselling
Stockholders' resale of Century Common Stock under the Registration Statement is
effected in accordance with the Securities Act and the regulations promulgated
thereunder, including:
(i) promptly filing all such Exchange Act Reports as may be necessary
to update the information relating to Century included in the Registration
Statement;
(ii) promptly furnishing to the Reselling Stockholders such number of
copies of such Registration Statement, each amendment and supplement
thereto, the prospectus included in such Registration Statement and such
other documents as the Reselling Stockholders may reasonably request in
order to facilitate the disposition of Acquired Shares owned by the
Reselling Stockholders;
(iii) using its best efforts to register or qualify the resales under
the securities or "blue sky" laws of such jurisdictions as the Reselling
Stockholders reasonably request and taking any and all other acts that may
be necessary or advisable to enable the Reselling Stockholders to
consummate such resales in such jurisdictions, provided however, that
Century will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for
this subparagraph or (ii) subject itself to taxation in any such
jurisdiction;
(iv) entering into such agreements and taking all such other actions
as the Reselling Stockholders reasonably request in order to expedite or
facilitate such resales;
(v) notify the Reselling Stockholder, at any time when a prospectus
relating thereto is required to be delivered by such stockholder under the
Securities Act in connection with a resale of Acquired Shares, of the
happening of any event as a result of which the prospectus included in the
Registration Statement contains an untrue statement of a material fact or
omits any fact necessary to make the statements therein not misleading,
and, at the request of any such Reselling Stockholder, Century will prepare
a supplement or amendment to such prospectus or file an Exchange Act Report
so that, as thereafter delivered to the purchasers of such stock, such
prospectus will not contain an untrue statement of a material fact or omit
to state any fact necessary to make the statements therein not misleading;
(vi) otherwise using its reasonable best efforts to comply with all
applicable rules and regulations of the SEC; and
(vii) in the event of the issuance of any stop order suspending the
effectiveness of the Registration Statement, or of any order suspending or
preventing the use of any related prospectus or suspending the
qualification of any Century Common Stock registered under such
Registration Statement for sale in any jurisdiction, using its reasonable
best efforts promptly to obtain the withdrawal of such order.
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8.2 Further Assurances. Century and the Principal Stockholders each agree
to execute and deliver such other documents, certificates, agreements and other
instruments and to take such other actions as may be necessary or desirable in
order to consummate or implement expeditiously the transactions contemplated by
this Agreement.
8.3 Notification of Regulatory Authorities. Promptly after the Effective
Time, Century shall complete any necessary or appropriate notifications of
Governmental Entities regarding consummation of the Merger, including without
limitation notifying the FCC and MPSC thereof.
8.4 Severance Payments. Within 30 days after the Closing Date Century shall
(i) cause Celutel to pay to the Senior Officers bonus payments in the amounts
set forth on Schedule 3.23 and (ii) cause a severance payment to be made to
Scarpa in the amount set forth in Exhibit G hereto so long as Mr. Scarpa has
executed and delivered the Scarpa Termination Agreement.
8.5 Indemnification Agreements. Century shall cause the Surviving
Corporation to maintain and abide by the indemnification agreements of Celutel
set forth on Schedule 3.16 (under the heading "Indemnification Agreements") and
the indemnification obligations of Celutel set forth in its Bylaws as in effect
on the date delivered to Century hereunder.
8.6 Biloxi Microwave Licenses. Century shall use its reasonable best
efforts to take all necessary or appropriate actions to expeditiously and
diligently prosecute to a favorable conclusion the requests for reinstatements
of the microwave licenses filed by Biloxi on March 8, 1993, as described further
on Schedule 3.18 under the heading "Biloxi Microwave."
ARTICLE 9.
TERMINATION
9.1 Methods of Termination. Anything contained in this Agreement to the
contrary notwithstanding, this Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time (notwithstanding any adoption
of this Agreement by the stockholders of Celutel):
(a) by mutual written consent of Celutel and Century; or
(b) by either Celutel or Century:
(i) upon ten days written notice from either such party to the
other following any failure by the stockholders of Celutel to adopt this
Agreement at the Stockholders Meeting; or
(ii) if the Merger is not consummated upon the first to occur of
(A) the tenth day after satisfaction or waiver of the conditions to
Closing contained in Sections 7.1(a), 7.2(g) or 7.3(g) or (B) March 6,
1994, provided that such date shall be extended if the reason for a
delay is that final FCC approval has not been received and the party
asserting the extension has used its reasonable best efforts to obtain
FCC approval and further provided that no party shall have the right to
terminate under (A) or (B) if any delay in consummating the Merger is
attributable to a willful or material breach of this Agreement by such
party; or
(iii) if there shall be any Applicable Law that makes consummation
of the Merger illegal or otherwise prohibited or a Governmental Entity
shall have issued an order, decree or ruling or taken any other action
permanently restraining or enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree,
ruling or other action shall have become final and nonappealable,
provided that the party asserting the right to terminate under this
subsection shall have used its reasonable best efforts to prevent the
entry of any such order, decree, ruling or other action; or
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(c) by Celutel, if (i) any of the representations and warranties of
Century and Sub contained in this Agreement shall not be true and correct
in any material respect, when made or at any time prior to the Closing as
if made at and as of such time, (ii) Century or Sub shall have failed to
fulfill in any material respect any of its obligations under this
Agreement, (iii) Century shall have commenced, or there shall be commenced
against Century, any Proceeding under any Applicable Law relating to
bankruptcy, insolvency, reorganization of relief of debtors seeking to
adjudicate Century bankrupt or insolvent, or (iv) the Board of Directors of
Celutel, upon receipt of an unsolicited, bona fide Acquisition Proposal,
makes a Fiduciary Determination, provided, in the case of each of clauses
(i) and (ii), such misrepresentation, breach of warranty, or failure
(provided it can be cured) has not been cured within 15 days of Century's
receipt of a notice from Celutel asserting such misrepresentation, breach
of warranty or failure and asserting Celutel's right to terminate this
Agreement under this subsection in the absence of curative action by
Century within such 15-day period; or
(d) by Century if (i) any of the representations and warranties of
Celutel and the Principal Stockholders contained in this Agreement shall
not be true and correct in any material respect, when made or at any time
prior to the Closing as if made at and as of such time, (ii) either Celutel
or the Principal Stockholders shall have failed to fulfill in any material
respect any of its obligations under this Agreement or (iii) Celutel, CIVC
or Scarpa shall have commenced, or there shall be commenced against,
Celutel, CIVC or Scarpa, any Proceeding under any Applicable Law relating
to bankruptcy, insolvency, reorganization of relief of debtors seeking to
adjudicate Celutel, CIVC or Scarpa bankrupt or insolvent, provided, in the
case of each of clauses (i) and (ii), such misrepresentation, breach of
warranty, or failure (provided it can be cured) has not been cured within
15 days of Celutel's receipt of a notice from Century asserting such
misrepresentation, breach of warranty or failure and asserting Century's
right to terminate this Agreement under this subsection in the absence of
curative action by Celutel within such 15-day period.
9.2 Effect of Termination. (a) In the event of termination of this
Agreement pursuant to Article 9, written notice thereof shall forthwith be given
to the other parties specifying the provision hereof pursuant to which such
termination is made, and this Agreement shall become void and have no effect and
no party shall have liability hereunder to any other party or any of their
respective directors, officers, employees, stockholders, representatives or
Affiliates, except that (i) the agreements contained in this Section 9.2, in
Sections 6.6(b), 6.11 and 12.8, and in all other sections of Article 12 shall
survive the termination hereof and (ii) nothing contained in this Article 9
shall relieve any party from liability for actual damages (excluding
consequential damages) incurred as a result of any material breach of the
representations, warranties, covenants and agreements made by the breaching
party in this Agreement or common law fraud.
(b) If Celutel terminates this Agreement pursuant to Section 9.1(c)(iv),
Celutel shall promptly thereafter, and in no event later than 30 days after such
termination, pay to Century a fee, as liquidated damages, equal to 2% of the
value of the Aggregate Merger Consideration, calculated in good faith as of the
date of termination. Century's receipt of notification of any Acquisition
Proposal or any other event or condition that results in termination of this
Agreement as a result of the Celutel Board of Directors making a Fiduciary
Determination shall not affect Century's rights to receive this termination fee.
ARTICLE 10.
INDEMNIFICATION
Prior to the Closing Date the Principal Stockholders shall take the actions
specified in Section 10.2, and after the Closing Date Century, the Principal
Stockholders and the other parties named below shall have the following rights
and obligations:
10.1 Indemnification. (a) Except as otherwise provided in Section 10.4
hereof, Century and its subsidiaries and each of their respective officers,
directors, employees, agents, Affiliates, successors and permitted assigns
(collectively, the "Century Indemnitees") shall be defended, indemnified, held
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harmless, and reimbursed for, from and against each and every demand, claim,
action, loss (which shall include any diminution in value of Celutel, any
Subsidiary or any of their assets), liability, judgment, damage, cost and
expense (including interest, penalties, and the reasonable fees, disbursements
and expenses of attorneys, accountants and other professional advisors)
(collectively, "Losses") imposed on or incurred by the Century Indemnitees,
directly or indirectly, relating to, resulting from or arising out of (i) any
inaccuracy of any representation or warranty made by Celutel or the Principal
Stockholders in this Agreement (including the representations and warranties
made in any Exhibit or Schedule hereto) or any Closing Instrument, (ii) any
breach of any covenant, agreement or other obligation of Celutel or the
Principal Stockholders under this Agreement or any Closing Instrument, (iii) any
claim of any nature made by former stockholders of Celutel in their capacity as
stockholders or by the minority stockholders or partners of the Cellular
Entities in their capacity as stockholders or partners (whether arising under
the securities laws, corporate law, tort law, equitable principles or otherwise
and whether or not described in any Celutel Exchange Act Report and whether or
not arising out of any matter described in any Schedule hereto) that relate to
any act or omission of Celutel or the Subsidiaries prior to the Closing or to
the distribution of the Merger Consideration in accordance with this Agreement,
including the negotiation, execution, delivery, announcement or performance of
the Century Purchase Agreement or this Agreement and the disbursement of funds
in accordance with the Allocation Agreement and the LC Escrow Agreement,
provided that in no event will any Century Indemnitee be entitled to be
indemnified for Losses resulting from any breach of a representation, warranty
or covenant of Century hereunder (in which event the Celutel Stockholders shall
continue to have the rights to indemnification and other remedies provided
hereunder), (iv) any claim arising out of any Additional Purchases or any
Transaction Agreement, or (v) the matters described on Schedule 3.18 under the
heading "Biloxi Microwave," provided, however, that the Celutel Stockholders
shall have no liability under this Section 10.1(a) unless and until the
aggregate of all Losses resulting therefrom (other than those resulting from
breaches of any covenants, agreements or other obligations under Article 2)
exceeds $200,000, in which event the Celutel Stockholders shall be liable only
for all Losses in excess of such amount. Subject to all of the procedures,
limitations and conditions of this Article 10, the Celutel Stockholders, acting
through the Stockholders' Representative, shall defend, indemnify, hold harmless
and reimburse the Century Indemnitees for, from and against all Losses arising
out of all claims under this Section 10.1(a) other than (i) any Losses that
arise out of Unlimited Claims (as defined in Section 10.4) or claims under
Section 10.1(a)(v), in each case as to which written notice was not given prior
to the first anniversary of the Closing Date, or (ii) any portion of Losses
arising out of Unlimited Claims that exceed the amount payable under the Letter
of Credit (the Losses specified in (i) and (ii) being hereinafter referred to as
"Uncovered Losses"), and the Principal Stockholders shall jointly and severally
defend, indemnify, hold harmless and reimburse the Century Indemnities for, from
and against all Uncovered Losses.
(b) Except as otherwise provided in Section 10.4 hereof, Century shall
defend and indemnify and hold harmless the Celutel Stockholders and each of
their respective successors, heirs, executors, administrators, and personal
representatives (collectively, the "Stockholder Indemnitees"), and shall
reimburse the Stockholder Indemnitees, for, from and against each and every Loss
imposed on or incurred by the Stockholder Indemnitees, directly or indirectly,
relating to, resulting from or arising out of (i) any inaccuracy of any
representation or warranty made by Century in this Agreement (including the
representations and warranties made in any Exhibit or Schedule hereto) or any
Closing Instrument or (ii) any breach of any covenant, agreement or other
obligation of Century under this Agreement (including those specified in
Sections 6.2(a) and 8.1) or any Closing Instrument, provided, however, that
Century shall have no liability under this Section 10.1(b) unless and until the
aggregate of all Losses resulting therefrom (other than those resulting from
breaches of any covenants, agreements or other obligations under Article 2)
exceeds $200,000, in which event Century shall be liable only for all Losses in
excess of such amount.
10.2 Letter of Credit. (a) Prior to the Closing, Celutel shall obtain a
letter of credit (the "Letter of Credit") issued by PNC Bank or any other
financial institution reasonably satisfactory to Century (the "Bank") that
entitles Century to request indemnification payments under this Article 10 on
the terms and conditions set forth below.
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(b) The Letter of Credit shall obligate the Bank to pay to Century the
amount specified in any disbursement request jointly executed by Century and the
Stockholders' Representative. If within 15 days prior to the expiration of the
Letter of Credit's term (as it may be extended pursuant to subsection (c) below)
Century certifies in writing to the Bank that a bona fide unresolved claim under
this Article 10 is pending (and delivers a copy of such certification to the
Stockholders' Representative) for an amount in excess of $200,000 (minus any
prior deductions from this amount for resolved claims) for which a claim for
indemnification has been made in accordance with this Article 10 and which has
been disputed by the Stockholders' Representative, the Letter of Credit shall
further obligate the Bank to tender the disputed amount to First American Bank &
Trust of Louisiana, Monroe, Louisiana (the "Escrow Agent"), which will hold such
amount as escrow agent pursuant to the terms and conditions of the escrow
agreement to be entered into at Closing pursuant to Section 7.2(o) (the "Escrow
Agreement"). Century agrees that it shall not instruct the Bank to transfer
funds to the Escrow Agent in excess of the amount of indemnifiable Losses
reasonably expected to result from such unresolved claim.
(c) The maximum amount payable by the Bank under the Letter of Credit shall
be $3,500,000. Subject to the Bank's obligation to tender disputed funds into
escrow, the Letter of Credit shall expire on the first anniversary of the
Closing Date unless extended at the option of the Stockholders' Representative
in order to avoid draws thereon payable to the Escrow Agent pursuant to Section
10.2(b). In the event of any such extension or extensions, the Letter of Credit
shall provide that the Bank's obligation to tender funds into escrow will be
deferred until the expiration of the applicable extension period.
(d) The Letter of Credit will provide that the Bank will have no right or
obligation to disburse funds to any Person other than Century or the Escrow
Agent, and Century will take all such action as may be necessary to permit it to
act as agent and attorney-in-fact for any other Century Indemnitee who has a
claim under this Article 10.
10.3 Notice and Defense of Claims. (a) A party seeking indemnification
hereunder (the "Indemnified Person") shall give prompt written notice to the
indemnifying person or persons, or any successors thereto (the "Indemnifying
Person"), of any matter with respect to which the Indemnified Person seeks to be
indemnified (the "Indemnity Claim"), and, for any such claim not arising out of
the claim of a third party, the Indemnified Person shall also give concurrent
notice to the Bank at all times during which the Letter of Credit is in effect.
Such notice shall state the nature of the Indemnity Claim and, if known, the
amount of the Loss. If the Indemnity Claim arises from a claim of a third party,
the Indemnified Person shall give such notice within a reasonable period of time
after the Indemnified Person has actual notice of such claim, and in the event
that a Proceeding is commenced, within 20 days after receipt of written notice
by the Indemnified Person thereof. Notwithstanding anything herein to the
contrary, the failure of an Indemnified Person to give timely notice of an
Indemnity Claim shall not bar such Indemnity Claim except and to the extent that
the failure to give timely notice has impaired the ability of the Indemnifying
Person to defend the Indemnity Claim.
(b) If the Indemnity Claim arises from the claim or demand of a third
party, the Indemnifying Person shall have the right to assume its defense,
including the hiring of counsel and the payment of all associated fees and
expenses. The Indemnified Person shall have the right to employ separate counsel
with respect to such claim, and to participate (but not control) in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the Indemnified Person, provided, however, that if both the Indemnified Person
and the Indemnifying Person are named as parties and the Indemnified Person
shall in good faith determine that representation by the same counsel will
result in a significant conflict of interest, then the fees and expenses of such
separate counsel shall be at the expense of the Indemnifying Person if the
Indemnifying Person is ultimately held liable in connection with such claim. In
the event that the Indemnifying Person, within 30 days after notice of any such
claim, fails to assume the defense thereof, the Indemnified Person shall have
the right to undertake the defense of such claim for the account of the
Indemnifying Person, subject to the right of the Indemnifying Person to assume
the defense of such claim at any time prior to the final determination thereof,
provided that the Indemnified Person shall not settle or compromise such claim
without the prior written consent of the Indemnifying Person. Anything in this
Article 10 to the contrary notwithstanding, the Indemnifying Person shall not,
without the Indemnified Person's prior consent, settle or compromise any claim
or
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consent to the entry of any judgment with respect to any claim unless such
settlement, compromise or judgment (i) includes as an unconditional term thereof
the release by the claimant or the plaintiff of the Indemnified Person from all
liability in respect of such claim and (ii) does not impose any criminal penalty
or any other material adverse condition, obligation or other equitable remedy on
or with respect to the Indemnified Person (and the Indemnifying Person may,
without the Indemnified Person's prior consent, settle or compromise any claim
or consent to the entry of any judgment so long as clauses (i) and (ii) are
satisfied). Except to the extent otherwise provided in Section 10.4, all Losses
of the Century Indemnitees (other than Uncovered Losses) arising out of any such
claim (subject to any deductions in accordance with the provisions of Section
10.1(a)) shall be paid pursuant to the Letter of Credit (which payment shall
release all Celutel Stockholders from all further obligations hereunder to
Century with respect to such claim).
(c) If the Indemnity Claim does not arise from the claim or demand of a
third party, the Indemnifying Person shall, within 15 days of its receipt of
written notice of such Indemnity Claim, notify the Indemnified Person in writing
whether or not it objects to such claim. If the Indemnifying Person does not
object (or if it does object and amounts become due as set forth in the next
sentence), all Losses of the Century Indemnitees (other than Uncovered Losses)
arising out of such claim (subject to any deductions in accordance with the
provisions of Section 10.1(a)) shall be paid pursuant to the Letter of Credit
(which payment shall release all Celutel Stockholders from all further
obligations hereunder to Century with respect to such claim). If, on the other
hand, the Indemnifying Person does object to the Indemnity Claim and the parties
are unable to settle any such dispute, either the Indemnifying Person or the
Indemnified Person may, after complying with any relevant provisions of this
Agreement, the Letter of Credit or Escrow Agreement, commence an action or
proceeding to resolve such dispute and determine any amounts due hereunder from
the Indemnifying Person, all of which shall become chargeable to and payable by
the Indemnifying Person in accordance with the terms and conditions of this
Article 10 immediately upon the determination of such liability pursuant to such
action or proceeding.
(d) Notwithstanding anything to the contrary in this Agreement or the LC
Escrow Agreement, (i) all claims of the Stockholder Indemnitees under Section
10.1(b) shall be pursued and administered solely by the Stockholders'
Representative, (ii) upon a final determination that an indemnification payment
is payable under Section 10.1(b), such payment shall be paid solely to the
Stockholders' Representative (which payment shall release Century from all
further obligations hereunder), (iii) all claims (other than the Unlimited
Claims that will or could reasonably be expected to result in Uncovered Losses)
of the Century Indemnitees under Section 10.1(a) shall be defended and otherwise
administered solely by the Stockholders' Representative and (iv) upon a final
determination that an indemnification payment for Losses (other than Uncovered
Losses) is payable under Section 10.1(a), the Stockholders' Representative shall
promptly execute all instruments necessary or appropriate in order for Century
to receive payment therefor under the Letter of Credit or Escrow Agreement and
use its reasonable best efforts to take all other action necessary to ensure
that Century shall receive such payment without the necessity of obtaining any
other consents, approvals or signatures.
10.4 Limitations. Notwithstanding anything to the contrary herein:
(a) No party shall have liability under this Article 10 unless written
notice of an Indemnity Claim shall have been given prior to the first
anniversary of the Closing Date, provided, however, that any of the Century
Indemnitees may give written notice of and may make a claim (i) after such
date and at any time prior to the third anniversary of the Closing Date if
such claim arises from any inaccuracy of any representations or warranties
made by Celutel in Section 3.29 (it being understood that all information
set forth in items (i), (ii) or (iv) of Schedule 3.29 has been provided
solely for informational purposes and shall not in any manner be deemed to
limit, restrict or qualify the representations and warranties made by
Celutel in Section 3.29) or if such claim arises under subsection (iii),
(iv) or (v) of Section 10.1(a) and (ii) after such date and at any time
prior to the expiration of the appropriate statute of limitations with
respect thereto if such claim arises from any inaccuracy of any
representations or warranties made by Celutel in Section 3.28 (the claims
specified in (i) and (ii) above (other than claims arising under Section
10.1(a)(v)) being hereinafter referred to as the "Unlimited Claims"),
provided, however, that nothing in this Section 10.4
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shall modify the obligation of the Indemnified Person to give the written
notice specified in Section 10.3(a) hereof.
(b) Subject to paragraph (g), neither the Celutel Stockholders, on the
one hand, nor Century, on the other hand, shall have any liability under
this Agreement or any of the agreements or transactions contemplated hereby
in excess of $3,500,000 in the aggregate for all claims made under this
Agreement or any of the agreements or transactions contemplated hereby,
provided, however, that this limitation will be inapplicable with respect
to the Unlimited Claims and further provided that any liability for failure
to make any payments required under Article 2 will not apply against this
limit.
(c) The Celutel Stockholders shall have no liability after the Closing
Date for any Loss under Section 10.1(a)(i) if they (or the Stockholders'
Representative) can establish that Century had actual knowledge prior to
the Closing of the inaccuracy of the representation or warranty giving rise
to the Loss, and Century shall have no liability after the Closing Date for
any Loss under Section 10.1(b)(i) if it can establish that Celutel or the
Principal Stockholders had actual knowledge prior to the Closing of the
inaccuracy of the representation or warranty giving rise to the Loss, it
being understood that in any Proceeding to determine liability under this
Article 10 the Indemnifying Person shall have the burden of proof of
establishing such actual knowledge.
(d) No Celutel Stockholder shall have any liability under this Article
10 for Losses arising out of any inaccuracy of any representation or
warranty made by the Principal Stockholders in Article 4 or any breach of
any covenant, agreement or other obligation of the Principal Stockholders
hereunder or under any Closing Instrument, other than the Principal
Stockholder who made the specific representation, warranty, covenant or
agreement from which the Loss arises.
(e) Under no circumstances shall any Celutel Stockholder have any
liability for any special, incidental or consequential Losses (including
Losses for diminution in value), except in connection with any one or more
indemnification payments made pursuant to Section 10.1(a) that, together
with all other indemnification payments, in the aggregate do not exceed
$3.5 million.
(f) The Century Indemnitees will be reimbursed for all indemnifiable
Losses solely in accordance with the terms and conditions specified herein
and in the Letter of Credit (and, if applicable, the Escrow Agreement),
provided, however, that if the Principal Stockholders are obligated
pursuant to this Article 10 to indemnify any Century Indemnitee for any
Uncovered Losses, the Principal Stockholders shall promptly pay to each
such Century Indemnitee all amounts due hereunder.
(g) In the absence of common law fraud, this Article 10 shall serve as
the sole and exclusive remedy of the Century Indemnitees and the
Stockholder Indemnitees for Losses and for any other claims (other than
those arising under Article 2) in any way relating to this Agreement or any
of the other agreements or transactions contemplated hereby or thereby
(other than the Century Purchase Agreement), to the exclusion of all other
statutory or common law remedies (including rights under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended).
10.5 Survival. (a) Notwithstanding anything herein to the contrary, all
indemnification rights hereunder may be asserted and enforced by any Person
otherwise entitled to enforce indemnification rights hereunder regardless of (i)
any investigation, inquiry or examination made for or on behalf of such Person
(including the examination of any agreements or other documents expressly
furnished to such Person hereunder), subject only to the terms of Section
10.4(c), (ii) any reliance or lack of reliance upon the absence of any event or
condition giving rise to indemnification rights under this Article by such
Person, or (iii) the receipt of any Closing Certificate, opinion or other
instrument at Closing by such Person.
(b) Except as otherwise provided in Section 10.4(a), all representations
and warranties contained herein or in any Closing Instrument shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby for a period of one year.
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ARTICLE 11.
STOCKHOLDERS' REPRESENTATIVE
11.1 Designation. Subject to the terms and conditions of this Article 11,
CIVC (the "Stockholders' Representative") is designated by each of the Celutel
Stockholders to serve, and Century hereby acknowledges that the Stockholders'
Representative shall serve, as the sole representative of the Celutel
Stockholders from and after the Effective Time with respect to the matters set
forth in this Agreement and the LC Escrow Agreement to be entered into at the
Closing.
11.2 Authority. Each of the Celutel Stockholders, by adoption of this
Agreement by the Celutel Stockholders at the Stockholders Meeting and by the
execution of the Letter of Transmittal, will, effective as of the Effective
Time, irrevocably appoint the Stockholders' Representative as the agent, proxy
and attorney-in-fact for such Celutel Stockholder for all purposes of this
Agreement and the LC Escrow Agreement, including full power and authority on
such Celutel Stockholder's behalf (i) to take all actions which the
Stockholders' Representative considers necessary or desirable in connection with
the defense, pursuit or settlement of any adjustments to the Aggregate Merger
Consideration pursuant to Article 2 and any claims for indemnification pursuant
to Article 10 hereof, including to sue, defend, negotiate, settle, compromise
and otherwise handle any such adjustments to the Aggregate Merger Consideration
and any such claims for indemnification made by or against, and other disputes
with, Century pursuant to this Agreement or any of the agreements or
transactions contemplated hereby, (ii) to engage and employ agents and
representatives (including accountants, legal counsel and other professionals)
and to incur such other expenses as it shall deem necessary or prudent in
connection with the administration of the foregoing, (iii) to provide for all
expenses incurred in connection with the administration of the foregoing
(including any expenses associated with any extension(s) of the Letter of
Credit) to be paid by directing the LC Escrow Agent and the Non-Public
Stockholders to pay (or to reimburse the Stockholders' Representative for) such
expenses in the amounts determined by applying the procedures specified in
Section 11.7, (iv) to disburse all indemnification payments received from
Century under Article 10 to the LC Escrow Agent and the Non-Public Stockholders
in the amounts determined by applying the procedures specified in Section 11.7,
(v) upon Century's reasonable request, to use its reasonable best efforts to
supply Century with all such information requested by it in connection with
making payments under Section 2.8(e), (vi) to direct the LC Escrow Agent to
disburse any funds remaining in the LC Escrow Account (and any other remaining
funds delivered to the LC Escrow Agent pursuant to Articles 2 or 10) upon
termination of the LC Escrow Agreement in accordance with its terms, (vii) to
accept and receive notices pursuant to this Agreement and the LC Escrow
Agreement, (viii) to extend the Letter of Credit in accordance with Section
10.2(c) and to amend and grant consents and waivers after the Closing under this
Agreement and LC Escrow Agreement, and (ix) to take all other actions and
exercise all other rights which the Stockholder Representative (in its sole
discretion) considers necessary or appropriate in connection with this Agreement
and the LC Escrow Agreement. Each of the Celutel Stockholders will, by executing
the Letter of Transmittal, agree that such agency and proxy are coupled with an
interest, and are therefore irrevocable without the consent of the Stockholders'
Representative and shall survive the death, incapacity, bankruptcy, dissolution
or liquidation of any Celutel Stockholder. All decisions and acts by the
Stockholders' Representative shall be binding upon all of the Celutel
Stockholders, and no Celutel Stockholder shall have the right to object,
dissent, protest or otherwise contest the same.
11.3 Resignation. In the event that the Stockholders' Representative shall
resign for any reason, the Stockholders' Representative shall (in consultation
with the Independent Directors) select another representative to fill such
vacancy and such substituted representative shall be deemed to be the
Stockholders' Representative for all purposes of this Agreement and the LC
Escrow Agreement.
11.4 Conflict. In the event that the Stockholders' Representative
determines (in its sole judgment) that its interest in pursuing or declining to
pursue any claim against Century conflicts in any
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material respect with the interests of the Celutel Stockholders generally, the
Stockholders' Representative shall consult with the Independent Directors. If
the Stockholders' Representative and the Independent Directors cannot agree on
how to handle such claim, the Independent Directors shall assume the role of
Stockholders' Representative with respect to such claim and shall for all
purposes hereunder and under the LC Escrow Agreement be deemed to the
Stockholders' Representative with respect to such claims.
11.5 Exculpation. Neither the Stockholders' Representative nor any agent
employed by it shall be liable to any Celutel Stockholder relating to the
performance of its duties under this Agreement or the LC Escrow Agreement for
any errors in judgment, negligence, oversight, breach of duty or otherwise
except to the extent it is finally determined in a court of competent
jurisdiction by clear and convincing evidence that the actions taken or not
taken by the Stockholders' Representative constituted fraud or were taken or not
taken in bad faith. The Stockholders' Representative shall be indemnified and
held harmless by the Public Stockholders (payable by the LC Escrow Agent out of
the LC Escrow Account) and by each other Non-Public Stockholder, all in the
amounts determined by applying the procedures specified in Section 11.7, against
all expenses (including attorneys' fees), judgments, fines and other amounts
paid or incurred in connection with any action, suit, proceeding or claim to
which the Stockholders' Representative is made a party by reason of the fact
that it was acting as the Stockholders' Representative pursuant to this
Agreement or the LC Escrow Agreement, provided, however, that the Stockholders'
Representative shall not be entitled to indemnification hereunder to the extent
it is finally determined in a court of jurisdiction by clear and convincing
evidence that the actions taken or not taken by the Stockholders' Representative
constituted fraud or were taken or not taken in bad faith. The Stockholders'
Representative shall be protected in acting upon any notice, statement or
certificate believed by it to be genuine and to have been furnished by the
appropriate person and in acting or refusing to act in good faith or any matter.
11.6 Acknowledgement. The Principal Stockholders acknowledge that none of
the costs or expenses of administering the LC Escrow Account, the LC Escrow
Agreement or any other related instrument governing the affairs of the Celutel
Stockholders after the Closing Date shall be borne by Century or Celutel.
11.7 Allocation of Payments. Whenever the Celutel Stockholders are entitled
to receive any payments hereunder or are obligated to make any payments
hereunder (including those specified in Sections 2.8, 11.2 and 11.5 and Article
10), (i) each Public Stockholder shall be entitled to receive or shall be
obligated to make (payable to or from the LC Escrow Account) such portion of any
such payment that is equal to the Pro Rata Share Equivalent Interest held by
such stockholder as of the Effective Time, all in accordance with this Agreement
and the LC Escrow Agreement and (ii) each Non-Public Stockholder (including
CIVC) shall be entitled to receive or shall be obligated to make such portion of
any such payment that is equal to its pro rata interest with respect thereto
(determined after giving effect to all of the terms and conditions of the
Allocation Agreement, as calculated by the Stockholders' Representative, and in
accordance with this Agreement and the LC Escrow Agreement).
ARTICLE 12.
MISCELLANEOUS
12.1 Notices. Any notice, communication, request, reply, consent, advice or
disclosure (hereinafter severally and collectively called "notice") required or
permitted to be given or made by any party to another in connection with this
Agreement or the transactions herein contemplated must be in writing and may be
given or served (i) by depositing such notice in the United States mail, postage
prepaid and registered or certified with return receipt requested, (ii) by
delivering such notice in person to the address of the person or entity to be
notified, (iii) by telecopying such notice (provided a copy thereof is
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subsequently delivered in one of the other manners specified herein), or (iv) by
sending such notice by a national commercial courier service for next day
delivery. Notice deposited in the mail in the manner hereinabove described shall
be effective 72 hours after such deposit, and notice delivered in person, by
telecopy or by commercial courier shall be effective at the time of delivery
(subject, in the case of any telecopy, to compliance with the above-stated
delivery requirements). For purposes of notice, the addresses of the parties
shall, until changed as hereinafter provided, be as follows:
If to Century or Sub:
Century Telephone Enterprises, Inc.
100 Century Park Drive
Monroe, Louisiana 71211-4065
Attention: Glen F. Post, III
Telecopy: (318) 388-9562
with copies to:
Harvey P. Perry, Esq., Senior Vice President,
Secretary and General Counsel
Century Telephone Enterprises, Inc.
100 Century Park Drive
Monroe, Louisiana 71211-4065
Telecopy: (318) 388-9562
Kenneth J. Najder, Esq.
Jones, Walker, Waechter,
Poitevent, Carrere & Denegre
Place St. Charles
201 St. Charles Avenue
New Orleans, Louisiana 70170-5100
Telecopy: (504) 582-8012
If to Celutel:
Celutel, Inc.
900 Bestgate Road
Annapolis, Maryland 21401
Attention: Chairman
Telecopy: (410) 573-5205
with copies to the Stockholders' Representative
(at the address indicated below) and to:
William S. Clarke, Esq.
5 Independence Way
Princeton, New Jersey 08540-6627
Telecopy: (609) 520-9319
If to Scarpa:
Frank S. Scarpa
10 Graemoor Terrace
Palm Beach Gardens, Florida 33418
Telecopy: (407) 624-9365
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with a copy to:
Edwin M. Martin, Jr., Esq.
Piper & Marbury
1200 Nineteenth Street, N.W.
Washington, D.C. 20036
Telecopy: (202) 861-6315
If to CIVC:
Continental Illinois Venture Corporation
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Avy H. Stein
Telecopy: (312) 987-0887
with a copy to:
William S. Kirsch, Esq.
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Telecopy: (312) 861-2200
If to the Stockholders' Representative:
Continental Illinois Venture Corporation
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Avy H. Stein
Telecopy: (312) 987-0887
with copies to:
Douglas H. Dittrick
Douglas Communications Corporation II
1200 East Ridgewood Avenue
East Wing--Suite 30
Ridgewood, New Jersey 07458
J. Walter Corcoran
Phillips Credit Corporation
100 East 42nd Street
New York, New York 10017
William S. Kirsch, Esq.
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Telecopy: (312) 861-2200
or such substituted persons or addresses of which any of the parties may give
notice to the other in writing.
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12.2 Expenses. Regardless of whether the transactions contemplated by this
Agreement are consummated, all expenses and fees, including fees for legal,
accounting, investment banking and other advisory services, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
borne by the party hereto incurring them, unless otherwise specified or in any
other Section hereof.
12.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, without regard to
the principles of conflict of laws.
12.4 Partial Invalidity. In case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, but this Agreement
shall be construed as if such invalid, illegal or unenforceable provision or
provisions had never been contained herein.
12.5 Successors and Assigns; Parties in Interest. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors, heirs, executors, administrators, personal representatives, and
permitted assigns, but neither this Agreement nor any of the rights, interests
or obligations hereunder are assignable by the parties hereto without the prior
written consent of the other parties, except for any assignments or transfers by
Century of its rights under Article 10 made in connection with a disposition of
any of the properties acquired by it hereunder (which may be made freely without
any such consents). Nothing in this Agreement, expressed or implied, is intended
or shall be construed to confer upon any Person, other than the parties and
their respective successors, heirs, executors, administrators, personal
representatives, and permitted assigns, any right, remedy or claim under or by
reason of this Agreement, except for the rights provided to the current and
former officers, directors and employees of Celutel pursuant to Sections 8.4 and
8.5 and the rights provided to the Century Indemnitees and Stockholder
Indemnitees pursuant to Article 10 and the LC Escrow Agreement.
12.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be considered an original counterpart, and
shall become a binding agreement when each party shall have executed a
counterpart.
12.7 Titles and Headings. Titles and headings to Sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
12.8 Entire Agreement. (a) The Schedules and Exhibits referred to in this
Agreement shall be construed with, and are an integral part of, this Agreement
to the same extent as if the same had been set forth verbatim herein. This
Agreement (including the Schedules and Exhibits hereto) and the agreement
referred to in Section 6.16 contains the entire understanding of the parties
hereto with regard to the subject matter contained herein and, except to the
extent otherwise provided in paragraph (b) below, supersedes all prior
agreements or understandings among the parties with respect thereto, including
the letter agreement dated August 18, 1993 by and among Century, Celutel and the
Principal Stockholders.
(b) Notwithstanding anything to the contrary in the Century Purchase
Agreement, Century, Celutel and CHI hereby agree that the Century Purchase
Agreement shall remain in full force and effect until the consummation of the
Merger, at which time such agreement will be deemed to be automatically
terminated, provided, however, that at no time shall any party to the Century
Purchase Agreement have any obligation to consummate any of the transactions
contemplated thereunder or to perform any of the covenants or agreements
specified therein unless and until this Agreement is duly terminated in
accordance with Article 9, at which time each such party will once again be
fully obligated to perform all of its covenants and agreements thereunder on the
terms and subject to the
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conditions specified therein. To effect the foregoing, Century, Celutel and CHI
hereby amend Section 10.1(b) of the Century Purchase Agreement in its entirety
to read as follows: "either Sellers or Buyer if the transactions provided for
herein to be closed on the Closing Date shall not have been consummated on or
before the earlier of (i) April 6, 1994, or (ii) 45 days after the termination
of the Agreement and Plan of Merger dated October 8, 1993 by and between, among
others, Buyer and Celutel."
12.9 Remedies. Subject to the limitations on remedies contained in Section
10.4(g) and the rights of Century and Celutel under Article 9, each party
acknowledges that the subject matter of this Agreement is unique and that no
adequate remedy of law would be available for breach of this Agreement, and
accordingly, each party agrees that any other party or parties, as the case may
be, shall be entitled to an appropriate decree of specific performance or other
equitable remedies to enforce this Agreement (without any bond or other security
being required) and each party waives the defense in any action or proceeding
brought to enforce this Agreement that there exists an adequate remedy at law.
12.10 No Waiver. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. No waiver of any breach of this
Agreement shall be held to constitute a waiver of any other or subsequent
breach. Notwithstanding the foregoing, upon consummating the Merger each party
shall be deemed to have acknowledged that all conditions to its obligation to
consummate the Merger have been fulfilled or duly waived, and, in the absence of
common law fraud, to have waived any right to subsequently assert that any such
conditions were not fulfilled or duly waived. Except as otherwise provided in
the foregoing sentence or in Section 6.7, any waiver must be in writing.
12.11 Amendment. This Agreement may be amended by action taken by Century,
Sub, Celutel and the Principal Stockholders at any time before or after approval
of the Merger by the stockholders of Celutel but, after any such approval, no
amendment shall be made which decreases the Aggregate Merger Consideration or
changes the form thereof or which adversely affects the rights of Celutel's
stockholders hereunder without the further approval of such stockholders. This
Agreement may not be amended except by an instrument in writing duly signed by
or on behalf of all the parties hereto.
12.12 Litigation. If any action at law or in equity, including an action
for declaratory relief, is brought in connection with this Agreement or a breach
hereof, the prevailing party shall be entitled to the full amount of all
reasonable expenses, including all court costs and actual attorneys' fees paid
or incurred in good faith, incurred in connection with such action.
12.13 References. All references in this Agreement to Articles, Sections,
and other subsections or subdivisions refer to the Articles, Sections, and other
subsections or subdivisions of this Agreement unless expressly provided
otherwise. The words "this Agreement", "herein", "hereof", "hereby",
"hereunder", and words of similar import refer to this Agreement as a whole and
not to any particular subdivision unless expressly so limited. Whenever the
words "include", "includes", and "including" are used in this Agreement, such
words shall be deemed to be followed by the words "without limitation". Each
reference herein to a Schedule or Exhibit refers to the information specifically
set forth therein, and all Schedules shall clearly indicate which subsection,
paragraph or item with respect to which the information set forth thereon is
provided. All pronouns used in this Agreement shall be deemed to refer to the
masculine, feminine, neuter, singular and plural, as the identity of the Person
to whom reference is made may require.
* * * * *
[All Signatures, Joinders, Certifications, Exhibits
and Schedules have been intentionally deleted.]
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AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF MERGER
This AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER (this "Amendment"),
dated as of January 5, 1994, is by and among Century Telephone Enterprises,
Inc., a Louisiana corporation ("Century"), Celutel Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Century ("Sub"), and Celutel, Inc.,
a Delaware corporation ("Celutel"), and is joined into by (i) Continental
Illinois Venture Corporation, a Delaware corporation ("CIVC"), for purposes of
Sections 10, 11, 12, 13, 17, 18 and 19 hereof, (ii) Frank S. Scarpa ("Scarpa")
for purposes of Sections 6, 7, 10, 11, 12, 13, 14, 17, 18 and 19 hereof and
(iii) Forrest L. Metz ("Metz") for purposes of Sections 15, 18 and 19 hereof.
WITNESSETH:
WHEREAS, on October 8, 1993, Century, Sub, Celutel, CIVC and Scarpa entered
into an Agreement and Plan of Merger (the "Merger Agreement"); and
WHEREAS, such parties desire to amend the Merger Agreement in accordance
with Section 12.11 thereof in the manner specified below;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in the Merger Agreement and this Amendment, and intending to be
legally bound hereby, Century, Sub, Celutel, CIVC, Scarpa and Metz hereby agree
as follows:
1. The following definitions set forth in Section 1.1 of the Merger
Agreement are hereby amended to read in their entirety as follows:
"Aggregate Merger Consideration" means $146,315,867 plus the Working
Capital Surplus, if any, minus (i) the Working Capital Deficit, if any, and
(ii) the Long-Term Indebtedness as of the Effective Time.
"Celutel Share Equivalents" mean, with respect to any record holder of
Celutel Securities as of any specified date, the sum of (i) the number of
shares of Celutel Common Stock held by such Person as of such date, (ii)
the number of shares of Celutel Common Stock into which the Celutel
Preferred Stock held of record by such Person (including all accrued and
unpaid stock dividends payable with respect to the Celutel Preferred Stock)
is convertible as of such date pursuant to Section 6A of the Celutel
Certificate of Designation and (iii) the number of shares of Celutel Common
Stock that would be issuable to such Person if such Person had sold his
Warrants to Celutel as of such date in exchange for such number of shares
of Celutel Common Stock equal to, in the case of Scarpa, the Scarpa Warrant
Settlement Value divided by the Estimated Per Share Equivalent
Consideration, and, in the case of Metz, the Metz Warrant Settlement Value
divided by the Estimated Per Share Equivalent Consideration.
"Celutel Stockholders" mean each record holder of Celutel Securities
outstanding immediately prior to the Effective Time (other than holders of
Dissenting Shares and other than shares of Celutel Stock that are held in
the treasury of Celutel or by any Subsidiary).
"Pro Rata Share Equivalent Interest" means, with respect to any
Celutel Stockholder, the quotient determined by dividing the Celutel Share
Equivalents held by such Person immediately prior to the Effective Time by
the Aggregate Celutel Share Equivalents.
"Public Stockholder Holdback Amount" means the portion of Aggregate
Cash Consideration to be delivered on the Closing Date by Century to the LC
Escrow Agent for the purposes set forth herein and in the LC Escrow
Agreement, which amount shall equal (i) $3,500,000 multiplied by the
aggregate Pro Rata Share Equivalent Interest held by the Public
Stockholders as of the Effective Time, plus (ii) $70,000.
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"Warrants" mean the Metz Warrants and Scarpa Warrants, referred to
collectively.
2. Section 1.1 of the Merger Agreement is hereby further amended by adding
the following new definitions:
"Aggregate Celutel Share Equivalents" mean the aggregate number of
Celutel Share Equivalents held immediately prior to the Effective Time by
all record holders of Celutel Securities (including all Dissenting Shares
but excluding any shares of Celutel Stock held in the treasury of Celutel
or by any Subsidiary), determined as if the conversion and purchase
transactions referred to in the definition of "Celutel Share Equivalents"
had been consummated immediately prior to such time.
"Agreement" means this Agreement, as amended by Amendment No. 1
thereto dated January , 1994.
"Celutel Securities" mean the Celutel Stock and the Warrants, referred
to collectively.
"Estimated Per Share Equivalent Consideration" means the quotient
derived by dividing (i) Celutel's estimate of the Aggregate Merger
Consideration set forth in the Calculation Certificate to be delivered by
Celutel pursuant to Section 2.8 by (ii) the Aggregate Celutel Share
Equivalents.
"Metz" means Forrest L. Metz, holder of the Metz Warrants.
"Metz Warrant Settlement Value" means the sum of (i) 25,000 multiplied
by the excess (if any) of the Estimated Per Share Equivalent Consideration
over $7.00 and (ii) 25,000 multiplied by the excess (if any) of the
Estimated Per Share Equivalent Consideration over $8.00.
"Metz Warrants" means the Warrants to Purchase Common Stock dated
April 26, 1989, May 30, 1988 and May 30, 1988 that entitle Forrest L. Metz
to purchase up to 25,000 shares of Celutel Common Stock per warrant at
respective per share prices of $7.00, $8.00 and $15.30, each as extended
pursuant to warrant extension agreements dated November 1, 1991.
"Scarpa Warrant Settlement Value" means the sum of (i) 1,000,000
multiplied by the excess (if any) of the Estimated Per Share Equivalent
Consideration over $5.00 and (ii) 744,843 multiplied by the excess (if any)
of the Estimated Per Share Equivalent Consideration over $5.50.
"Scarpa Warrants" mean Class A Stock Purchase Warrants dated January
5, 1988 and May 17, 1988 that entitle Scarpa to purchase up to 1,000,000
and 744,843 shares of Celutel Common Stock, respectively, at respective per
share prices of $5.00 and $5.50 (represented by Warrant Nos. W-1991-5 and
W-1991-6).
3. Section 2.7(a)(ii) of the Merger Agreement is hereby amended to read in
its entirety as follows:
2.7 Conversion of Shares.
(ii) all Celutel Securities issued and outstanding (including accrued
and unpaid stock dividends payable with respect to the Celutel Preferred
Stock) immediately prior to the Effective Time (other than shares of
Celutel Stock to be cancelled pursuant to paragraph (a)(i) or Dissenting
Shares) shall be converted into (A) an amount of cash equal to 50% of the
Aggregate Merger Consideration (the "Aggregate Cash Consideration") and (B)
such number of shares of Century Common Stock equal to the quotient
determined by dividing 50% of the Aggregate Merger Consideration by the
Century Stock Price (the "Aggregate Stock Consideration"); and
4. Section 2.7(b) of the Merger Agreement is hereby amended to read in its
entirety as follows:
(b) Subject to the adjustments, holdbacks and other terms and
conditions set forth in Sections 2.8 and 2.9 and the terms and conditions
of the Allocation Agreement, upon conversion of the Celutel Securities into
the Aggregate Merger Consideration in the manner described in paragraph
(a)(ii) above, each Celutel Stockholder shall have the right to receive (i)
a cash payment (without interest) equal to the Aggregate Cash Consideration
multiplied by such Person's Pro Rata Share Equivalent Interest, (ii) a
certificate representing such whole number of shares of Century Common
Stock as is derived by multiplying the number of shares of Century Common
Stock
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comprising the Aggregate Stock Consideration by such Person's Pro Rata
Share Equivalent Interest and (iii) in lieu of the issuance of a fractional
share of Century Common Stock hereunder, a cash payment (without interest)
equal to the fair market value of such fraction of a share of Century
Common Stock to which such holder would otherwise be entitled but for this
provision. For purposes of calculating the fractional share payment
specified in (iii) above, the fair market value of any such fraction of a
share of Century Common Stock shall equal the Century Stock Price
multiplied by such fraction.
5. The first sentence of Section 2.8(a) of the Merger Agreement is hereby
amended to read in its entirety as follows:
At least two business days prior to the Closing, Celutel shall deliver
to Century a certificate (the "Calculation Certificate") setting forth (i)
the amount to be owed by Celutel and the Subsidiaries as of the Effective
Time for all Long-Term Indebtedness, (ii) Celutel's good faith estimate of
Working Capital as of the Effective Time, (iii) Celutel's calculation of
the "Estimated Per Share Equivalent Consideration," the "Metz Warrant
Settlement Value" and the "Scarpa Warrant Settlement Value," along with a
schedule reflecting how such amounts were calculated, (iv) a true and
complete list of the amount of cash and number of shares of Century Common
Stock that each Non-Public Stockholder will be entitled to receive
hereunder at the Effective Time in respect of their Celutel Securities
(after giving effect to the terms and conditions of Sections 2.7(b) hereof
and the terms and conditions of the Allocation Agreement and the LC Escrow
Agreement) and (v) Celutel's calculation of the Public Stockholder Holdback
Amount, along with the name and address of the LC Escrow Agent and the
account number of the LC Escrow Account.
6. Article 2 of the Merger Agreement is hereby amended by adding to the end
thereof the following Section 2.12:
2.12 Settlement of Warrants. (a) Each of Scarpa and Metz agree that:
(i) At the Effective Time his Warrants will be, without further
action on the part of any party hereto, automatically converted into the
right to receive the consideration specified under Section 2.7, which
will constitute full settlement of all his rights and interests under
the Warrants;
(ii) After the Effective Time, his Warrants will be void and
entitle him to no rights of any kind whatsoever, other than the right to
receive the consideration specified under Section 2.7 on the terms and
conditions set forth herein;
(iii) From the date hereof through the Effective Time, he shall
refrain from exercising any portion of or rights under the Warrants and
shall not sell, transfer, assign or otherwise dispose of the Warrants or
any interests therein; and
(iv) At or prior to the Closing, he shall deliver his respective
Warrants to Century, marked "cancelled."
(b) Each of Scarpa and Metz represent and warrant that (i) his
respective Warrants represent his only Option or right of any nature
whatsoever to purchase or otherwise acquire any of Celutel's capital stock,
(ii) he is the lawful registered and beneficial owner of such Warrants, and
(iii) his respective Warrants contain his entire understanding with Celutel
with regard to the subject matter thereof, and have not been amended or
modified in any respect.
(c) Promptly after Century's receipt of the cancelled Warrants at or
after the Effective Time (along with any information relating to backup tax
withholding that Century may reasonably request), Century or its agent
shall mail the consideration specified in Section 2.7 to (i) in the case of
Scarpa, the address specified in his Letter of Transmittal, and (ii) in the
case of Metz, c/o Urban Engineering, 877 South Alvernon Way, Tucson,
Arizona 85711. Notwithstanding anything to the contrary herein, neither
Metz nor Scarpa shall be required to deliver a Letter of Transmittal with
respect to their Warrants.
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(d) Celutel hereby irrevocably consents to all of the transactions
contemplated by this Section 2.12 and irrevocably waives any provision to
the contrary contained in the Warrants.
7. Section 6.14 of the Merger Agreement is hereby deleted in its entirety
and the phrase '[Section 6.14 intentionally omitted]' is added in lieu thereof.
8. Section 7.1(g) of the Merger Agreement is hereby amended to read in its
entirety as follows:
(g) LC Escrow Agreement. An LC Escrow Agreement shall have been duly
executed and delivered by the LC Escrow Agent, the Stockholders'
Representative and the Non-Public Stockholders in substantially the form of
agreement distributed by Celutel's special counsel to, among others, PNC
Bank on December 17, 1993.
9. Section 7.2(k) of the Merger Agreement is hereby amended to read in its
entirety as follows:
(k) Settlement of Warrants. Neither Scarpa nor Metz shall have
breached any covenants contained in Section 2.12, and all of the
representations and warranties of Scarpa and Metz contained in such section
shall be true and correct on and as of the Closing Date as though made on
and as of such date.
10. Section 10.1(a) of the Merger Agreement is hereby amended to read in
its entirety as follows:
(a) Except as otherwise provided in Section 10.4 hereof, Century and
its subsidiaries and each of their respective officers, directors,
employees, agents, Affiliates, successors and permitted assigns
(collectively, the "Century Indemnitees") shall be defended, indemnified,
held harmless, and reimbursed for, from and against each and every demand,
claim, action, loss (which shall include any diminution in value of
Celutel, any Subsidiary or any of their assets), liability, judgment,
damage, cost and expense (including interest, penalties, and the reasonable
fees, disbursements and expenses of attorneys, accountants and other
professional advisors) (collectively, "Losses") imposed on or incurred by
the Century Indemnitees, directly or indirectly, relating to, resulting
from or arising out of (i) any inaccuracy of any representation or warranty
made by Celutel or the Principal Stockholders in this Agreement (including
the representations and warranties made in any Exhibit or Schedule hereto)
or any Closing Instrument, (ii) any breach of any covenant, agreement or
other obligation of Celutel or the Principal Stockholders under this
Agreement or any Closing Instrument, (iii) any claim of any nature made by
former stockholders of Celutel in their capacity as stockholders or by the
minority stockholders or partners of the Cellular Entities in their
capacity as stockholders or partners (whether arising under the securities
laws, corporate law, tort law, equitable principles or otherwise and
whether or not described in any Celutel Exchange Act Report and whether or
not arising out of any matter described in any Schedule hereto) that relate
to any act or omission of Celutel or the Subsidiaries prior to the Closing
or to the distribution of the Merger Consideration in accordance with this
Agreement, including the negotiation, execution, delivery, announcement or
performance of the Century Purchase Agreement or this Agreement and the
disbursement of funds in accordance with the Allocation Agreement and the
LC Escrow Agreement, provided that in no event will any Century Indemnitee
be entitled to be indemnified for Losses resulting from any breach of a
representation, warranty or covenant of Century hereunder (in which event
the Celutel Stockholders shall continue to have the rights to
indemnification and other remedies provided hereunder), (iv) any claim
arising out of any Additional Purchases or any Transaction Agreement, (v)
the matters described on Schedule 3.18 under the heading "Biloxi
Microwave," or (vi) any claim arising out of the automobile accident of
Celutel's employee, Jorge E. Abrego, on September 24, 1993 (if and to the
extent the Losses associated with such accident are not covered by
insurance), provided, however, that the Celutel Stockholders shall have no
liability under this Section 10.1(a) unless and until the aggregate of all
Losses resulting therefrom (other than those resulting from breaches of any
covenants, agreements or other obligations under Article 2) exceeds
$200,000, in which event the Celutel Stockholders shall be liable only for
all Losses in excess of such amount. Subject to all of the procedures,
limitations and conditions of this Article 10, the Celutel Stockholders,
acting through the Stockholders' Representative, shall
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defend, indemnify, hold harmless and reimburse the Century Indemnitees for,
from and against all Losses arising out of all claims under this Section
10.1(a) other than (i) any Losses that arise out of Unlimited Claims (as
defined in Section 10.4) or claims under Section 10.1(a)(v), in each case
as to which written notice was not given prior to the first anniversary of
the Closing Date, or (ii) any portion of Losses arising out of Unlimited
Claims that exceed the amount payable under the Letter of Credit (the
Losses specified in (i) and (ii) being hereinafter referred to as
"Uncovered Losses"), and the Principal Stockholders shall jointly and
severally defend, indemnify, hold harmless and reimburse the Century
Indemnities for, from and against all Uncovered Losses.
11. Section 10.4(a) of the Merger Agreement is hereby amended to read in
its entirety as follows:
(a) No party shall have liability under this Article 10 unless written
notice of an Indemnity Claim shall have been given prior to the first
anniversary of the Closing Date, provided, however, that any of the Century
Indemnitees may give written notice of and may make a claim (A) after such
date and at any time prior to the third anniversary of the Closing Date if
such claim arises from any inaccuracy of any representations or warranties
made by Celutel in Section 3.29 (it being understood that all information
set forth in items (i), (ii) or (iv) of Schedule 3.29 has been provided
solely for informational purposes and shall not in any manner be deemed to
limit, restrict or qualify the representations and warranties made by
Celutel in Section 3.29) or if such claim arises under subsection (iii),
(iv) or (v) of Section 10.1(a), (B) after such date and at any time prior
to the expiration of the appropriate statute of limitations with respect
thereto if such claim arises from any inaccuracy of any representations or
warranties made by Celutel in Section 3.28 and (C) after such date and at
any time prior to the third anniversary of the Closing Date if such claim
arises under subsection (vi) of Section 10.1(a), provided, however, that if
any currently pending lawsuit arising from a claim described under
subsection (vi) remains unresolved at the end of such three-year period,
such period shall be extended with respect to such lawsuit until such
lawsuit is resolved pursuant to a binding settlement with prejudice or a
final and nonappealable judgment, order, decree or similar court action
(the claims specified in (A), (B) and (C) above (other than claims arising
under Section 10.1(a)(v)) being hereinafter referred to as the "Unlimited
Claims"), provided, however, that nothing in this Section 10.4 shall modify
the obligation of the Indemnified Person to give the written notice
specified in Section 10.3(a) hereof.
12. Section 10.4(e) of the Merger Agreement is hereby amended to read in
its entirety as follows:
(e) Under no circumstances shall any Celutel Stockholder have any
liability for any special, incidental or consequential Losses (including
Losses for diminution in value), except in connection with any one or more
indemnification payments made pursuant to Section 10.1(a) that, together
with all other indemnification payments, in the aggregate do not exceed
$3.5 million, provided, however, that under no circumstances will punitive
damages be considered special, incidental or consequential Losses.
13. The parties hereto acknowledge that the Supplemental Consideration
contemplated by the Merger Agreement has been appropriately calculated and
adequately reflected in the revised definition of "Aggregate Merger
Consideration" appearing in Section 1 hereof, and agree to waive any rights to
object to the calculation of such amount after the date of this Amendment.
14. The portion of the preamble of the Merger Agreement that lists the
provisions of the Merger Agreement as to which Scarpa shall be bound is hereby
amended to add Section 2.12 and delete Section 6.14.
15. (a) Metz hereby (i) agrees to be bound by Section 2.12 and Articles 10,
11 and 12 of the Merger Agreement, as amended hereby (collectively, the
"Agreement"), as if and to the same extent as though he had originally executed
a joinder to the Merger Agreement as a Celutel Stockholder, and (ii)
acknowledges his receipt and review of a preliminary copy of the Proxy Statement
and Prospectus (the "Proxy Statement") filed with the Securities and Exchange
Commission on December 6, 1993 as part of
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Century's Registration Statement on Form S-4 (Registration No. 33-50791), which
describes, among other things, his rights and obligations under the Agreement.
(b) Without limiting the generality of subsection (a), Metz hereby
represents and warrants that he understands that (i) Continental Illinois
Venture Corporation (the "Stockholders' Representative") will, upon the adoption
of the Agreement by the Celutel Stockholders and without any notarial act or
other action of any kind on his part, be irrevocably appointed as his agent,
proxy and attorney-in-fact from and after the Closing Date (as defined in the
Agreement) with respect to those matters set forth in the Agreement and the LC
Escrow Agreement (as defined in the Agreement), all as more fully described in
the Proxy Statement, (ii) that such agency and proxy are coupled with an
interest, and are therefore irrevocable without the consent of the Stockholders'
Representative and shall survive his death, incapacity or bankruptcy, (iii) all
decisions and acts by the Stockholders' Representative in such capacity will be
binding upon him, and, except as set forth in the Proxy Statement, he will have
no right to object, dissent, protest or otherwise contest such decisions or
acts, and (iv) the cash portion of his Merger Consideration payable as of the
Closing Date will be reduced by his pro rata portion of the Public Stockholder
Holdback Amount (as defined in the Agreement) in order to fund his pro rata
share of (a) any indemnity claims made by Century or its affiliates pursuant to
the Agreement, (b) any obligations with respect to post-Closing Date adjustments
to the Aggregate Merger Consideration (as defined in the Agreement) and (c)
certain fees and expenses, all as more fully described in the Proxy Statement.
Metz further acknowledges that all of his Merger Consideration (as defined in
the Agreement) other than his pro rata share of the Public Stockholder Holdback
Amount shall be delivered by Century or its exchange agent and that his pro rata
share of any remaining amounts held in accordance with the LC Escrow Agreement
shall be delivered by PNC Bank, National Association, the LC Escrow Agent (as
defined in the Agreement), all on the terms and conditions described herein and
in the Proxy Statement.
(c) Metz hereby represents and warrants that he has the full legal right,
power, capacity and authority to execute, deliver and perform this Amendment,
without the consent or joinder of any other person, and this instrument
constitutes a valid and legally binding obligation of Metz, enforceable against
him in accordance with its respective terms.
16. After the Closing Date, Century shall (i) provide the Stockholders'
Representative, on a quarterly basis or at such other time or times reasonably
requested by the Stockholders' Representative, with a list of former Celutel
stockholders who have notified Century or its exchange agent of a change in
their mailing address in the manner indicated in the Letter of Transmittal (as
defined in the Agreement), (ii) promptly notify the Stockholders' Representative
of any act or omission of a former Celutel stockholder that results in such
stockholder forfeiting his appraisal rights under Section 262 of the General
Corporation Law of the State of Delaware, and (iii) upon the reasonable request
of the Stockholders' Representative, provide such other information which may be
necessary for the Stockholders' Representative to discharge its obligations
under the LC Escrow Agreement.
17. The parties acknowledge that, except as provided above, all terms and
conditions of the Merger Agreement shall remain in full force and effect.
18. This Amendment shall be governed by and construed in accordance with
the internal laws of the State of Delaware, without regard to the principles of
conflict of laws.
19. This Amendment may be executed in one or more counterparts, each of
which shall be considered an original counterpart, and shall become a binding
agreement when each party shall have executed a counterpart.
* * * * *
[All Signatures have been intentionally deleted.]
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APPENDIX II
TERM CROSS-REFERENCE GLOSSARY
The following terms used in the Proxy Statement have the meanings set forth
on the pages indicated below:
<TABLE>
<S> <C>
PAGE ON WHICH
DEFINED TERM: TERM IS FIRST DEFINED:
- -------------------------------------------------------------------------------------------- -----------------------
"Acquired Shares"........................................................................... 47
"Acquiring Person".......................................................................... 69
"Acquiror".................................................................................. 73
"Aggregate Cash Consideration".............................................................. 23
"Aggregate Merger Consideration"............................................................ x
"Aggregate Stock Consideration"............................................................. 23
"Aggregate Transaction Value"............................................................... 21
"Allocation Agreement"...................................................................... 30
"AMEX"...................................................................................... 65
"Automobile Claims"......................................................................... 33
"Average Century Price"..................................................................... 25
"Bank"...................................................................................... 61
"broker non-votes".......................................................................... 5
"Business Combination"...................................................................... 73
"Calculation Amount"........................................................................ 22
"Celltech".................................................................................. xiii
"Celutel"................................................................................... i
"Celutel Affiliates"........................................................................ 42
"Celutel Bylaws"............................................................................ 67
"Celutel Certificate"....................................................................... 67
"Celutel Common Stock"...................................................................... vi
"Celutel Preferred Stock"................................................................... vi
"Celutel Securities"........................................................................ 22
"Celutel Share Equivalents"................................................................. ix
"Celutel Stock"............................................................................. vi
"Celutel Warrants".......................................................................... 29
"Century"................................................................................... i
"Century Articles".......................................................................... 67
"Century Bylaws"............................................................................ 67
"Century Indemnitees"....................................................................... 33
"Century Letter of Intent".................................................................. 11
"Century Preferred Stock"................................................................... 67
"Century Stock"............................................................................. i
"Century Sub"............................................................................... 5
"CIVC"...................................................................................... vi
"Claim"..................................................................................... 35
"Closing"................................................................................... viii
"Closing Date".............................................................................. 22
"Code"...................................................................................... xii
</TABLE>
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<TABLE>
<S> <C>
PAGE ON WHICH
DEFINED TERM: TERM IS FIRST DEFINED:
- -------------------------------------------------------------------------------------------- -----------------------
"Commission"................................................................................ ii
"Continuing Directors"...................................................................... 69
"Daniels"................................................................................... 8
"Delaware GCL".............................................................................. xiv
"dissenting stockholders"................................................................... 22
"Distribution Date"......................................................................... 69
"Effective Time"............................................................................ viii
"Engagement Letter"......................................................................... 21
"Escrow Agent".............................................................................. xi
"Escrow Agreement".......................................................................... 37
"Exchange Act".............................................................................. ii
"Exchange Agent"............................................................................ xiii
"Exempt Person"............................................................................. 69
"FCC"....................................................................................... xii
"FCC Claims"................................................................................ 33
"Fiduciary Determination"................................................................... 41
"Indebtedness Adjustment"................................................................... 22
"Interested Shareholder".................................................................... 72
"Interested Shares"......................................................................... 73
"IRS"....................................................................................... 31
"Issuer".................................................................................... x
"Lazard".................................................................................... vii
"LC Escrow Account"......................................................................... 35
"LC Escrow Agent"........................................................................... x
"LC Escrow Agreement"....................................................................... x
"LEC"....................................................................................... 1
"Letter of Credit".......................................................................... xi
"Liability Cap"............................................................................. 34
"Losses".................................................................................... 33
"Louisiana Fair Price Statute".............................................................. 72
"Louisiana Law"............................................................................. 67
"Meeting"................................................................................... vi
"Merger".................................................................................... i
"Merger Agreement".......................................................................... vi
"Merger Consideration"...................................................................... x
"Merger Proposal"........................................................................... vi
"MGC Agreement"............................................................................. 9
"MGC Properties"............................................................................ 9
"Mr. Scarpa"................................................................................ vii
"MSA"....................................................................................... xi
"non-dissenting stockholders"............................................................... 22
"Non-Public Stockholders"................................................................... 30
"Other Acquirees"........................................................................... 52
"Other Acquisitions"........................................................................ 52
"Other Bidder".............................................................................. 9
"Outside Directors"......................................................................... 38
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
PAGE ON WHICH
DEFINED TERM: TERM IS FIRST DEFINED:
- -------------------------------------------------------------------------------------------- -----------------------
"pop"....................................................................................... vi
"Post-Closing Liabilities".................................................................. x
"Principal Stockholders".................................................................... vii
"pro forma information"..................................................................... 52
"Pro Rata Share"............................................................................ 36
"Pro Rata Share Equivalent Interest"........................................................ 29
"Proposed Acquiree"......................................................................... 52
"Proposed Acquisition"...................................................................... 52
"Proxy Statement"........................................................................... ii
"Public Stockholder Holdback Amount"........................................................ x
"Public Stockholders"....................................................................... xi
"Purchase and Sale Claims".................................................................. 33
"Purchase Price"............................................................................ 68
"Record Date"............................................................................... 5
"Registration Statement".................................................................... i
"Right"..................................................................................... 68
"Rule 145".................................................................................. 42
"S & P 500"................................................................................. 19
"Section 262"............................................................................... 44
"Securities Act"............................................................................ i
"Selling Stockholders"...................................................................... i
"Series AA Preferred Stock"................................................................. 68
"Stock Acquisition Date".................................................................... 69
"Stockholder Claims"........................................................................ 33
"Stockholder Indemnitees"................................................................... 34
"Stockholders' Representative".............................................................. vi
"Symphony".................................................................................. 59
"Uncovered Losses".......................................................................... 33
"Unlimited Claims".......................................................................... 34
"Working Capital Adjustment"................................................................ 22
</TABLE>
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APPENDIX III
LAZARD FRERES & CO.
ONE ROCKEFELLER PLAZA
NEW YORK, N.Y. 10020
TELEPHONE (212) 632-6000
FACSIMILE (212) 632-6060
January , 1994
The Board of Directors
CELUTEL, INC.
900 Bestgate Road
Suite 400
Annapolis, MD 21401
Dear Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to the Public Stockholders (as defined below) of Class A Common Stock,
par value $.20 per share (collectively, the "Common Stock"), of Celutel, Inc.
("Celutel") of the consideration (the "Merger Consideration") which they will
receive in the proposed merger (the "Merger") of Celutel and a subsidiary of
Century Telephone Enterprises, Inc. ("Century"). For purposes of this opinion,
Public Stockholders is defined to include all holders of Common Stock but does
not include the following holders of Celutel capital stock (as to whom we
express no opinion): (i) holders who are Senior Officers as defined in the
merger agreement described below; and (ii) holders of Celutel's 18% Senior
Convertible Preferred Stock ("Preferred Stock") or Warrants ("Warrants") as
defined in the Merger Agreement (as defined below), whether or not they also
hold Common Stock.
We understand that the Merger is to be effected pursuant to an Agreement
and Plan of Merger dated as of October 8, 1993, as amended as of January 5,
1994, among Century, a subsidiary of Century and Celutel (the "Merger
Agreement"), pursuant to which, among other things, each share of Common Stock
(other than shares held by dissenting stockholders) will be converted into the
right to receive cash and Century Common Stock, par value $1.00 per share, (the
"Century Common Stock"), in the amounts and subject to the adjustments as
described in the Merger Agreement.
Pursuant to the Merger Agreement the aggregate merger consideration is
based on the following formula: $146,315,867 plus the working capital surplus,
if any, minus (i) the working capital deficit, if any, and (ii) the long-term
indebtedness of Celutel, in each case as of the effective date of the Merger,
all as more fully described in the Merger Agreement. Holders of shares of Common
Stock which are converted pursuant to the Merger will receive, based on their
respective pro rata share interests, the following consideration: (i) an amount
of cash equal to 50% of the aggregate merger consideration and (ii) such number
of shares of Century Common Stock equal to the quotient obtained by dividing 50%
of the aggregate merger consideration by the average stock price of Century
Common Stock. The Merger Agreement defines the average price of Century Common
Stock as the arithmetical average of the per share closing prices of Century
Common Stock as reported in the NYSE Composite Transactions section of The Wall
Street Journal for each of the ten days immediately preceding the third trading
day prior to the completion of the Merger, subject to a floor price of $27 and a
ceiling price of $33. The Merger Agreement also contains certain adjustments and
holdbacks which are principally related to certain post closing calculations and
indemnification provisions.
We further understand that the Merger Consideration which the Public
Stockholders will receive pursuant to the Merger Agreement is calculated as if
(i) all shares of Preferred Stock are converted at closing into Common Stock at
the then present conversion rate, including all accrued and unpaid dividends
(without receiving, or being compensated for, any redemption premium or
redemption warrant) and (ii) all Warrants were purchased by Celutel for a number
of shares of Celutel Common Stock as calculated in accordance with the Merger
Agreement. We express no opinion on the allocation
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agreement among the holders of Preferred Stock and the Senior Officers
allocating their respective Merger Consideration.
Lazard, Freres & Co. has acted as financial advisor to Celutel in
connection with the proposed Merger. We have, among other things:
i. reviewed the terms and conditions of the Merger Agreement and Proxy
Statement and Prospectus relating to the Merger,
ii. analyzed certain historical business and financial information
relating to Celutel and Century, including certain recent Annual
Reports to Stockholders and Annual Reports on Forms 10-KSB or 10-K
of Celutel and Century and certain recent Quarterly Reports on
Forms 10-QSB or 10-Q of Celutel and Century,
iii. reviewed certain financial forecasts and other data provided to us
by Celutel relating to the business of Celutel,
iv. conducted discussions with members of the senior management of
Celutel and limited discussions with members of the senior
management of Century with respect to the business and prospects of
Celutel and Century and the strategic objectives of each,
v. reviewed public information with respect to certain other companies
in lines of business and in markets, we believe to be generally
comparable to the businesses of Celutel and Century,
vi. reviewed the financial terms of certain recent business combinations
in the telecommunications industry specifically and in other
industries generally,
vii. reviewed the historical stock prices and trading volumes of the
Common Stock and of the Century Common Stock, and
viii. conducted such other financial studies, analyses and
investigations as we deemed appropriate.
We have neither received nor reviewed any financial projections or other
non-public information prepared by Century pertaining to the future prospects of
Century.
We have relied upon the accuracy and completeness of the financial and
other information provided by Celutel and Century to us and have not undertaken
any independent verification of such information or any independent valuation or
appraisal of any of the assets of Celutel or Century. With respect to the
financial forecasts referred to above, we have assumed that they have been
reasonably prepared on a basis reflecting the best currently available judgments
of Celutel's management as to the future financial performance of Celutel.
Further, our opinion is based on economic, monetary and market conditions
existing on the date of this opinion. We express no opinion as to what the value
of the Century Common Stock actually will be when issued to the Public
Stockholders upon consummation of the Merger.
In rendering our opinion, we have also assumed that obtaining the necessary
regulatory and governmental approvals for the proposed Merger may delay
consummation of the Merger, and that, in the course of obtaining such approvals,
no restriction will be imposed that will have a material adverse effect on the
contemplated benefits of the proposed Merger.
Our engagement and the opinion expressed herein is solely for the benefit
of Celutel's Board of Directors and is not on behalf of and is not intended to
confer the rights or remedies upon Century, any stockholders of Celutel or
Century, or any person other than Celutel's Board of Directors.
Based on the foregoing and such other factors as we deemed relevant,
including our assessment of current economic, monetary and market conditions, we
are of the opinion that as of the date hereof, the Merger Consideration is fair
to the Public Stockholders (other than Century or any of its respective
affiliates) from a financial point of view.
Very truly yours,
Lazard, Freres & Co.
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APPENDIX IV
LC ESCROW AND REIMBURSEMENT AGREEMENT
LC ESCROW AND REIMBURSEMENT AGREEMENT (this "Agreement") made as of the
10th day of February, 1994 by and among PNC Bank, National Association, in its
capacity as the issuer of the Letter of Credit (the "ISSUER"), PNC Bank,
National Association, in its capacity as escrow agent hereunder (the "LC ESCROW
AGENT"), Continental Illinois Venture Corporation, a Delaware corporation
("CIVC"), in its capacity as the Stockholders' Representative for all Celutel
Stockholders (the "STOCKHOLDERS' REPRESENTATIVE") and in its capacity as a
stockholder of Celutel, Inc., a Delaware corporation ("CELUTEL"), Avy H. Stein,
John R. Willis, Frank S. Scarpa, the Scarpa Family Trust and each of the other
stockholders listed on the signature pages hereto (together with CIVC,
collectively, the "NON-PUBLIC STOCKHOLDERS"). CIVC, Messrs. Stein, Willis and
Scarpa and the Scarpa Family Trust are collectively referred to herein as the
"NP-CREDIT STOCKHOLDERS." The Non-Public Stockholders other than the NP-Credit
Stockholders are referred to herein as the "NP-CASH STOCKHOLDERS." Capitalized
terms used but not otherwise defined in context shall have the respective
meanings set forth in paragraph 3.
WHEREAS, Century Telephone Enterprises, Inc., a Louisiana corporation
("CENTURY"), Celutel Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of Century ("SUB"), and Celutel have entered into an Agreement and
Plan of Merger, dated as of October 8, 1993, as amended (the "MERGER
AGREEMENT"), providing for the merger of Sub with and into Celutel.
WHEREAS, the Merger Agreement requires Celutel to obtain from the Issuer
the Letter of Credit to serve as security for and to satisfy indemnification
claims made against the Celutel Stockholders by the Century Indemnitees under
the Merger Agreement (each, a "CLAIM" and the amount paid out to Century or the
Escrow Agent under the Letter of Credit, the "CLAIM AMOUNT").
WHEREAS, the Merger Agreement also requires the Celutel Stockholders to pay
to Century any adjustment to the Aggregate Merger Consideration (an
"ADJUSTMENT") due Century.
WHEREAS, the Merger Agreement provides that at the Closing Century shall
deposit into escrow with the LC Escrow Agent the Public Stockholder Holdback
Amount in the aggregate amount of $530,800, $460,000 of which shall be held
as cash collateral to reimburse the Issuer for the Public Share of any Claim
Amount (the "REIMBURSEMENT AMOUNT") and $70,000 of which shall be held to pay
to Century the Public Share of any Adjustment (the "ADJUSTMENT AMOUNT").
WHEREAS, the Issuer is willing to issue the Letter of Credit for the
account of all Celutel Stockholders if (i) the LC Escrow Agent has received the
Reimbursement Amount to be held by the LC Escrow Agent on behalf of the Issuer
as cash collateral to secure the Public Share of reimbursement obligations to
the Issuer, (ii) the NP-Cash Stockholders have deposited into escrow with the LC
Escrow Agent cash collateral to be held by the LC Escrow Agent on behalf of the
Issuer in the aggregate amount of $ to secure each NP-Cash
Stockholder's Pro Rata Share of reimbursement obligations to the Issuer (the "NP
REIMBURSEMENT AMOUNT"), (iii) the NP-Credit Stockholders have executed certain
reimbursement agreements for the benefit of the Issuer setting forth their
reimbursement obligations to the Issuer, (iv) the Stockholders' Representative
has executed certain reimbursement agreements for the benefit of the Issuer and
for the limited purposes described therein on behalf of the Celutel Stockholders
other than the NP-Credit Stockholders (together with the reimbursement
agreements contemplated in clause (iii) above, the "REIMBURSEMENT DOCUMENTS")
and (v) such other conditions as are referred to in the Commitment Letter dated
November 19, 1993, by and among the
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Issuer, Frank S. Scarpa and CIVC and the summary of terms and conditions
attached thereto are satisfied.
WHEREAS, the Issuer will be reimbursed for any Claim Amount as follows: (i)
the LC Escrow Agent shall, upon notification from the Issuer of a Claim Amount,
pay (x) the Public Share of the Claim Amount to the Issuer from the
Reimbursement Account (as defined below) and (y) each NP-Cash Stockholder's Pro
Rata Share of the Claim Amount to the Issuer from the NP Reimbursement Account
(as defined below) and (ii) each NP-Credit Stockholder shall pay its Pro Rata
Share of the Claim Amount to the Issuer as set forth in the Reimbursement
Documents.
WHEREAS, Century shall be paid any Adjustment as follows: (i) the LC Escrow
Agent shall, upon notification from the Stockholders' Representative of an
Adjustment due Century, pay to Century the Public Share of the Adjustment from
the Adjustment Account (as defined below) to the extent of the funds in the
Adjustment Account and (ii) each Non-Public Stockholder shall pay to Century its
Pro Rata Share of the Adjustment from its own funds (which shall not include the
amounts held in the NP Reimbursement Account).
WHEREAS, the Merger Agreement requires Century to pay to each Celutel
Stockholder its Pro Rata Share of any (i) Adjustment due the Celutel
Stockholders and (ii) indemnification claims payable by Century.
NOW THEREFORE, in consideration of the promises and respective agreements
set forth above, the parties agree as follows:
1. LC Escrow Agent. The Celutel Stockholders, by the adoption of the Merger
Agreement, and the Issuer , by execution of this Agreement, hereby designate and
appoint the LC Escrow Agent to serve in accordance with the terms, conditions
and provisions of this Agreement, and the LC Escrow Agent hereby agrees to act
as such, upon the terms, conditions and provisions provided in this Agreement.
2. Stockholders' Representative. The Non-Public Stockholders each hereby
confirm the appointment of the Stockholders' Representative as their
representative under this Agreement and the Stockholders' Representative shall
have the power and authority to take all actions required or permitted to be
taken under this Agreement and the Merger Agreement.
3. Definitions.
"Account" means the Account and any sub-accounts thereof established
pursuant to the terms of this Agreement.
"Aggregate Merger Consideration" means $ plus or minus any
adjustments made pursuant to Article 2 of the Merger Agreement.
"Celutel Stock" means, collectively, (i) shares of Class A Common Stock,
$.20 par value per share, of Celutel, (ii) shares of 18% Senior Convertible
Preferred Stock, $.20 par value per share, of Celutel and (iii) warrants issued
by Celutel to Frank S. Scarpa and Forest L. Metz entitling each such party to
purchase certain amounts of Celutel's Class A Common Stock, $.20 par value per
share.
"Celutel Stockholder" means each record holder of Celutel Stock outstanding
immediately prior to the Closing.
"Century Indemnitees" means, collectively, Century and its subsidiaries and
each of their respective officers, directors, employees, affiliates, successors
and permitted assigns.
"Closing" means the closing of the transactions contemplated by the Merger
Agreement.
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"Dissenting Stockholder" means each Public Stockholder set forth in Exhibit
D hereto as a Dissenting Stockholder.
"Escrow Agent" means First American Bank & Trust of Louisiana, Monroe,
Louisiana.
"Exchange Agent" means Society Shareholder Services, Inc., or such
successor exchange agent as may be appointed by Century.
"Failed Dissenting Stockholder" means each Public Stockholder set forth in
Exhibit D hereto as a Failed Dissenting Stockholder.
"Letter of Credit" means the letter of credit issued by the Issuer in favor
of Century dated as of the date hereof.
"Non-Dissenting Stockholder" means each Public Stockholder set forth in
Exhibit D hereto who is not a Dissenting Stockholder.
"Pro Rata Share" means, for each Public Stockholder and for each Non-Public
Stockholder, the percentage set forth in Exhibits D & A hereto, respectively,
unless another exhibit is referenced, in which case, the percentage set forth in
that exhibit for the Celutel Stockholders therein listed.
"Public Share" means the percentage set forth in Exhibit A hereto as the
Public Share.
"Public Stockholders" means each Celutel Stockholder set forth on Exhibit D
hereto.
"Public Stockholder Holdback Amount" means the aggregate amount of $530,800
to be delivered by Century to the LC Escrow Agent pursuant to Article 2 of the
Merger Agreement.
4. Deposits.
(a) Concurrently with the execution of this Agreement, Century has
delivered the Public Stockholder Holdback Amount to the LC Escrow Agent for
deposit into escrow account number [ ] (the "ACCOUNT") as follows:
(i) the Reimbursement Amount shall be deposited into a sub-account of the
Account known as the Reimbursement Account (the "REIMBURSEMENT ACCOUNT") and
(ii) the Adjustment Amount shall be deposited into a sub-account of the Account
known as the Adjustment Account (the "ADJUSTMENT ACCOUNT") subject to the terms
and provisions herein contained, the receipt of which is hereby acknowledged by
the LC Escrow Agent by its execution of this Agreement.
(b) Concurrently with the execution of this Agreement, each NP-Cash
Stockholder has delivered the amount set forth in Exhibit E hereto (in the
aggregate, the NP Reimbursement Amount) to the LC Escrow Agent for deposit into
a sub-account of the Account known as the NP Reimbursement Account (the "NP
REIMBURSEMENT ACCOUNT") subject to the terms and conditions herein contained,
the receipt of which is hereby acknowledged by the LC Escrow Agent by its
execution of this Agreement.
(c) If at any time during the term of this Agreement the LC Escrow Agent
receives any additional amounts from Century or the Stockholders' Representative
representing claims or adjustments paid by Century to the Public Stockholders,
the LC Escrow Agent shall deposit such additional amounts (the "ADDITIONAL
AMOUNTS") into a sub-account of the Account known as the Additional Amounts
Account (the "ADDITIONAL AMOUNTS ACCOUNT").
5. Reimbursement Documents. Concurrently with the execution of this
Agreement, the NP-Credit Stockholders and the Issuer have entered into the
Reimbursement Documents pursuant to which, among other things, the Issuer will
be reimbursed for up to $ by the NP-Credit Stockholders for their
aggregate Pro Rata Share of all draws under the Letter of Credit.
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6. Investment Income. All income, interest and realized gains of all kinds
("INVESTMENT INCOME") on funds in the Reimbursement Account, the Adjustment
Account and the Additional Amounts Account shall be part of the Additional
Amounts and shall be deposited in the Additional Amounts Account. All Investment
Income on funds in the NP Reimbursement Account shall be part of the NP
Reimbursement Amount and shall be deposited in the NP Reimbursement Account. All
Investment Income on funds in the Dissenters Account (as defined below) shall be
deposited in the Dissenters Account.
7. Distributions.
(a) Adjustment. The Stockholders' Representative shall give written notice
to the LC Escrow Agent and each NonPublic Stockholder if an Adjustment is due
Century under the Merger Agreement and the amount of the Adjustment, specifying
in such notice the Public Share of the Adjustment and that a distribution is
being requested pursuant to this paragraph 7(a). Within 10 days after receipt of
such notice, (i) the LC Escrow Agent shall pay to Century the Public Share of
the Adjustment, as specified in the Stockholders' Representative's notice, out
of the Adjustment Account to the extent of the funds in the Adjustment Account
and (ii) each Non-Public Stockholder shall pay to Century its Pro Rata Share of
the Adjustment from its own funds (which shall not include amounts held in the
NP Reimbursement Account). To the extent that the balance in the Adjustment
Account is insufficient to cover the Public Share of an Adjustment (the
"DEFICIENCY"), the LC Escrow Agent shall give the Stockholders' Representative
written notice of the Deficiency and the Stockholders' Representative shall then
give each Non-Public Stockholder written notice of the Deficiency. Within 10
days after receipt of such notice from the Stockholders' Representative, each
Non-Public Stockholder shall pay to Century its Pro Rata Share, as set forth in
Exhibit C hereto, of the Deficiency from its own funds (which shall not include
amounts held in the NP Reimbursement Account). Notwithstanding the above, the
Non-Public Stockholders, in the aggregate, shall not be liable to Century for
any part of any Deficiency in excess of the Public Share of $3,500,000 less (i)
the Adjustment Amount and (ii) the Public Share of all Claim Amounts paid at or
prior to the time the Deficiency is due Century.
(b) Adjustment and Additional Amounts. Within 5 days after the later of
(i)the final calculation of the Aggregate Merger Consideration under the Merger
Agreement and (ii)the payment of any required Adjustment, if at that time the
sum of the balances in the Adjustment Account and the Additional Amounts Account
exceeds $ 25,000, then the Stockholders' Representative shall provide the LC
Escrow Agent with written notice (i)instructing the LC Escrow Agent to
distribute (x)the balance in the Adjustment Account and (y)the balance in the
Additional Amounts Account as of the date of such notice and (ii)specifying that
a distribution is being requested pursuant to this paragraph7(b). Within 10days
after receipt of such notice, the LC Escrow Agent shall pay to each
Non-Dissenting Stockholder and to each Failed Dissenting Stockholder its Pro
Rata Share, as set forth in ExhibitD hereto, of the amounts in clauses (x) and
(y) above and the LC Escrow Agent shall deposit into a sub-account of the
Account known as the Dissenters Account (the "DISSENTERS ACCOUNT") each
Dissenting Stockholder's Pro Rata Share, as set forth in ExhibitD hereto, of the
amounts in clauses (x) and (y) above (in the case of each such stockholder, such
amount is referred to as such stockholder's "DISSENTER SHARE").
(c) Claims. If the Issuer pays any Claim Amount, the Issuer shall (i) give
written notice to the LC Escrow Agent of a Claim Amount, specifying in such
notice the Public Share of the Claim Amount and each NP-Cash Stockholder's Pro
Rata Share of the Claim Amount, and (ii) collect from each NP-Credit Stockholder
its Pro Rata Share of the Claim Amount pursuant to the Reimbursement Documents.
Immediately upon receipt of such notice from the Issuer, the LC Escrow Agent
shall pay to the Issuer (i) the Public Share of the Claim Amount, as specified
in the Issuer's notice, out of the Reimbursement Account and (ii) each NP-Cash
Stockholder's Pro Rata Share of the Claim Amount, as specified in the Issuer's
notice, out of the NP Reimbursement Account.
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(d) Upon Termination. The LC Escrow Agent shall make the following
distributions in the following order of priority as soon as practicable
following the termination of the Letter of Credit on FEBRUARY 9, 1995 or upon
such later date as the Letter of Credit may terminate (and of which date the LC
Escrow Agent receives written notice from the Stockholders' Representative on or
before FEBRUARY 9, 1995) if extended by the Stockholders' Representative and
the Issuer (the Issuer being under no obligation to extend the Letter of
Credit)(the "TERMINATION DATE"), provided and to the extent the appropriate
funds are available in the Account:
(i) first, any distributions required by subparagraphs (a), (b), or
(c) of this paragraph 7, provided that the LC Escrow Agent receives the
written notice required by subparagraphs (a) or (b) on or before the
Termination Date,
(ii) second, any distributions required by paragraphs 11 and 15,
(iii) third, any distribution required by paragraph 13, provided that
the LC Escrow Agent receives the written notice required by such paragraph
on or before the Termination Date,
(iv) fourth, a distribution to each NP-Cash Stockholder of its Pro
Rata Share, as set forth in Exhibit B hereto, of the remaining balance in
the NP Reimbursement Account,
(v) fifth, a distribution to Century of (x) each Dissenting
Stockholder's Pro Rata Share, as set forth in Exhibit D hereto, of the
balance in the Reimbursement Account, the Adjustment Account and the
Additional Amounts Account and (y) each Dissenting Stockholder's Dissenter
Share, including any Investment Income thereon, out of the Dissenters
Account, and
(vi) sixth, a distribution (x) to each Non-Dissenting Stockholder and
each Failed Dissenting Stockholder of its Pro Rata Share, as set forth in
Exhibit D hereto, of the balance in the Reimbursement Account, the
Adjustment Account and the Additional Amounts Account and (y) to each
Failed Dissenting Stockholder, its Dissenter Share, including any
Investment Income thereon, out of the Dissenters Account.
The distributions required pursuant to this subparagraph (d) shall be made
in the foregoing order of priority, provided that clauses (iv), (v) and (vi) of
this subparagraph (d) shall rank equal in priority, and the LC Escrow Agent
shall not be required to make any distribution of lower priority until the LC
Escrow Agent has made all distributions of higher priority.
8. Termination of Agreement. This Agreement shall terminate upon the
distribution of all funds in the Account pursuant to paragraph 7(d).
Notwithstanding the previous sentence, the obligations described in paragraphs
11, 13 and 15 and the obligations of the Celutel Stockholders under the
Reimbursement Documents shall survive the termination of this Agreement.
9. Rights and Responsibilities of the LC Escrow Agent.
(a) PNC Bank, National Association, in its capacity as the LC Escrow Agent,
is acting solely as the LC Escrow Agent and is not a party to, nor has it
reviewed or approved any agreement or matter of background related to this
Agreement, other than this Agreement, and has assumed, without investigation,
the authority of the individuals and entities executing this Agreement to be so
authorized on behalf of the party or parties involved, including, without
limitation, the authority of the Stockholders' Representative to execute this
Agreement on behalf of the Public Stockholders. Without limiting the generality
of the foregoing, the LC Escrow Agent is not responsible for determining whether
or assuring that the treatment of the Celutel Stockholders under this Agreement
is consistent with the terms and provisions of the Merger Agreement or the proxy
materials distributed pursuant thereto or as otherwise required under applicable
law and is not responsible for determining the Pro Rata Share, as set forth in
Exhibits A - D hereto, of any Celutel Stockholder.
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(b) The LC Escrow Agent shall act as custodian of the funds in the Account
and shall hold, invest and distribute the funds in the Account only as provided
herein.
(c) The LC Escrow Agent shall invest and reinvest any funds in the Account
in the Dreyfus Government Cash Management Fund, a mutual fund which invests
primarily in treasury bills, treasury notes or other direct obligations of the
United States of America unless the LC Escrow Agent is otherwise instructed by
the Stockholders' Representative. The Stockholders' Representative shall be
limited in directing the investment of the funds in the Account to those
investments listed in Exhibit F hereto. Absent its willful misconduct or gross
negligence, the LC Escrow Agent shall not be liable or responsible in any manner
for any loss, depreciation or rate of return resulting from any such investment
or liquidation, or for any costs in connection therewith, and all of said losses
and costs shall be borne by the Account. The LC Escrow Agent shall file all
required Internal Revenue Service Forms 1099 (or similar forms) to report
Investment Income hereunder and shall comply with all tax withholding
requirements under the Internal Revenue Code.
(d) The LC Escrow Agent shall not be liable for any damages, or have any
obligations other than the duties prescribed herein in carrying out or executing
the purposes and intent of this Agreement; provided, however, that nothing
herein contained shall relieve the LC Escrow Agent from liability arising out of
its own willful misconduct or gross negligence. The LC Escrow Agent's duties and
obligations under this Agreement shall be entirely administrative and not
discretionary. The LC Escrow Agent shall not be liable as a result of any action
or omission taken or made by the LC Escrow Agent except for its willful
misconduct or gross negligence. The LC Escrow Agent will be indemnified, held
harmless and be reimbursed from, against and for, any and all liabilities,
costs, fees and expenses (including reasonable attorney's fees) the LC Escrow
Agent may suffer or incur by reason of its execution and performance of this
Agreement as set forth in paragraph 11. The LC Escrow Agent shall be protected
in acting upon any written notice, request, waiver, consent, authorization, or
other paper or document delivered to it hereunder, except to the extent same
constitutes willful misconduct or gross negligence.
(e) In the event that the LC Escrow Agent shall be uncertain as to its
duties or rights hereunder or shall receive instructions from any of the
undersigned with respect to any property held by it in escrow pursuant to this
Agreement which, in the opinion of the LC Escrow Agent, are in conflict with any
of the provisions of this Agreement, the LC Escrow Agent shall be entitled to
refrain from taking any action until it shall be directed otherwise in writing
by all of the other parties hereto or by an order of a court of competent
jurisdiction. The LC Escrow Agent shall be deemed to have no notice of, or
duties with respect to, any agreement or agreements with respect to any property
held by it in escrow pursuant to this Agreement other than this Agreement. This
Agreement sets forth the entire agreement between the parties hereto and the LC
Escrow Agent as escrow agent. Notwithstanding any provision to the contrary
contained in any other agreement (excluding any amendment to this Agreement)
between any of the parties hereto, the LC Escrow Agent shall have no interest in
the property held by it in escrow pursuant to this Agreement except its right to
be paid Fees and Indemnities (as defined below) as provided in paragraph 11 and
the LC Escrow Agent shall have a lien on, and right of set off against the
amounts in the Account to secure payment of same to the extent payment of same
is provided in paragraph 11. In the event that any of the terms and provisions
of any other agreement (excluding any amendment to this Agreement) between any
of the parties hereto conflict or are inconsistent with any of the terms and
provisions of this Agreement, the terms and provisions of this Agreement shall
govern and control in all respects, provided that nothing herein shall affect in
any manner the obligations of the Celutel Stockholders under the Reimbursement
Documents.
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(f) The LC Escrow Agent may consult with, and obtain advice from, legal
counsel in the event of any question as to any of the provisions hereof or its
duties hereunder, and it shall incur no liability and shall be fully protected
in acting in accordance with the opinion and instructions of such counsel absent
its own willful misconduct or gross negligence. The reasonable cost of such
services shall be added to and be a part of the LC Escrow Agent's Fees (as
defined below).
(g) The LC Escrow Agent may resign upon thirty (30) calendar days prior
written notice to the Stockholders' Representative and the Issuer, provided that
no such resignation shall be effective until a successor escrow agent shall have
been jointly appointed by the Stockholders' Representative and the Issuer
hereunder and shall have accepted such appointment, and any amounts in the
Accounts (less any Fees) shall have been delivered to such /successor escrow
agent. Notwithstanding the foregoing, the LC Escrow Agent shall be entitled to
resign after sixty (60) calendar days if no successor shall have accepted
appointment, in which case the LC Escrow Agent shall retain any amounts in the
Accounts without liability to anyone until such time as it receives written
notice executed by both the Stockholders' Representative and the Issuer, except
to make the delivery provided for in the previous sentence. The LC Escrow Agent
shall be indemnified in accordance with paragraph 11 for any Fees incurred in
holding the amounts in the Accounts after its resignation pursuant to this
paragraph.
10. Payments. At any time the LC Escrow Agent is required to distribute any
amounts under paragraph 7 to any Celutel Stockholder, the Stockholders'
Representative or Century, as the case may be, such distribution shall be
effected by issuance by the LC Escrow Agent of a check in the appropriate amount
payable to such stockholder, the Stockholders' Representative or Century, as the
case may be, and by mailing of such check (i) in the case a Public Stockholder,
to the address listed on Exhibit D hereto, (ii) in the case of a NP-Cash
Stockholder and the Stockholders' Representative to the address listed in
paragraph 18 or any other address as such party has directed the LC Escrow Agent
and which the LC Escrow Agent has received at least 10 days prior to the date
any distribution is required hereunder and (iii) in the case of Century to the
following address, Century Telephone Enterprises, Inc., 100 Century Park Drive,
Monroe, Louisiana, 71211-4605, Attention: Stewart Ewing, or any other address as
Century has directed the LC Escrow Agent and which the LC Escrow Agent has
received at least 10 days prior to the date any distribution is required
hereunder.
11. Fees and Indemnification of the LC Escrow Agent.
(a) Concurrently with the execution of this Agreement, Celutel has paid the
LC Escrow Agent the sum of $32,500 for all fees and expenses of administering
the Account for a period of one year, including costs of mailing checks to the
Public Stockholders and the NP-Cash Stockholders not more than twice.
Notwithstanding the foregoing, a cash sweep upkeep charge of $2.50 per $1,000 (
1/4 of 1%) per year shall be assessed against the principal par value of any
fund or investment (but not including the Dreyfus Government Cash Management
Fund) which pays interest on a daily basis and allows participants day-in and
day-out admissions and withdrawals. Cash sweep upkeep charges accrue daily and
are charged monthly against the income of the fund or investment.
(b) If the Letter of Credit is extended, each Celutel Stockholder shall be
obligated to pay its Pro Rata Share of any additional fees and expenses of the
LC Escrow Agent incurred in the performance of its duties under this Agreement
(the "FEES"). The LC Escrow Agent shall collect any Fees as follows:
(i) by withdrawing the Public Share of any Fee from the Adjustment
Account, the Additional Amounts Account and/or the Reimbursement Account
(provided that no draw shall be made from the Reimbursement Account unless
the Letter of Credit has terminated and all amounts payable to the Issuer
pursuant to paragraph 7 have been made),
(ii) by withdrawing each NP-Cash Stockholder's Pro Rata Share of any
Fee from the NP Reimbursement Account (provided that the Letter of Credit
has terminated and all amounts payable to the Issuer pursuant to paragraph
7 have been made), or, in the event that the Letter of
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Credit has not terminated or there are insufficient funds in the NP
Reimbursement Account, by sending each NP-Cash Stockholder written notice
of a Fee and its Pro Rata Share of such Fee, and
(iii) by sending each NP-Credit Stockholder written notice of a Fee
and its Pro Rata Share of such Fee.
Within 5 days after receipt of notice of a Fee, each NP-Credit Stockholder,
and, to the extent not paid out of the NP Reimbursement Account, each NP-Cash
Stockholder, shall pay to the LC Escrow Agent its Pro Rata Share of the Fee
specified in the LC Escrow Agent's notice. If any portion of a Fee is not paid
to the LC Escrow Agent as provided above, whether as a result of insufficient
funds in the Account or otherwise, the LC Escrow Agent shall collect the
remaining amount of the Fee by giving written notice to each Non-Public
Stockholder of its Pro Rata Share, as set forth in Exhibit C hereto, of the
remaining amount of the Fee. Within 5 days after receipt of such notice, each
Non-Public Stockholder shall pay to the LC Escrow Agent the amount specified in
such notice.
(c) The LC Escrow Agent shall be indemnified and held harmless by the
Celutel Stockholders from, against and for any loss, liability, claim, demand,
costs, fees and expenses (including reasonable attorney's fees) arising out of,
in connection with or resulting from the provisions of this Agreement and/or its
performance hereunder (the "INDEMNITY"), except to the extent caused by its
willful misconduct or gross negligence. The LC Escrow Agent shall collect any
Indemnity as a Fee in accordance with subparagraph (a) of this paragraph 11.
(d) If any portion of any Fee or Indemnity is not paid as required by
sub-paragraphs (a), (b) and (c) of this paragraph 11, whether as a result of
insufficient amounts in the Account or otherwise, Frank S. Scarpa and CIVC shall
be jointly and severally liable to the LC Escrow Agent for such amount and shall
pay same to the LC Escrow Agent within 10 days of written notice delivered by
the LC Escrow Agent. In the event that any payment is made to the LC Escrow
Agent pursuant to this subparagraph (c), the party or parties who made such
payment shall have the right to collect from any Non-Public Stockholder on whose
behalf such payment was made the amount so paid.
12. Responsibilities of the Stockholders' Representative.
(a) The Stockholders' Representative shall promptly distribute any amount
received from Century pursuant to the Merger Agreement by delivering to (i) the
LC Escrow Agent each Public Stockholder's Pro Rata Share of such amount and (ii)
each Non-Public Stockholder its Pro Rata Share of such amount.
(b) The Stockholders' Representative shall duly deliver all notices to such
parties as may be required hereunder, including without limitation the notices
required pursuant to paragraph 7.
13. Indemnification of the Stockholders' Representative. The Stockholders'
Representative shall be indemnified and held harmless by the Celutel
Stockholders from, against and for any loss, liability, claim, demand, costs,
fees and expenses (including reasonable attorney's fees) arising out of, in
connection with or resulting from the provisions of this Agreement, the Escrow
Agreement, the Merger Agreement and/or the Stockholders' Representative's
performance under any of the foregoing (the "STOCKHOLDERS' REPRESENTATIVE
INDEMNITY"), except to the extent caused by its willful misconduct or gross
negligence. The Stockholders' Representative shall collect any Stockholders'
Representative Indemnity as follows: by giving written notice to (i) the LC
Escrow Agent of a Stockholders' Representative Indemnity and the Stockholders'
Representative Indemnity amount, specifying in such notice the Public Share of
the Stockholders' Representative Indemnity, each NP-Cash Stockholders' Pro Rata
Share of the Stockholders' Representative Indemnity and that a distribution is
being requested pursuant to this paragraph 13, and (ii) each NP-Credit
Stockholder of its Pro Rata Share of any Stockholders' Representative Indemnity.
Within 10 days after receipt of notice of a Stockholders' Representative
Indemnity, (i) the LC Escrow Agent shall pay to the Stockholders'
Representative, pursuant to and subject to the priorities of paragraph 7(d), (x)
the Public Share of the Stockholders'
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Representative Indemnity, as specified in the Stockholders' Representative's
notice, out of the Adjustment Account, the Additional Amounts Account and/or the
Reimbursement Account and (y) each NP-Cash Stockholder's Pro Rata Share of the
Stockholders' Representative Indemnity, as specified in the Stockholders'
Representative's notice, out of the NP Reimbursement Account and (ii) each
NP-Credit Stockholder shall pay to the Stockholders' Representative its Pro Rata
Share of the Stockholders' Representative Indemnity set forth in the
Stockholders' Representative's notice. If any portion of a Stockholders'
Representative Indemnity is not paid to the Stockholders' Representative as
provided above, whether as a result of insufficient funds in the Account or
otherwise, the Stockholders' Representative shall collect the remaining amount
of the Stockholders' Representative Indemnity by notifying each Non-Public
Stockholder of its Pro Rata Share, as set forth in Exhibit C hereto, of the
Stockholders' Representative Indemnity. Within 10 days after receipt of such
notice, each Non-Public Stockholder shall pay to the Stockholders'
Representative the amount set forth in such notice.
14. Responsibilities of the Issuer. PNC Bank, National Association, in its
capacity as the Issuer, is acting solely as the Issuer and is not a party to,
nor has it reviewed or approved any agreement or matter of background related to
this Agreement, other than this Agreement and the Reimbursement Documents, and
has assumed, without investigation, the authority of the individuals and
entities executing this Agreement to be so authorized on behalf of the party or
parties involved, including, without limitation, the authority of the
Stockholders' Representative to execute this Agreement on behalf of the Public
Stockholders. Without limiting the generality of the foregoing, the Issuer is
not responsible for determining whether or assuring that the treatment of the
Celutel Stockholders under this Agreement is consistent with the terms and
provisions of the Merger Agreement or the proxy materials distributed pursuant
thereto or as otherwise required under applicable law and is not responsible for
determining the Pro Rata Share, as set forth in Exhibits A--D hereto, of any
Celutel Stockholder.
15. Indemnification of the Issuer.
(a) The Issuer shall be indemnified and held harmless by the Celutel
Stockholders from, against and for any loss, liability, claim, demand, costs,
fees and expenses (including reasonable attorney's fees) arising out of, in
connection with or resulting from the provisions of this Agreement, the
provisions of the Reimbursement Documents, the Issuer's issuance of the Letter
of Credit and/or the Issuer's performance under any of the foregoing (the
"ISSUER INDEMNITY"), except to the extent caused by its willful misconduct or
gross negligence. Notwithstanding the foregoing, (i) no Public Stockholder shall
be obligated to indemnify the Issuer for the failure of any other Celutel
Stockholder to make a required payment to the Issuer hereunder or under the
Reimbursement Documents and (ii) no Non-Public Stockholder shall be obligated to
indemnify the Issuer for the failure of any other Celutel Stockholder to make a
required reimbursement payment to the Issuer in respect of a Claim Amount. The
Issuer shall collect any Issuer Indemnity as follows: by giving written notice
to (i) the LC Escrow Agent of an Issuer Indemnity, specifying in such notice the
Public Share of the Issuer Indemnity, if the Letter of Credit has terminated,
each NP-Cash Stockholder's Pro Rata Share of the Issuer Indemnity, and that a
distribution is being requested pursuant to this paragraph 15 and (ii) each
NP-Credit Stockholder, and, if the Letter of Credit has not terminated or there
are insufficient funds in the NP Reimbursement Account, each NP-Cash
Stockholder, of an Issuer Indemnity and such stockholder's Pro Rata Share of the
Issuer Indemnity. Within 5 days after receipt of such notice from the Issuer,
(i) the LC Escrow Agent shall (x) pay to the Issuer the Public Share of the
Issuer Indemnity, as specified in the Issuer's notice, out of the Adjustment
Account, the Additional Amounts Account and/or the Reimbursement Account
(provided that no draw shall be made from the Reimbursement Account unless the
Letter of Credit has terminated and all amounts payable to the Issuer pursuant
to paragraph 7 have been made) and (y) pay to the Issuer each NP-Cash
Stockholder's Pro Rata Share of the Issuer Indemnity, as specified in the
Issuer's notice, out of the NP Reimbursement Account, provided that the Letter
of Credit has terminated and all amounts payable to the Issuer pursuant to
paragraph 7 have been made, and (ii) each NP-Credit Stockholder, and, if
applicable, each NP-Cash Stockholder, shall pay to the
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Issuer its Pro Rata Share of the Issuer Indemnity set forth in the Issuer's
notice. If any portion of an Issuer Indemnity is not paid to the Issuer as
provided above, whether as a result of insufficient funds in the Account or
otherwise, the Issuer shall collect the remaining amount of the Issuer Indemnity
by giving written notice to each Non-Public Stockholder of its Pro Rata Share,
as set forth in Exhibit C hereto, of the remaining Issuer Indemnity. Within 5
days after receipt of such notice, each Non-Public Stockholder shall pay to the
Issuer the amount specified in such notice.
(b) If any portion of any Issuer Indemnity is not paid as required by
subparagraph (a) of this paragraph 15, whether as a result of insufficient
amounts in the Account or otherwise, Frank S. Scarpa and CIVC shall be jointly
and severally liable to the Issuer for such amount and shall pay same to the
Issuer within 10 days of written notice delivered by the Issuer. In the event
that any payment is made to the Issuer pursuant to this subparagraph (b), the
party or parties who made such payment shall have the right to collect from any
Non-Public Stockholder on whose behalf such payment was made the amount so paid.
16. References To and Updates Of Exhibit D.
(a) From time to time, Exhibit D hereto may be updated and amended by
Century and/or the Exchange Agent to reflect, among other things, the change of
address of a Public Stockholder and the conversion of a Dissenting Stockholder
to a Failed Dissenting Stockholder. Any updated and amended Exhibit D will be
delivered to the LC Escrow Agent by the Stockholders' Representative.
(b) References to Exhibit D herein shall mean the most recent Exhibit D
received by the LC Escrow Agent from the Stockholders' Representative, provided
that the LC Escrow Agent may rely on the most recent Exhibit D in its possession
at the time the LC Escrow Agent receives notice that a distribution is required
hereunder for purposes of making such distribution.
17. Amendment and Cancellation. No cancellation, waiver, modification or
amendment of this Agreement shall be effective unless in writing and executed by
the parties hereto, provided that the amendment of Exhibit D described in
paragraph 16 shall be effective without any action by the parties hereto.
18. Notices.
(a) All communications required pursuant to this Agreement shall be given
by hand, by registered mail (postage prepaid), return receipt requested, or by
reputable overnight courier (carriage prepaid), addressed as follows:
(i) If to the LC Escrow Agent:
PNC Bank, National Association
Corporate Trust Department
One Oliver Plaza, 23rd Floor
Pittsburgh, Pennsylvania 15265
Attention: Mark C. Baker
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(ii) If to the Issuer:
PNC Bank, National Association
Broad and Chestnut Streets
P.O. Box 7648
Philadelphia, Pennsylvania 19101
Attention: Donald W. Kraftson
A copy to:
PNC Bank, National Association
Broad and Chestnut Streets
P.O. Box 7648
Philadelphia, Pennsylvania 19101
Attention: Maryann V. Bryla
(iii)If to the Stockholders' Representative:
Continental Illinois Venture Corporation
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Avy H. Stein and Beth F. Johnston
A copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: William S. Kirsch, Esq.
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(iv) If to the Non-Public Stockholders:
Continental Illinois Venture Corporation
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Avy H. Stein and Beth F. Johnston
A copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: William S. Kirsch, Esq.
Mr. Avy H. Stein
932 Chaucer Lane
Highland Park, Illinois 60035
Mr. John R. Willis
2118 N. Hudson St.
Chicago, IL 60603
Mr. Burton E. McGillivray
1010 Ash St.
Winnetka, IL 60093
Mr. Harrison I. Steans
1900 Meadow Lane
Bannockburn, IL 60015
William Blair Venture Partners III, LP
135 S. LaSalle St.
Chicago, IL 60603
Attention: Samuel B. Guren
PNC Capital Corporation
Fifth Avenue & Wood St.
Pittsburgh, PA 15222
Attention: Gary J. Zentner
K&E Partners
200 E. Randolph Drive
Chicago, Illinois 60601
Attention: William S. Kirsch, Esq.
Mr. Frank S. Scarpa
10 Graemoor Terrace
Palm Beach Gardens, Florida 33418
A copy to:
Piper & Marbury
1200 Nineteenth Street, N.W.
Washington, D.C. 20036
Attention: Edwin M. Martin,
Jr., Esq.
Scarpa Family Trust
873 Coach Way
Annapolis, Maryland 21401
Attention: Valerie S. Hart, Trustee
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Mr. Richard J. Donnelly
6 Whittier Parkway
Severna Park, Maryland 21146
Mr. David A. Warren
3454 Merrimac Court
Davidsonville, Maryland 21035
Ms. Valerie S. Hart
873 Coach Way
Annapolis, Maryland 21401
or to such other addresses and addressees as any party may notify the other
parties in accordance with the terms hereof.
(b) Notices shall be deemed received seven days after their deposit,
properly addressed, in the U.S. registered mail (postage prepaid), one business
day after deposit, properly addressed with a reputable overnight carrier
(carriage prepaid), or on the day delivered by hand, except that notices shall
not be deemed to be received by the LC Escrow Agent until such notices are
actually received by the LC Escrow Agent.
(c) Notices of disbursements between the LC Escrow Agent and the Issuer may
be given in such other manner as the LC Escrow Agent and the Issuer may
determine.
19. Parties in Interest. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns. No person or entity shall be
deemed a third party beneficiary to this Agreement except that Century shall be
entitled to payment under this Agreement as specifically provided herein and
subject to the conditions and limitations specifically provided herein.
20. Captions. The paragraph captions used herein are for reference purposes
only, and shall not in any way affect the meaning or interpretation of this
Agreement.
21. Disagreements. In the event that there shall be any disagreement
between any of the parties to this Agreement, or between them or any of them and
any other person, resulting in adverse claims or demands being made in
connection with this Agreement, or in the event that the LC Escrow Agent shall
be in doubt as to what action it should take hereunder, the LC Escrow Agent may,
at its option, refuse to comply with any claims or demands on it or refuse to
take any other action hereunder, so long as such disagreement continues or such
doubt exists; and in any such event, the LC Escrow Agent (i) shall not be or
become liable in any way or to any person for its failure or refusal to act, and
the LC Escrow Agent shall be entitled to continue to so refrain from acting
until the dispute is resolved by the parties involved and the LC Escrow Agent is
provided written evidence satisfactory to it in its sole discretion of such
resolution, and (ii) may deposit, in its sole discretion, the funds in the
Accounts that it then holds with any Pennsylvania court and interplead the
parties. Upon such deposit and filing of interpleader, the LC Escrow Agent shall
be relieved of all liability as to funds in the Accounts and shall be entitled
to recover from the Celutel Stockholders its reasonable attorneys' fees and
other costs and expenses incurred in commencing and maintaining such action as
set forth in paragraph 11.
22. Governing Law. This Agreement shall be construed in accordance with the
law of the Commonwealth of Pennsylvania, without regard to the principles of
conflict of laws.
23. Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
* * * * * *
[All Signatures and Exhibits A-E have been intentionally deleted.]
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EXHIBIT F
Money Market Mutual Funds in which the LC Escrow Agent may invest funds in
the Account as instructed by the Stockholders' Representative.
(i) Dreyfus Treasury Cash Management Fund
(ii) Dreyfus Treasury Prime Cash Management Fund
(iii) Federated Trust for U.S. Treasury Obligations
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APPENDIX V
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
262 APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Sections 251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock which, at
the record date fixed to determine the stockholders entitled to receive
notice of and to vote at the meeting of stockholders to act upon the
agreement of merger or consolidation, were either (i) listed on a national
securities exchange or designated as a national market system security on
an interdealer quotation system by the National Association of Securities
Dealers, Inc. or (ii) held of record by more than 2,000 stockholders; and
further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger
did not require for its approval the vote of the stockholders of the
surviving corporation as provided in subsection (f) of Section 251 of this
title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation;
b. Shares of stock of any other corporation which at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000
stockholders;
c. Cash in lieu of fractional shares of the corporations described
in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock and cash in lieu of
fractional shares described in the foregoing subparagraphs a., b. and c.
of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to
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the merger, appraisal rights shall be available for the shares of the
subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify such
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or 253 of this title, the surviving or resulting corporation, either
before the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal
rights of the effective date of the merger or consolidation and that
appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the stockholder at his address as it
appears on the records of the corporation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
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<PAGE>
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by one or more publications at
least one week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining the fair rate of
interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
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<PAGE>
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation. (Last amended by Ch.
61, L. '93, eff. 7-1-93.)
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<PAGE>
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 "Indemnification 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
<TABLE>
<S> <C>
EXHIBIT
NO.
- ---------
2 --Agreement and Plan of Merger dated as of October 8, 1993, by and among Century, Celutel
Acquisition Corp. and Celutel, Inc., as amended by Amendment No. 1 thereto dated as of January
5, 1994 (included in Appendix I to the Proxy Statement and Prospectus forming a part of this
Registration Statement).
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
EXHIBIT
NO.
- ---------
A list of the exhibits and schedules to this agreement is included in the table of contents to the
agreement. All 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.
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), as amended by an instrument 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.
23.1 --Consent of KPMG Peat Marwick.*
23.2 --Consent of Coopers & Lybrand.*
23.3 --Consent of Jones, Walker, Waechter, Poitevent, Carrere & Denegre (included in Exhibit 5).
24 --Power of Attorney (included in the original signature pages of this Registration Statement).
28.1 --Form of Proxy of Celutel to be used by the common stockholders of Celutel (relating to the Annual
Meeting of Stockholders of such company described in the Prospectus and Proxy Statement forming a
part of this Registration Statement).
28.2 --Form of Proxy of Celutel to be used by the preferred stockholders of Celutel (relating to the
Annual Meeting of Stockholders of such company described in the Prospectus and Proxy Statement
forming a part of this Registration Statement).
28.3 --Form of Letter of Transmittal to be used by the common stockholders of Celutel (relating to the
Annual Meeting of Stockholders of such company described in the Prospectus and Proxy Statement
forming a part of this Registration Statement).
28.4 --Form of Letter of Transmittal to be used by the preferred stockholders of Celutel (relating to the
Annual Meeting of Stockholders of such company described in the Prospectus and Proxy Statement
forming a part of this Registration Statement).
</TABLE>
- ---------------
* Filed by this Amendment No. 2. All other exhibits have been 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.
II-2
<PAGE>
(c) Reports, Opinions or Appraisals Relating to the Transaction
An opinion of Lazard, Freres & Co. is included in Appendix III to the Proxy
Statement and Prospectus forming a part of this Registration Statement.
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 registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, 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) 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
II-3
<PAGE>
is against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
(d) 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.
(e) 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.
(f) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who 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.
(g) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (f) immediately preceding or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415 promulgated under the Act will be
filed as a part of an amendment to the registration statement (or, if permitted
under the Act, a supplement thereto) 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 bona
fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Monroe, State of
Louisiana, on January 6, 1994.
CENTURY TELEPHONE ENTERPRISES, INC.
By: /s/ HARVEY P. PERRY
..................................
Harvey P. Perry
Senior Vice President, Secretary,
General Counsel and Director
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<S> <C> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------ ----------------------------------------- --------------------
* Chairman of the Board of Directors January 6, 1994
................................................
Clarke M. Williams
* President, Chief Executive Officer and January 6, 1994
................................................ Vice Chairman of the Board of Directors
Glen F. Post, III
* Senior Vice President and Chief Financial January 6, 1994
................................................ Officer (Principal Financial Officer)
R. Stewart Ewing, Jr.
* Controller (Principal Accounting Officer) January 6, 1994
................................................
Murray H. Greer
* President-Telecommunications Services and January 6, 1994
................................................ Director
W. Bruce Hanks
/s/ HARVEY P. PERRY Senior Vice President, Secretary, General January 6, 1994
................................................ Counsel and Director
Harvey P. Perry
* President-Telephone Group and Director January 6, 1994
................................................
Jim D. Reppond
* Director January 6, 1994
................................................
William R. Boles
* Director January 6, 1994
................................................
Ernest Butler, Jr.
* Director January 6, 1994
................................................
Calvin Czeschin
</TABLE>
S-1
<PAGE>
<TABLE>
<S> <C> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------ ----------------------------------------- --------------------
* Director January 6, 1994
................................................
James B. Gardner
* Director January 6, 1994
................................................
R. L. Hargrove, Jr.
* Director January 6, 1994
................................................
Johnny Hebert
* Director January 6, 1994
................................................
F. Earl Hogan
* Director January 6, 1994
................................................
Tom S. Lovett
* Director January 6, 1994
................................................
C. G. Melville
*By: /s/ HARVEY P. PERRY
..........................................
Harvey P. Perry
Attorney-in-fact
</TABLE>
S-2
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<S> <C>
EXHIBIT NO. EXHIBIT
- ------------- -----------------------------------------------------------------------------------------------------
2 --Agreement and Plan of Merger dated as of October 8, 1993, by and among Century, Celutel Acquisition
Corp. and Celutel, Inc., as amended by Amendment No. 1 thereto dated as of January , 1994
(included in Appendix I to the Proxy 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. All 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.
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), as amended by an instrument 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 longterm 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.
23.1 --Consent of KPMG Peat Marwick.*
23.2 --Consent of Coopers & Lybrand.*
23.3 --Consent of Jones, Walker, Waechter, Poitevent, Carrere & Denegre (included in Exhibit 5).
</TABLE>
<PAGE>
<TABLE>
<S> <C>
EXHIBIT NO. EXHIBIT
- ------------- -----------------------------------------------------------------------------------------------------
24 --Power of Attorney (included in the original signature pages of this Registration Statement).
28.1 --Form of Proxy of Celutel to be used by the common stockholders of Celutel (relating to the Annual
Meeting of Stockholders of such company described in the Prospectus and Proxy Statement forming a
part of this Registration Statement).
28.2 --Form of Proxy of Celutel to be used by the preferred stockholders of Celutel (relating to the
Annual Meeting of Stockholders of such company described in the Prospectus and Proxy Statement
forming a part of this Registration Statement).
28.3 --Form of Letter of Transmittal to be used by the common stockholders of Celutel (relating to the
Annual Meeting of Stockholders of such company described in the Prospectus and Proxy Statement
forming a part of this Registration Statement).
28.4 --Form of Letter of Transmittal to be used by the preferred stockholders of Celutel (relating to the
Annual Meeting of Stockholders of such company described in the Prospectus and Proxy Statement
forming a part of this Registration Statement).
</TABLE>
- ---------------
* Filed by this Amendment No. 2. All other exhibits have been previously filed.
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
THE BOARD OF DIRECTORS
CENTURY TELEPHONE ENTERPRISES, INC.
We consent to the use of our reports dated February 4, 1993, incorporated
herein by reference and to the references to our firm under the headings
"Selected Financial Information--Century Selected Consolidated Operating and
Financial Data" and "Experts" in the Proxy Statement and Prospectus. Our report
covering the consolidated financial statements refers to changes in the method
of accounting for income taxes and postretirement benefits other than pensions.
KPMG PEAT MARWICK
Shreveport, Louisiana
January 5, 1994
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference of our report on the
consolidated balance sheets of Celutel, Inc. and Subsidiaries as of April 30,
1993 and 1992, and the consolidated statements of operations, changes in
shareholders' deficit and cash flows for the years ended April 30, 1993, 1992
and 1991 into the Registration Statement on Form S-4 of Century Telephone
Enterprises, Inc. (No. 33-50791) relating to its proposed acquisition of
Celutel, Inc. We also consent to the reference to our firm under the caption
"Experts."
COOPERS & LYBRAND
Washington, D.C.
January 5, 1994
