<PAGE>
File No. 333-40069
As filed with the Securities and Exchange Commission on November 25, 1997
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CITIZENS UTILITIES COMPANY
(Exact name of registrant as specified in charter)
DELAWARE 4939 06-0619596
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. employer
incorporation or organization)Classification Code Number)identification number)
High Ridge Park, Bldg. No. 3, Stamford, Connecticut 06905
(203) 329-8800
(Address, including zip code, and
telephone number, including
area code, of registrant's
principal executive
offices)
Robert J. DeSantis
Vice President and Treasurer
Citizens Utilities Company
High Ridge Park, Bldg. No. 3
P.O. Box 3801
Stamford, Connecticut 06905
Tel. No. (203) 329-8800
(Name and address, including zip code, and telephone number, including area
code, of agent for service)
Copies to:
Jonathan H. Churchill, Esq.
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004-1490
Tel. No. 212-858-1109
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Approximate date of commencement of proposed sale of the securities to
the public: From time to time after the effective date of this Registration
Statement.
If 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, check the following box:
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CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C>
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Title of each class Amount to be Proposed maximum Proposed maximum Amount of
of securities to be registered offering per unit aggregate offering Registration fee
registered price
======================= ====================== ======================= ====================== ===================
Common Stock 2,300,000 Shares* $7.24** $16,655,246*** $5,047****
======================= ====================== ======================= ====================== ===================
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* This Registration Statement shall be deemed to cover additional securities
to be issued in connection with or as a result of stock splits, stock
dividends or similar transactions.
** Assumed based upon merger formula.
*** Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457. Based on the market value of securities being
received computed as of the latest practicable date, which is May 9, 1997,
the last date on which a bid price was publicly available.
**** Already paid.
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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 the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
OGDEN TELEPHONE COMPANY
PROXY STATEMENT
-----------------------------------------
CITIZENS UTILITIES COMPANY
PROSPECTUS
-----------------------------------------
This Proxy Statement/Prospectus is being furnished to the security
holders of Ogden Telephone Company ("Ogden"), a New York corporation, in
connection with the solicitation of proxies by the Board of Directors of Ogden
for use at the Special Meeting of Ogden shareholders to be held at 10:00 a.m. on
December 30, 1997, and at any and all adjournments thereof (the "Meeting").
This Proxy Statement/Prospectus relates, among other things, to the
proposed merger (the "Merger") between Ogden and Citizens-Ogden
Telecommunications Company ("C-O Tel"), a wholly owned subsidiary of Citizens
Utilities Company, a Delaware corporation ("Citizens" or the "Company").
Pursuant to the Merger, C-O Tel will merge into Ogden and the holders of Ogden
common stock, no par value per share (the "Ogden Common Stock"), will receive
shares of Common Stock, par value $.25 per share, of Citizens ("Citizens Common
Stock") in exchange for their securities of Ogden, pursuant to the Agreement and
Plan of Reorganization dated as of February 3, 1997 (the "Merger Agreement"), a
copy of which is attached hereto as Annex A. Pursuant to the Merger Agreement,
all of the issued and outstanding shares of Ogden Common Stock (other than
certain shares) will be converted into the right to receive that number of
shares of Citizens Common Stock which is equal to (i) the quotient resulting
from $23,000,000 (as adjusted pursuant to the Merger Agreement) divided by the
average of the per share closing sale prices of Citizens Common Stock on the New
York Stock Exchange ("NYSE") for a period of fifteen trading days ending on the
fifth day on which the NYSE is open for trading immediately preceding the
Effective Time, divided by (ii) the number of shares of Ogden Common Stock then
outstanding, after giving effect to the conversion of Ogden's convertible
preferred stock and the cancellation of certain shares of Ogden Common Stock.
The outstanding shares of Citizens Common Stock are, and the shares of
Citizens Common Stock to be offered pursuant to this Prospectus will upon notice
of issuance be, listed on the NYSE under the symbol "CZN". The last reported
sale price of Citizens Common Stock on the NYSE Composite Transaction List on
November 24, 1997 was $9.875 per share and on July 31, 1996, the last trading
day preceding the public announcement of the Merger, the last reported sale
price of Citizens Common Stock was $10.44 per share, adjusted for
subsequent stock dividends.
Citizens has filed a Registration Statement on Form S-4 (such
Registration Statement and all exhibits relating thereto and any amendments
thereof, the "Registration Statement") under the Securities Act of 1933, with
the Securities and Exchange Commission, covering shares of Citizens Common Stock
to be issued in connection with the Merger. This Proxy Statement/Prospectus,
along with the documents incorporated herein by reference, also constitutes the
prospectus of Citizens filed as part of the Registration Statement relating to
up to 2,300,000 shares of Citizens Common Stock to be issued pursuant to the
Merger.
All information contained in this Proxy Statement/Prospectus with
respect to Citizens and C-O Tel has been provided by Citizens. All information
contained in this Proxy Statement/Prospectus with respect to Ogden have been
provided by Ogden.
This Proxy Statement/Prospectus and the accompanying forms of proxy are
first being mailed to shareholders of Ogden on or about December 1, 1997.
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 PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Proxy Statement/Prospectus is November 26, 1997
<PAGE>
AVAILABLE INFORMATION
Citizens is subject to the informational requirements of the Securities
Exchange Act of 1934 ("1934 Act") and in accordance therewith files reports,
proxy and information statements and other information (collectively, "1934 Act
Reports") with the Securities and Exchange Commission (the "SEC"). Such reports,
proxy and information statements and other information can be inspected and
copied at the public reference facilities maintained by the SEC in Washington,
D.C., and at certain of its regional offices at Citicorp Center, Suite 1400, 500
West Madison Street, Chicago, Illinois 60661 and Suite 1300, 7 World Trade
Center, New York, New York 10048. Copies of such material can also be obtained
from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates (1-800-SEC-0330). The SEC also
maintains a web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information and documents regarding Citizens.
Certain securities of Citizens are listed on the New York Stock Exchange, 20
Broad Street, New York, New York 10005, and reports, proxy material and other
information concerning Citizens may be inspected at the office of that Exchange.
This Proxy Statement/Prospectus does not contain all the information
set forth in the Registration Statement of which this Proxy Statement/Prospectus
is a part, and which Citizens has filed with the Commission under the Securities
Act of 1933. Reference is made to such Registration Statement for further
information with respect to Citizens and Ogden and the securities of Citizens
offered hereby. Statements contained herein concerning the provisions of
documents are necessarily summaries of such documents, and each statement is
qualified in its entirety by reference to the copy of the applicable document
filed with the Commission or attached as an annex hereto.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Proxy Statement/Prospectus incorporates documents by reference of
Citizens which are not presented herein or delivered herewith. These documents
are available upon request from the Office of the Secretary, Citizens Utilities
Company, High Ridge Park, Stamford, Connecticut 06905, (telephone number (203)
329-8800). In order to receive documents before the Meeting, requests should be
made by December 22, 1997.
The following documents filed by Citizens with the SEC pursuant to the
1934 Act are incorporated into this Proxy Statement/Prospectus by reference:
Citizens' Annual Report on Form 10-K for the year ended December 31,
1996.
Citizens' Quarterly Reports on Form 10-Q for the periods ended March
31, June 30, and September 30, 1997 and its Current Reports on Form 8-K filed
with the Commission on January 16, March 18, May 1 (as supplemented on May 2),
July 11, July 23, August 7, and November 17, 1997.
The description of the Citizens' Common Stock is contained in
"Description of Citizens Common Stock" herein.
All documents subsequently filed by Citizens pursuant to Sections
13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of this Proxy
Statement/Prospectus and prior to the date of the Meeting of Ogden shareholders
shall be deemed to be incorporated by reference in this Proxy
Statement/Prospectus and to be a part hereof from the date of filing of such
documents.
Citizens hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Proxy
Statement/Prospectus is delivered, upon written or oral request of such person,
a copy of any or all of the documents referred to above which have been or may
be incorporated by reference in this Proxy Statement/Prospectus, other than
exhibits to such documents not specifically incorporated by reference herein.
Requests for such copies should be directed to Office of the Secretary, Citizens
Utilities Company, High Ridge Park, Stamford, Connecticut 06905 (telephone (203)
329-8800).
No one has been authorized to make any representations, or to provide
shareholders of Ogden with any information which is different from that
contained in or incorporated by reference in this Proxy Statement/Prospectus,
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Citizens or Ogden or by any other person.
Neither the delivery of this Proxy Statement/Prospectus nor any offer or sale
made hereunder shall, under any circumstances, create any implication that there
has been no change in the affairs of the Citizens or Ogden since the date hereof
or that the information contained herein is accurate as of any time after the
date hereof. This Proxy Statement/Prospectus does not constitute an offer or
solicitation by anyone in any jurisdiction in which such offer or solicitation
is not authorized or in which the person making such offer or solicitation is
not qualified to do so or to anyone to whom it is unlawful to make such offer or
solicitation.
Shareholders of Ogden should rely only on the information contained in
or incorporated by reference in this Proxy Statement/Prospectus.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
SUMMARY..........................................................................................................7
General ......................................................................................7
The Companies ......................................................................................7
Information About Citizens Utilities Company...................................................7
Information About Co-Tel.......................................................................7
Information About Ogden Telephone Company......................................................8
Meeting of Ogden Shareholders, Vote Required and Certain Holdings.......................................8
The Merger ......................................................................................9
Basic Terms of Merger Agreement................................................................9
Conversion of Ogden Common Stock...............................................................9
Reasons for the Merger..................................................................................9
Recommendation of Ogden Board of Directors.............................................................10
Conditions to the Merger...............................................................................10
Regulatory Matters.....................................................................................10
New York Public Service Commission Approval...................................................10
Hart-Scott-Rodino Act.........................................................................10
Effective Time of the Merger...........................................................................11
Right to Terminate.....................................................................................11
Citizens Common Stock..................................................................................11
Accounting Treatment...................................................................................11
Certain Federal Income Tax Consequences................................................................11
Dissenting Shareholders' Appraisal Rights..............................................................12
Resale of Citizens Common Stock........................................................................12
Exchange of Certificates...............................................................................12
Interests of Certain Persons in the Merger.............................................................13
Selected Financial Information of Citizens.............................................................14
Selected Financial Information of Ogden................................................................15
Comparative Share Data.................................................................................16
Current Market Value as of Announcement Date...........................................................18
INTRODUCTION....................................................................................................17
BACKGROUND AND REASONS FOR THE MERGER AND RELATED MATTERS.......................................................17
Background of Ogden's Activities Leading to and Ogden's Reasons for the Merger.........................17
Recommendation .....................................................................................19
Background of Citizens' Activities Leading to the Merger...............................................20
Citizens' Reasons for the Merger.......................................................................20
DESCRIPTION OF THE MERGER AND THE MERGER AGREEMENT..............................................................20
Effective Time and Consequences........................................................................20
Basic Terms of Merger Agreement........................................................................21
Conversion of Ogden Common Stock..............................................................21
Final Merger Consideration....................................................................22
Description of Common Stock of Citizens................................................................23
Exchange Procedure.....................................................................................24
Conversion and Redemption of Ogden Convertible Preferred Stock and Ogden Preferred Stock...............25
Other Aspects of the Merger Agreement..................................................................25
Certain Covenants of Ogden....................................................................25
Other Covenants of Ogden......................................................................27
Certain Covenants of Citizens and C-O Tel.....................................................27
Limitations on Other Proposals or Offers......................................................27
Regulatory Matters.....................................................................................29
New York Public Service Commission Approval...................................................29
Hart-Scott-Rodino Act.........................................................................29
General................................................................................................29
Termination of the Merger Agreement....................................................................31
Certain Fees and Expenses..............................................................................32
Resale of Citizens Common Stock........................................................................33
MEETING OF OGDEN SHAREHOLDERS...................................................................................33
Date, Time, Place .....................................................................................33
Purpose of the Meeting.................................................................................33
Vote Required; Shares Entitled to Vote.................................................................34
Solicitation of Proxies................................................................................34
Voting and Revocation of Proxies.......................................................................35
Dissenters' Rights of Appraisal........................................................................35
Principal Shareholders.................................................................................35
Interests of Certain Persons in the Merger.............................................................37
FORWARD LOOKING STATEMENTS .....................................................................................36
INFORMATION ABOUT CITIZENS UTILITIES COMPANY....................................................................38
INFORMATION ABOUT C-O TEL.......................................................................................39
INFORMATION ABOUT OGDEN TELEPHONE COMPANY.......................................................................39
Introduction .....................................................................................39
Description of Business................................................................................39
Market Price and Dividend Information..................................................................40
OGDEN TELEPHONE COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF ITS FINANCIAL CONDITION AND RESULTS OF OPERATIONS42
Selected Financial Information.........................................................................42
Supplementary Financial Information....................................................................43
Management's Discussion and Analysis of Financial Condition and Results of Operations..................43
Overview......................................................................................43
Results of Operations.........................................................................43
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30, 1996.........43
1996 Compared to 1995.........................................................................44
1995 Compared to 1994.........................................................................45
Liquidity and Capital Resources...............................................................45
New Accounting Pronouncement..................................................................46
DESCRIPTION OF CITIZENS COMMON STOCK............................................................................46
General .....................................................................................46
Stock Dividend Sale Plan...............................................................................47
Transfer Agent .....................................................................................47
Resale of Citizens Common Stock by Affiliates..........................................................47
COMPARATIVE RIGHTS OF SHAREHOLDERS OF CITIZENS AND OGDEN........................................................47
General .....................................................................................47
Business Combinations..................................................................................48
Dissenting Shareholders' Appraisal Rights..............................................................48
State Takeover Legislation.............................................................................48
Stockholder Rights Plans...............................................................................49
Amendments to Certificate of Incorporation.............................................................49
Amendments to By-laws..................................................................................49
Preemptive Rights .....................................................................................50
Dividend Sources .....................................................................................50
Duration of Proxies....................................................................................50
Stockholder Action.....................................................................................51
Special Stockholder Meetings...........................................................................51
Removal of Directors...................................................................................51
Number of Directors; Vacancies on the Board............................................................52
Indemnification of Directors...........................................................................52
Limitation of Personal Liability of Directors..........................................................54
ACCOUNTING TREATMENT............................................................................................54
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.........................................................................54
DISSENTING SHAREHOLDERS' APPRAISAL RIGHTS.......................................................................56
EXPERTS.........................................................................................................58
LEGAL OPINIONS..................................................................................................58
INDEX TO FINANCIAL STATEMENTS OF OGDEN..........................................................................59
ANNEXES.........................................................................................................A-1
</TABLE>
<PAGE>
SUMMARY
The following is a summary of certain of the information contained
elsewhere in this Proxy Statement/Prospectus. This summary does not purport to
be complete and reference is made to, and this summary is qualified in its
entirety by, the more detailed information contained in this Proxy
Statement/Prospectus, the Annexes hereto and the documents referred to or
incorporated by reference herein. Ogden shareholders are urged to carefully read
this Proxy Statement/Prospectus, including the Annexes hereto.
General
This Proxy Statement/Prospectus relates, among other things, to the
proposed merger (the "Merger") between Ogden Telephone Company ("Ogden"), a New
York corporation, and Citizens-Ogden Telecommunications Company ("C-O Tel"), a
wholly owned subsidiary of Citizens Utilities Company, a Delaware corporation
("Citizens" or the "Company"). Pursuant to the Agreement and Plan of
Reorganization dated as of February 3, 1997, as amended (the "Merger
Agreement"), C-O Tel will merge with and into Ogden and the holders of Ogden
common stock, no par value per share (the "Ogden Common Stock"), will receive
shares of common stock, par value $.25 per share, of Citizens ("Citizens Common
Stock") in exchange for their securities of Ogden. The Merger Agreement is
attached hereto as Annex A and is incorporated by reference in this Proxy
Statement/Prospectus.
The Companies
Information About Citizens Utilities Company
Citizens Utilities Company is a communications and public services
company which provides, either directly or through subsidiaries,
telecommunications, electric distribution, natural gas transmission and
distribution, water and wastewater services to customers in twenty states.
Subsidiaries of Citizens provide telecommunication, and divisions of Citizens
provide electric distribution and natural gas transmission and distribution
services, purchasing most of the electric power needed and all gas supplies.
Water and wastewater services are provided either by divisions of Citizens or by
its subsidiaries. Citizens Communications operates an integrated distribution
network over which it provides local, long distance, paging, cellular, network
sales and other communications products and services. Citizens also has
investments in Centennial Cellular Corp., a cellular telephone company, and owns
Electric Lightwave, Inc., a leading competitive provider of telecommunications
services for business and long distance carriers in the western United States.
See "Information About Citizens Utilities Company."
Citizens, with administrative offices at High Ridge Park, Stamford,
Connecticut 06905 (telephone (203) 329-8800), was incorporated in Delaware in
1935 to acquire the assets and business of a predecessor corporation. Since
then, Citizens has grown as a result of investment in its own operations and the
acquisition of additional operations. See "Information About Citizens Utilities
Company."
Information About Co-Tel
C-O Tel is a newly formed New York corporation and a wholly owned
subsidiary of Citizens organized for the sole purpose of effecting the Merger.
The principal executive offices of C-O Tel are located at c/o Citizens Utilities
Company, High Ridge Park, Stamford, Connecticut 06905.
Information About Ogden Telephone Company
Ogden is an independent telephone operating company regulated by the
New York Public Service Commission ("NYPSC") which provides telephone service in
Monroe County, New York. Incorporated in New York in 1907, Ogden provides local
telephone services to residential and commercial customers in a 104-mile service
territory in the suburban and rural areas north and west of Rochester, New York.
Ogden has two wholly owned subsidiaries, NewOp Communications Corporation
("NewOp") and Phone Trends, Inc. ("PTI") (together, "Ogden Subsidiaries").
NewOp, which does business under the name "OTC Long Distance," operates as a
long distance reseller marketing its products to customers within Ogden's
franchised territory. PTI is a deregulated entity which holds a general
partnership interest in New York State Independent Network, a partnership of
several independent telephone companies which developed and built a Common
Channel Signaling System No. 7 network.
The mailing address of Ogden is 21 West Avenue, Spencerport, New York
14559 and the telephone number is (716) 352-7200. See "Information About Ogden
Telephone Company."
Meeting of Ogden Shareholders, Vote Required and Certain Holdings
Time, Date and Place. The Meeting of Ogden shareholders will be
held on December 30, 1997 at 10:00 a.m. at the offices of Harter, Secrest &
Emery, 700 Midtown Tower, Rochester, New York 14604.
Purpose of Meeting. At the Meeting the Ogden shareholders will be asked
to consider and vote upon a proposal to approve and adopt the Merger Agreement,
which provides for the Merger of Ogden with C-O Tel.
Record Date; Required Vote for the Merger. The record date for
determining the Ogden shareholders entitled to notice of and to vote at the
Meeting is December 1, 1997. Approval of the Merger requires the affirmative
vote of the holders of at least two-thirds (66 2/3%) of the shares of Ogden
Common Stock issued and outstanding and entitled to vote as of the close of
business on the record date, with each holder being entitled to one vote per
share. Abstentions will be tallied with the same effect as no votes. A broker
non-vote has no effect on the vote for or against a specified matter. Ogden
agreed that, prior to the closing of the Merger, it would arrange to have all of
its outstanding 7% Preferred Stock ("Ogden Preferred Stock") and 8% Convertible
Preferred Stock ("Odgen Convertible Preferred Stock") redeemed or converted to
Ogden Common Stock in accordance with the rights attaching to each type of
stock. By notice dated October 28, 1997, all outstanding shares of Ogden
Preferred Stock will be redeemed effective November 27, 1997. Effective November
27, 1997, 4,940 shares of Ogden Convertible Preferred Stock will be converted
to Ogden Common Stock, while 728 shares of Ogden Convertible Preferred Stock
will be redeemed. Thus, as of November 27, 1997, 131,040.5 shares of Ogden
Common Stock will be issued and outstanding. See "Meeting of Ogden
Shareholders--Vote Required; Shares Entitled to Vote," "--Principal
Shareholders" and "Description of the Merger and the Merger Agreement--
Conversion and Redemption of Ogden Convertible Preferred Stock and Ogden
Preferred Stock."
Beneficial Ownership by Directors and Executive Officers. On February
3, 1997, the date of the Merger Agreement, Ogden directors and executive
officers and their affiliates beneficially owned an aggregate of 82,850 shares
(or approximately 76.14%) of Ogden Common Stock. The Ogden directors, executive
officers and their affiliates have agreed to vote the shares of Ogden Common
Stock over which they have voting authority in favor of the Merger Agreement by
entering into a Voting Agreement. Taking into account the conversion of 4,940
shares of Ogden Convertible Preferred Stock to Ogden Common Stock, Ogden
directors and executive officers who entered into the Voting Agreement will own
or exercise control over approximately 82,899 (approximately 63.26%) of the
outstanding shares of Ogden Common Stock on the record date for the Meeting of
Ogden shareholdes. The Voting Agreement is attached as Annex D and is
incorporated by reference into this Proxy Statement/Prospectus. See
"Meeting of Ogden Shareholders--Principal Shareholders."
The Merger
Basic Terms of Merger Agreement
Upon the date and time of filing of the Certificate of Merger with the
Secretary of State of the State of New York ("Effective Time"), C-O Tel will be
merged with and into Ogden, with Ogden being the surviving corporation, and C-O
Tel ceasing to exist as a separate entity. The holders of Ogden Common Stock
will receive shares of Citizens Common Stock in exchange for their Ogden shares
according to an exchange ratio set forth in the Merger Agreement and described
below.
Conversion of Ogden Common Stock
At the Effective Time of the Merger, and on the terms described in the
Merger Agreement, all of the issued and outstanding shares of Ogden Common
Stock, other than shares held by Citizens, C-O Tel, any other subsidiary of
Citizens, or by Ogden as treasury stock, all of which shall be cancelled
("Cancelled Shares"), and Dissenting Shares, (see "Dissenting Shareholders'
Appraisal Rights"), will be converted into the right to receive that number of
shares of Citizens Common Stock equal to (i) the quotient resulting from
$23,000,000 (as adjusted pursuant to Section 2.1(d) of the Merger Agreement)
divided by the average of the per share closing sale prices of Citizens Common
Stock on the New York Stock Exchange ("NYSE") for a period of fifteen trading
days ending on the fifth day on which the NYSE is open for trading immediately
preceding the Effective Time (the "Market Price"), divided by (ii) the number of
shares of Ogden Common Stock then outstanding, after giving effect to the
conversion of Ogden Convertible Preferred Stock and the cancellation of the
Cancelled Shares.
No fractional shares of Citizens Common Stock will be issued in the
Merger. Instead, any shareholder of Ogden otherwise entitled to receive a
fractional share of Citizens Common Stock will be paid an amount in cash equal
to such fraction of a share of Citizens Common Stock, multiplied by the Market
Price.
See "Description of the Merger and the Merger Agreement" for further
discussion.
Reasons for the Merger
The reasons for the Merger are outlined under "Background and Reasons
for the Merger and Related Matters."
Recommendation of Ogden Board of Directors
As set forth under "Background and Reasons for the Merger and
Related Matters--Recommendation," the Board of Directors of Ogden believes the
Merger is in the best interests of and is fair to all of its shareholders and
recommends that the Ogden shareholders vote for the adoption and approval of
the Merger. For a description of the interests of members of the Board of
Directors of Ogden in the Merger see "Meeting of Ogden Shareholders-- Interests
of Certain Persons in the Merger."
Conditions to the Merger
Consummation of the Merger is subject to the approval of the Merger
Agreement by the requisite vote of Ogden shareholders and the satisfaction or
waiver of the conditions set forth in the Merger Agreement. See "Description of
the Merger and the Merger Agreement-- General."
Regulatory Matters
New York Public Service Commission Approval
Consummation of the Merger requires the consent of the NYPSC pursuant
to the Public Service Law of New York. On March 17, 1997, Citizens, C-O Tel and
Ogden filed a joint application for such authority and approval. The NYPSC's
approval of the acquisition by Citizens of all of the issued and outstanding
voting equity securities of Ogden is a condition to the parties' obligations to
consummate the Merger. The Merger Agreement requires the approval to have been
granted pursuant to a final order and to have been obtained free of any special
terms, conditions or restrictions which Citizens determines, in good faith and
following consultation with Ogden, will materially and adversely affect the
actual, prospective operational and financial benefits to Citizens of the
transactions contemplated by the Merger Agreement and free of any special terms,
conditions or restrictions which Ogden determines, in good faith and following
consultation with Citizens, will materially and adversely affect the actual,
prospective operational and financial benefits to the Ogden shareholders as
contemplated by the Merger Agreement. Citizens and Ogden received a written
order from the NYPSC, issued and effective October 23, 1997, approving the
application. Citizens and Ogden unconditionally accepted and consented to the
Order on October 27, 1997. See "Description of the Merger and the Merger
Agreement--Regulatory Matters." NYPSC approval should not be construed by a
shareholder as a recommendation by the NYPSC with respect to the Merger.
Hart-Scott-Rodino Act
The Merger is subject to the requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, and the rules and regulations thereunder,
which provides that certain transactions may not be consummated until required
information has been furnished to the Antitrust Division (the "Antitrust
Division") of the Department of Justice and the Federal Trade Commission (the
"FTC") and certain waiting periods have been satisfied. Citizens and Ogden filed
the required information and material with the Antitrust Division and the FTC on
October 22, 1997. On November 3, 1997 the FTC granted early termination of the
statutory waiting period. Such early termination of the waiting period will not
preclude the Antitrust Division or the FTC from later challenging the Merger on
antitrust grounds. See "Description of the Merger and the Merger
Agreement--Regulatory Matters."
Effective Time of the Merger
Subject to the terms and conditions of the Merger Agreement, the
closing of the transactions contemplated by the Merger Agreement (the "Closing")
will occur on the last business day of the month in which occurs the tenth
business day after the date Ogden and Citizens agree in writing that all
required regulatory approvals and approvals of the Ogden shareholders have been
obtained, or at such other time as the parties may agree. The date on which
the Closing occurs is referred to as the "Closing Date." The Merger shall
become effective at the time and date the Certificate of Merger is filed by the
Secretary of State of the State of New York, or such other later time as
may be set forth in the Certificate of Merger (the "Effective Time").
See "Description of the Merger and the Merger Agreement--Effective
Time and Consequences."
Right to Terminate
The Merger Agreement may be terminated and the Merger may be abandoned
at any time prior to the Closing Date by mutual written consent of the parties.
Either Ogden or Citizens may terminate the Merger Agreement if the Ogden
shareholders fail to approve the Merger Agreement and the transactions
contemplated thereby. In addition, either Ogden or Citizens alone may terminate
the Merger Agreement and abandon the Merger if conditions to such party's
obligations to consummate the Merger under the Merger Agreement have not been
satisfied or if the Closing of the transaction has not, for any reason, been
consummated by March 31, 1998. The Merger Agreement provides for the payment of
liquidated damages under certain defined termination scenarios. See "Description
of the Merger and the Merger Agreement--Certain Fees and Expenses."
Citizens Common Stock
Upon consummation of the Merger shareholders of Ogden will receive
shares of Citizens Common Stock. See "Description of the Merger and the Merger
Agreement--Description of Common Stock of Citizens."
Accounting Treatment
Citizens presently anticipates that it will account for the Merger
under the "pooling-of-interests" method of accounting. Application of this
accounting treatment is dependent upon evaluation of the facts and circumstances
existing at the time the Merger is consummated. See "Accounting Treatment."
Certain Federal Income Tax Consequences
The Merger is conditioned, in part, upon receipt of a private letter
ruling from the Internal Revenue Service or an opinion of Ogden's tax counsel to
the general effect, among other things, that for federal income tax purposes, no
gain or loss will be recognized by Ogden shareholders upon the conversion of
Ogden Common Stock into Citizens Common Stock, except to the extent of cash
received in lieu of fractional shares. The Federal income tax consequences set
forth in this Proxy Statement/Prospectus are for general information only. See
"Certain Federal Income Tax Consequences." Shareholders are urged to consult
their own tax advisors as to the specific consequences to them of the Merger
under federal, state, local and any other applicable tax laws.
Dissenting Shareholders' Appraisal Rights
Holders of Ogden Common Stock who oppose the Merger and comply with the
provisions of Section 623 of the New York Business Corporation Law ("BCL") are
entitled to demand and receive in cash the fair value of their shares as
determined pursuant to the BCL. Ogden shareholders who wish to exercise this
right must file a written objection to the Merger prior to the shareholder vote,
must not vote in favor thereof, and must meet certain other conditions. Such
shareholders will forfeit their right to a cash value payment if they do not
comply with all statutory procedures and requirements. A more complete
description of the procedure for perfecting dissenters' rights is set forth
under "Dissenting Shareholders' Appraisal Rights" and in Section 623 of the BCL,
which is attached hereto as Annex B.
Resale of Citizens Common Stock
Shareholders of Ogden who may be deemed to control, be controlled by,
or be under common control with Ogden as set forth in Rule 145 of the Securities
Act ("Affiliates") at the time of the Meeting of Ogden shareholders will be
subject to certain restrictions with respect to the resale of the shares of
Citizens Common Stock received by them in the Merger. Shareholders of Ogden who
are not Affiliates may resell the Citizens Common Stock acquired by them in
connection with the Merger without restriction. Shareholders who may be deemed
to be Affiliates will be required to sign an agreement ("Affiliates Agreement"),
the form of which is attached hereto as Annex C by which the Affiliate agrees
not to sell, transfer, or otherwise dispose of shares of Citizens Common Stock
except in accordance with Rule 145 or pursuant to a transaction exempt from
registration under the Securities Act. See "Description of the Merger and the
Merger Agreement - Resale of Citizens Common Stock."
Exchange of Certificates
After the Closing of the Merger, the Exchange Agent will mail to the
Ogden shareholders of record on the record date, other than (i) Citizens and its
subsidiaries, (ii) C-O Tel, (iii) the Ogden Subsidiaries and (iv) holders of
Dissenting Shares, instructions and a form of letter of transmittal
("Transmittal Form") for exchanging certificates representing shares of Ogden
Common Stock for certificates representing the shares of Citizens Common Stock
into which issued and outstanding Ogden Common Stock will be converted as a
result of the Merger. Upon the surrender to the Exchange Agent of such
certificates, together with a duly executed Transmittal Form, the Exchange Agent
will deliver certificates evidencing shares of Citizens Common Stock. Holders of
shares of Ogden Common Stock are urged to notify Maureen L. Howard, Secretary of
Ogden, immediately at (716) 352-7200, if their certificates are lost, stolen, or
destroyed, in order to begin the process of issuing replacement certificates.
See "Description of the Merger and the Merger Agreement --Exchange Procedure."
Beneficial owners of shares of Ogden Common Stock held of record by others
should contact the record owners to provide appropriate instructions for
completion of the Transmittal Form.
Interests of Certain Persons in the Merger
The interests of certain persons in the Merger are summarized under
"Meeting of Ogden Shareholders--Interests of Certain Persons in the Merger".
<PAGE>
Selected Financial Information of Citizens
The following financial information of Citizens is qualified in its
entirety by, and should be read in conjunction with, the information appearing
elsewhere herein and the documents and financial statements incorporated by
reference herein.
<TABLE>
<CAPTION>
Citizens Consolidated Selected Financial Information
(In thousands except percentages, ratios and per share amounts)
Nine Months Ended Year Ended December 31,
-------------------------
September 30,
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT 1997(1) 1996 1996 1995 1994 1993 1992
DATA
- ------------------------------------------------------------------------------------------------------------------
Revenues $1,014,751 $967,224 $1,306,517 $1,069,032 $ 906,150 $ 613,099 $576,881
Net Income $ (70,359) $131,139 $ 178,660 $ 159,536 $ 143,997 $ 125,630 $115,013
Earnings (Loss) Per
Share of Common
Stock(2) $ (.29) $ .53 $ .73 $ .66 $ .65 $ .57 $ .53
As at December 31,
-----------------------------------------------------------------
BALANCE SHEET At 1996 1995 1994 1993 1992
DATA September
- ------------- 30, 1997
Total Assets $4,502,170 $4,523,148 $3,918,187 $3,576,566 $2,627,118 $1,887,981
Long-Term Debt $1,585,361 $1,509,697 $1,187,000 $ 994,189 $ 547,673 $ 522,699
Equity(3) $1,797,873 $1,879,433 $1,559,913 $1,156,896 $ 974,486 $ 837,271
Long-Term Debt
to Long-Term
Debt and Equity 47% 45% 43% 46% 36% 38%
Stockholders'
Equity Per
Share of Common
Stock $ 6.57 $ 6.90 $ 6.42 $ 5.21 $ 4.41 $ 3.84
</TABLE>
- ------------------
(1) As discussed in the Company's Form 10-Q for the quarterly period ended June
30, 1997 and incorporated by reference herein, the Company recorded
approximately $197 million of pre-tax charges to earnings in the second
quarter of 1997. The pre-tax charges primarily relate to telecommunication
information systems and software costs no longer deemed recoverable in the
current regulatory environment, benefit plan curtailments and related
regulatory assets no longer deemed recoverable in the current regulatory
environment, a curtailment of certain telecommunication's long distance
service operations and regulatory commission orders issued in the second
quarter of 1997. Excluding such pre-tax charges, the Company's Income
Statement Data is as follows:
Nine Months Ended
(in thousands, except per share amount) September 30, 1997
------------------
Revenues $1,035,517
Net Income $64,805
Earnings Per Share of Common Stock (2) $.27
(2) Common Stock per share amounts (including the one-for-one conversion of all
Series A shares into Series B shares effective August 25, 1997) have been
adjusted retroactively for subsequent stock dividends and stock splits
through September 30, 1997. No adjustment has been made for Citizens' 1%
1997 fourth quarter stock dividend, as this adjustment is immaterial.
(3) Includes shareholders' equity and Company Obligated Mandatorily Redeemable
Convertible Preferred Securities.
<PAGE>
Selected Financial Information of Ogden
The following financial information of Ogden is qualified in its
entirety by, and should be read in conjunction with, the information appearing
elsewhere herein and the documents incorporated by reference herein.
<TABLE>
<CAPTION>
Ogden Consolidated Selected Financial Information
($ in thousands except per share amounts)
Nine Months Ended Year Ended December 31,
September 30,
--------------- ------------ ----------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
INCOME STATEMENT
- ----------------
DATA
- ----
Operating Revenues $ 8,000 $ 7,937 $ 10,597 $ 10,354 $ 9,808 $ 9,909 $ 9,358
Operating Income $ 2,287 $ 2,099 $ 2,637 $ 2,626 $ 2,454 $ 2,968 $ 1,810
Other Income/Interest $ 1,012 $ 949 $ 1,221 $ 1,244 $ 1,234 $ 1,879 $ 1,122
Expense/Income Taxes
Net Income $ 1,275 $ 1,150 $ 1,416 $ 1,382 $ 1,220 $ 1,089 $ 688
Earnings per Share $ 11.13 $ 10.02 $ 12.27 $ 12.05 $ 10.58 $ 9.36 $ 5.63
Cash Dividends $ 3.39 $ 3.29 $ 4.42 $ 4.04 $ 3.74 $ 3.56 $ 3.33
Declared per Common
Share
At
September
30, At December 31,
------------ ---------- ------------ ---------- ---------- ----------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
BALANCE SHEET DATA
Total Assets $ 27,444 $ 26,882 $ 27,680 $ 27,737 $ 27,214 $ 23,371
Long-Term Debt $ 8,049 $ 8,418 $ 9,004 $ 9,475 $ 9,849 $ 10,258
Stockholders' Equity $ 12,374 $ 11,533 $ 10,681 $ 9,820 $ 9,087 $ 8,463
</TABLE>
<PAGE>
Comparative Share Data
The following table sets forth, for the periods indicated, the
earnings, cash dividends declared and book value per common share data of both
Citizens and Ogden. The information set forth below should be read in
conjunction with the audited and unaudited financial statements of Citizens and
Ogden, which appear elsewhere, or are incorporated by reference, in this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 Year Ended December 31,
---------------------- --------------------------------------------
<S> <C> <C> <C> <C>
(Unaudited) 1996 1995 1994
---- ---- ----
Per Citizens Common Share:
Earnings $ (.29)(1) $ .73 $ .66 $ .65
Cash dividends declared(2) ---- ---- ---- ----
Book value (end of period) $ 6.57 $ 6.90 $ 6.42 $ 5.21
Nine Months Ended
September 30, 1997
Year Ended December 31,
---------------------- --------------------------------------------
(Unaudited) 1996 1995 1994
---- ---- ----
Per Ogden Common Share:
Earnings $ 11.13 $ 12.27 $ 12.05 $ 10.58
Cash dividends declared $ 3.39 $ 4.42 $ 4.04 $ 3.74
Book value (end of period) $ 103.41 $ 95.68 $ 88.32 $ 80.86
- -----------------
(1) Nine months ended September 30, 1997 includes second quarter pre-tax
charges of approximately $197 million. Excluding such charges earnings per
share would have been $.27.
(2) Citizens has paid a stock dividend on its outstanding shares of Common
Stock of 6.56%, 6.35%, and 5.04%, for the years ended December 31, 1996,
1995, and 1994, respectively.
<PAGE>
Nine Months Ended
September 30,
1997
Year Ended December 31,
--------------------- --------------------------------------------
1996 1995 1994
---- ---- ----
Ogden Equivalent Per Common Share
Data: (1)
Earnings(2) $ (4.23)(3) $ 11.01 $ 9.84 $ 9.71
Cash dividends declared $ 0 $ 0 $ 0 $ 0
Book value $ 98.48 $ 103.27 $ 96.04 $ 77.98
Nine Months Ended
September 30,
1997
Year Ended December 31,
--------------------- --------------------------------------------
1996 1995 1994
---- ---- ----
Citizens-Ogden Pro Forma Per Common
Share Data:
Earnings(2) $ (.28)(3) $ .73 $ .66 $ .65
Cash dividends declared(4) $ 0 $ 0 $ 0 $ 0
Book value $ 6.57 $ 6.88 $ 6.40 $ 5.20
</TABLE>
For further information regarding Citizens Common Stock, see
"Description of Citizens Common Stock."
- ---------------------
(1) Assumes for illustrative purposes only that the merger consideration, as
adjusted pursuant to Section 2.1(d) of the Merger Agreement, is $23
million; the Market Price is $11.34 and the number of shares of Ogden
Common Stock outstanding at the time of the Merger (assuming conversion of
4,940 shares of Ogden Convertible Preferred Stock into 22,230 shares of
Ogden Common Stock) is 131,041, resulting in a conversion ratio of 15
(meaning each share of Ogden Common Stock is converted to 15 shares of
Citizens Common Stock). Variations in any one of these assumptions will
necessarily affect the equivalent per share data.
(2) Common Stock per share amounts (including the one-for-one conversion of all
Series A shares into Series B shares effective August 25, 1997) have been
adjusted retroactively for subsequent stock dividends and stock splits
through September 30, 1997. No adjustment has been made for Citizens' 1%
1997 fourth quarter stock dividend, as this adjustment is immaterial.
(3) Nine months ended September 30, 1997 includes second quarter pre-tax
charges of approximately $197 million.
(4) Citizens has paid a stock dividend on its outstanding shares of Common
Stock of 6.56%, 6.35%, and 5.04%, for the years ended December 31, 1996
1995, and 1994, respectively.
<PAGE>
Current Market Value as of Announcement Date
The following table represents the closing price of Citizens Common
Stock on July 31, 1996, the last trading date prior to August 1, 1996, the
public announcement of the Merger, and on November 24, 1997. The table also sets
forth the closing per share price of Ogden Common Stock on May 20, 1996, the
last reported trade prior to the public announcement date as there was no trade
reported on the OTC Bulletin Board for July 31, 1996, and on May 9, 1997, the
most recent trade reported. Ogden Common Stock is not traded on an established
trading market, but is traded sporadically through the Pink Sheets and the OTC
Bulletin Board. See "Information About Ogden Telephone Company-Market Price and
Dividend Information." The Ogden Equivalent Per Share Price also shown below
represents the last sale prices of a share of Citizens Common Stock on July 31,
1996 and on November 24, 1997, multiplied by an assumed exchange ratio of 15.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Date Citizens Historical Ogden Historical Ogden Equivalent
Per Share Per Per
Closing Price(1) Share Price Share Price(2)
- ---------------------- ------------------------ ------------------------ -------------------------------
May 20, 1996 -- $150 --
July 31, 1996 $10.34 -- $155.10
May 9, 1997 -- $124 --
November 24, 1997 $9.875 -- $148.13
</TABLE>
- ---------------------
(1) Adjusted for subsequent stock dividends. No adjustment has been made
for Citizens' 1% 1997 fourth quarter stock dividend, as this adjustment is
immaterial.
(2) Assumes for illustrative purposes only that the merger consideration, as
adjusted pursuant to Section 2.1(d) of the Merger Agreement, is $23
million; the Market Price is $11.34 and the number of shares of Ogden
Common Stock outstanding at the time of the Merger (assuming conversion of
4,940 shares of Ogden Convertible Preferred Stock into 22,230 shares of
Ogden Common Stock) is 131,041, resulting in a conversion ratio of 15
(meaning each share of Ogden Common Stock is converted to 15 shares of
Citizens Common Stock). Variations in any one of these assumptions will
necessarily affect the equivalent per share data.
<PAGE>
INTRODUCTION
This Proxy Statement/Prospectus is being furnished in connection with
the solicitation by the Board of Directors of Ogden Telephone Company ("Ogden")
of proxies of the Ogden shareholders to be voted at the Special Meeting of
shareholders of Ogden to be held on December 30, 1997 at 10:00 a.m. and at any
and all adjournments thereof ("Meeting"). The Meeting will be held at the
offices of Harter, Secrest & Emery, 700 Midtown Tower, Rochester, New York
14604. This Proxy Statement/Prospectus and the enclosed form of proxy are being
sent to shareholders of Ogden on or about December 1, 1997.
BACKGROUND AND REASONS FOR THE MERGER AND RELATED MATTERS
The terms of the proposed Merger are the result of arms-length
negotiations by representatives of Citizens and representatives of Ogden.
Background of Ogden's Activities Leading to and Ogden's Reasons for the Merger
In late 1995, Ogden was experiencing increasing competition related to
deregulation in its Local Access Transport Area ("LATA"). While the LATA in
which Ogden's territory is located was already deregulated as of January 1,
1995, Ogden's Board of Directors and management were concerned about the
additional impact of the Telecommunications Act of 1996 ("Telecommunications
Act"), which was to be enacted in February of 1996. The Telecommunications Act
represented a federal mandate for deregulation of local telecommunications
services. In Ogden's view, rapid deregulation would eventually make it more
difficult for a small telephone company, such as Ogden, operating in a highly
competitive LATA to keep up with advancing technological demands while
continuing to pay dividends to its shareholders. Thus, in late 1995, Ogden began
seriously to consider its options for remaining competitive and increasing
shareholder value.
In Ogden's view, although its shares of Common Stock were thinly traded
through the OTC Bulletin Board and on the Pink Sheets published by the National
Quotation Bureau (see "Information About Ogden Telephone Company--Market Price
and Dividend Information"), the trading was not significant enough in the
competitive market for Ogden's shareholders to have any real liquidity in their
shares. Thus, in late 1995, the Board of Directors appointed two of its
executive officers to create a task force to investigate competitive options and
potential prices for purchase of Ogden's business. The executive officers, and
the eventual task force made up of officers and directors (the "Ogden Team"),
were charged with exploring sale or merger possibilities with companies offering
the highest and best value for the shareholders while considering the other
stakeholders, such as ratepayers, the employees and the community.
During January and February 1996, the Ogden Team compiled information
and, with the assistance of Kraskin & Lesse, LLP, prepared a Confidential
Information Memorandum ("Memorandum") containing financial and other general
information regarding Ogden and the Ogden Subsidiaries. Soon thereafter, the
Ogden Team began to identify companies which might be willing to enter into a
transaction, possibly a purchase or merger, with Ogden.
In March 1996, Ogden distributed the Memorandum to nine companies,
inviting each of them to consider proceeding with a possible transaction with
Ogden and the Ogden Subsidiaries. In April 1996, Ogden sent the Memorandum to
two additional companies, for a total of eleven potential suitors. For the next
two months, Ogden provided additional information to requesting companies. All
suitors were given the same information regardless of which company requested
it.
By June 10, 1996, Citizens, together with two other companies ("Company
1" and "Company 2"), had responded to the Memorandum with proposals for
purchasing or merging with Ogden. Ogden's confidentiality agreements do not
permit disclosure of the identity of Company 1 or Company 2. Citizens' initial
response to Ogden's Memorandum consisted of a proposal for a nontaxable merger
in exchange for publicly traded stock. Company 1 responded with a proposal
involving a potential installment sale, while Company 2 responded with a
nontaxable merger proposal which would have provided the Ogden shareholders with
the publicly traded stock of Company 2.
At a Special Meeting held on June 13, 1996, the Board of Directors
instructed the Ogden Team to meet with the three interested parties. Prior to
the meeting, Ogden requested Coopers & Lybrand, LLP to provide the Board of
Directors with a range of potential purchase prices that would represent the
fair value of the business. Based upon the range of values provided by Coopers &
Lybrand, the Directors established a $23.5 million threshold as the minimum
value for considering a sale or merger. Ogden expected that the $23.5 million
would either be in cash or high grade securities.
Between June 25 and 28, 1996, the Ogden Team met with representatives
of the three companies, including Citizens, that had provided proposals. Each
company was given the opportunity to explain its proposal and answer the Ogden
Team's questions and concerns. The Ogden Team then evaluated the proposal of
each company and determined that Citizens offered the best overall transaction
for the benefit of the shareholders.
In evaluating the proposals of Citizens, Company 1 and Company 2, the
Ogden Team considered several factors. Those factors included, among others, (i)
the overall bid price, deal structure, and tax effects of each of the proposed
transactions; (ii) the prices for shares of the stock of Citizens and Company 2
in comparison to the total consideration to be received; (iii) employee issues,
including whether and under what terms employees would be permitted to work for
the new company; (iv) whether the benefits packages offered by the suitors were
comparable to or better than the benefits packages of Ogden; (v) various
"agreement issues," including whether the parties would enter into a letter of
intent, when and how due diligence would be conducted, and the walk-away and
indemnification requirements of each suitor; and (vi) the business philosophies
of each of the suitors. At that point, while none of the suitors met the Board
of Directors' minimum dollar threshold, the Ogden Team determined that Citizens
was the best overall choice.
On July 11, 1996, the Ogden Team contacted Citizens to communicate
Ogden's interest in further considering Citizens' proposal if Citizens would
increase its bid to $23.5 million, the minimum set by the Board of Directors. By
letter dated July 29, 1996, Citizens confirmed it was willing to increase its
bid to $23.5 million.
Throughout the process, the Ogden Team kept the members of Ogden's
Board of Directors generally informally advised of the progress of the various
meetings with Citizens, Company 1 and Company 2. At a Special Meeting of the
Board of Directors on July 16, 1996, the Ogden Team met with the Board and
presented the proposals of the three suitors. After careful consideration of the
substance of each of the three proposals, and, after considering the same
factors, among others, identified by the Ogden Team, the Board determined that
the Citizens proposal provided the best overall value for Ogden and was in the
best interests of Ogden's shareholders.
In July 1996, Ogden and Citizens began negotiating a Letter of Intent
evidencing an intent to enter into a definitive agreement with respect to the
Merger. The Ogden Board of Directors thereafter approved the Letter of Intent
containing the $23.5 million offering price and it was signed on August 1, 1996.
In December 1996, during its due diligence review, Citizens suggested that a
reduction in the overall price was required due to certain issues regarding
actuarial assumptions and the valuation of the pension Ogden provided to its
employees. After negotiation and approval by Ogden's Board of Directors, the
parties determined that the best compromise would be to reduce the purchase
price by $500,000, making the final purchase price in the Merger Agreement $23
million.
Subsequently, the Ogden Board unanimously adopted and approved the
definitive Merger Agreement. On February 3, 1997, the Merger Agreement was
executed and delivered by Ogden and Citizens.
Recommendation
The Board of Directors of Ogden has unanimously adopted and approved
the Merger Agreement and recommends that the Ogden shareholders vote for the
adoption and approval of the Merger Agreement.
In arriving at its decision to approve and recommend the Merger
Agreement, the Ogden Board of Directors took into account a number of factors,
although no weight was assigned specifically to any one or more of such factors.
The Board considered, among other things, (i) the recent and historical prices
for shares of Ogden Common Stock in comparison to the total consideration to be
received from Citizens; (ii) its belief that the Merger consideration is fair,
from a financial point of view, to Ogden's shareholders; (iii) its belief that
the terms of the Merger Agreement, including the conditions to each party's
obligations, are fair and reasonable; (iv) Ogden's ability to benefit from the
continuity, knowledge and experience of the management and employees in
Citizens' nationwide organization (v) increased employee training opportunities;
(vi) advantages associated with the centralization of management and regulatory
services; and (vii) possible cost savings due to economies of scale in
activities such as purchasing and warehousing.
After careful consideration of the foregoing factors and consideration
of alternative courses of action, including the bids of Company 1 and Company 2,
Ogden's Board of Directors concluded and determined that the terms of the
Merger, which were negotiated at arm's length as described in "--Background of
Ogden's Activities Leading to and Ogden's Reasons for the Merger" were fair to,
and in the best interests of, Ogden and its shareholders.
For a description of the interests of members of the Ogden Board of
Directors in the Merger, see "Meeting of Ogden Shareholders--Interests of
Certain Persons in the Merger."
Background of Citizens' Activities Leading to the Merger
During 1996, Citizens continued its program of reviewing and evaluating
acquisition opportunities. In the early spring of 1996, Citizens received
Ogden's Confidential Information Memorandum referred to above, which prompted a
review of Ogden and its facilities and business and the relevant information
which was available. Citizens considered Ogden to be an attractive acquisition
because the Ogden service territory is close to existing telephone service areas
of Citizens Communications in New York State. Also, the Ogden franchise
territories include rural and suburban areas, which is consistent with the
character of Citizens' existing service territories. In addition, Ogden's
product strategy contemplates the use of a fiber optics system and expanded
service offerings, and its corporate culture stresses superior service and
up-to-date facilities.
In early June 1996, Citizens responded to Ogden's request for proposals
with a proposal for the acquisition of Ogden in a non-taxable merger in exchange
for Citizens' Common Stock. As described above, in late June and July, Citizens
continued its negotiations with Ogden and, by August 1, 1996, the two companies
had negotiated and signed a Letter of Intent confirming the understanding that
an acquisition would be carried out through a tax-free merger of a wholly owned
subsidiary of Citizens into Ogden in which the shareholders of Ogden would
receive common stock of Citizens with a market value during a measuring period
of $23.5 million (later reduced to $23 million).
Citizens' Reasons for the Merger
The service territory of Ogden and its two subsidiaries consists of the
suburban communities of Spencerport, Hilton and North Chili, six miles from
downtown Rochester, New York. This territory includes more than 20,000 access
lines and is close to a number of Citizens' territories. In character, it is
similar to Citizens' other telephone territories, being in large measure rural
and suburban.
Citizens believes that Ogden's corporate culture is similar to that of
Citizens. Ogden has earned commendations for service excellence from the New
York Public Service Commission in each year since 1988 and has stated its
corporate mission to be to provide customers with superior service while
maintaining a community oriented approach, making available advanced, efficient
communications on a global basis.
Citizens also considers that Ogden has a comparable product strategy.
Ogden has put in place a fiber optic system and expanded service offerings by
making available to its customers digital switching, Data Circuits, Centrex,
Signaling System No.7 that uses out-of-band signaling, Caller ID, customer
calling features, and long distance, voice mail and discounted "local"
long-distance calling plans.
DESCRIPTION OF THE MERGER AND THE MERGER AGREEMENT
Effective Time and Consequences
Provided that all conditions to the consummation of the Merger
contained in the Merger Agreement have been satisfied or waived, the Merger will
become effective at the time and date that the Certificate of Merger is filed by
the Secretary of State of the State of New York, or such other later time as may
be set forth in the Certificate of Merger (the "Effective Time"). It is
anticipated that the filing of the Certificate of Merger will take place on the
date of closing of the Merger Agreement ("Closing"). The Closing will be
scheduled to take place on the last business day of the month in which occurs
the tenth business day after the date Ogden and Citizens agree in writing that
all required regulatory approvals and the approval and adoption of the Merger
Agreement by the Ogden shareholders have been obtained ("Closing Date"),
although no assurance can be given in this regard and the parties have the
discretion to agree upon a different date. Ogden and Citizens each have the
right, but not the obligation, to terminate the Merger Agreement if the Closing
does not occur on or before March 31, 1998.
As of the Effective Time, C-O Tel will merge with and into Ogden, with
Ogden continuing in existence as the surviving corporation. Ogden shall possess
all the properties, assets and rights of C-O Tel and shall similarly become
liable for all debts, liabilities and other obligations of C-O Tel, while
retaining all properties, assets, rights, debts, liabilities and other
obligations of Ogden. The Board of Directors and all of the officers of Ogden
and of each of the Ogden Subsidiaries shall resign as of the Closing Date. The
executive officers of Ogden will become employees of the surviving corporation
under revised job titles and employment agreements. (See "Meeting of Ogden
Shareholders--Interests of Certain Persons in the Merger.") The Board of
Directors and the officers of C-O Tel as of the Effective Time shall be the
Board of Directors and officers of Ogden from the Effective Time until their
successors are duly elected or appointed and qualified. The Certificate of
Incorporation of Ogden in effect immediately prior to the Effective Time shall
be the Certificate of Incorporation of Ogden without any amendment. The By-Laws
of C-O Tel in effect immediately prior to the Effective Time shall be the
By-Laws of Ogden.
Basic Terms of Merger Agreement
Conversion of Ogden Common Stock
At the Effective Time of the Merger, and on the terms described in the
Merger Agreement, all of the issued and outstanding shares of Ogden Common Stock
(other than shares held by Citizens, C-O Tel, any other subsidiary of Citizens,
or by Ogden as treasury stock, all of which shall be cancelled ("Cancelled
Shares"), and Dissenting Shares, (see "Dissenting Shareholders' Appraisal
Rights") will be converted into the right to receive that number of shares of
Citizens Common Stock equal to (i) the quotient resulting from $23,000,000 (as
adjusted pursuant to Section 2.1(d) of the Merger Agreement) divided by the
average of the per share closing sale prices of Citizens Common Stock on the New
York Stock Exchange ("NYSE") for a period of fifteen trading days ending on the
fifth day on which the NYSE is open for trading immediately preceding the
Effective Time (the "Market Price"), divided by (ii) the number of shares of
Ogden Common Stock then outstanding, after giving effect to the conversion of
Ogden's 8% convertible preferred stock (the "Ogden Convertible Preferred Stock")
and the cancellation of the Cancelled Shares.
Section 2.1(d) of the Merger Agreement provides that the Merger
Consideration shall be decreased by the amount by which the Ogden Adjusted Net
Liabilities (as defined below) is greater than $10,051,305, and shall be
increased by an amount by which the Ogden Adjusted Net Liabilities is less than
$10,051,305 (with the resulting amount referred to as the "Initial Merger
Consideration").
For purposes of calculating the Ogden Adjusted Net Liabilities, the
following definitions apply:
"Ogden Net Liabilities" means, with respect to Ogden and the Ogden
Subsidiaries, that amount obtained by subtracting (x) the sum of the current
assets (after adjustment to exclude (i) accounts receivable that are more than
90 days past due and (ii) any other current asset of Ogden and the Ogden
Subsidiaries to the extent that Ogden, as the surviving corporation, will not
realize the full value of such asset after the Closing Date) and the deferred
pension expenses of Ogden and the Ogden Subsidiaries on a consolidated basis
from (y) the sum of the current liabilities, a reserve for potential tax
liability (to the extent not included in current liabilities) with an account
credit balance reasonably satisfactory to Citizens and Ogden, the long term debt
and the employee benefits liabilities (other than the accrued post-retirement
benefit obligation) of Ogden and the Ogden Subsidiaries on a consolidated basis
as shown on the balance sheet, in each case as of the Closing Date and
determined in accordance with generally accepted accounting principles. The
Ogden Net Liabilities shall be calculated without giving effect to the
redemption of the Ogden Preferred Stock and the Ogden Convertible Preferred
Stock (see "--Conversion and Redemption of Ogden Convertible Preferred Stock and
Ogden Preferred Stock" below) and borrowings related to such redemptions as
permitted by Section 3.1(b)(xiii) of the Merger Agreement or actions taken
pursuant to requests made by or of Ogden or any Ogden Subsidiary and agreed to
by Citizens.
"Ogden Adjusted Net Liabilities" means, with respect to Ogden and the
Ogden Subsidiaries, that amount obtained by either (x) subtracting from the
Ogden Net Liabilities the amount by which expended capital expenditures
described in Section 3.1(b)(i) of the Merger Agreement exceed budgeted capital
expenditures on a pro-rata basis, or (y) adding to the Ogden Net Liabilities the
amount by which expended capital expenditures described in Section 3.1(b)(ii) of
the Merger Agreement are exceeded by budgeted capital expenditures on a pro-rata
basis.
Final Merger Consideration
Ogden Adjusted Net Liabilities shall be estimated in good faith by
Ogden and set forth in a certificate (the "Initial Adjustment Certificate") to
be delivered to Citizens not later than five business days prior to the Closing
Date. The Initial Adjustment Certificate shall constitute the basis on which the
Initial Merger Consideration shall be calculated. At the Effective Time,
Citizens, in accordance with Section 2.2(a) of the Merger Agreement, will
deposit with Illinois Stock Transfer Company (the "Exchange Agent") for
immediate distribution to the holders of Ogden Common Stock, certificates
representing that number of shares of Citizens Common Stock equal to 95% of the
Initial Merger Consideration, less that number of shares distributable to
Dissenting Holders, with the balance of shares of Citizens Common Stock to be
held back and not distributed by Citizens (the "Heldback Shares") pending
determination of Final Merger Consideration. On or before 90 days after the
Closing Date, Citizens will deliver to Francis M. Smith or such other individual
designated by Ogden, in his capacity as the Ogden shareholders representative,
its proposed final calculation of Ogden Adjusted Net Liabilities in a
certificate (the "Final Adjustment Certificate"), which shall evidence the
nature and extent of any variances between the amounts estimated in the Initial
Adjustment Certificate and the amounts set forth in the Final Adjustment
Certificate.
If the Final Merger Consideration as set forth in the Final Adjustment
Certificate (the "Final Merger Consideration") is not greater or less than the
Initial Merger Consideration in an amount in excess of $100,000, then Citizens
will deposit with the Exchange Agent, for the benefit of the holders of shares
of Ogden Common Stock, additional certificates representing all of the Heldback
Shares, less the number of shares of Citizens Common Stock attributable to
Dissenting Holders. If the Final Merger Consideration is greater than the
Initial Merger Consideration by an amount in excess of $100,000, then Citizens
will deposit with the Exchange Agent, for the benefit of holders of Ogden Common
Stock, additional certificates representing all of the Heldback Shares plus such
number of additional shares of Citizens Common Stock equal to the number
obtained by dividing the total amount of such difference by the Market Price,
less that number of shares of Citizens Common Stock attributable to Dissenting
Holders. If the Final Merger Consideration is less than the Initial Merger
Consideration by an amount in excess of $100,000, then the number of Heldback
Shares shall be reduced by the number obtained by dividing the total amount of
such difference by the Market Price, and Citizens will promptly deposit with the
Exchange Agent, for the benefit of holders of Ogden Common Stock, additional
certificates representing such reduced number of Heldback Shares, less that
number of Shares of Citizens Common Stock attributable to Dissenting Holders.
Following the deposit of Heldback Shares (and additional shares, if any) by
Citizens with the Exchange Agent, the Exchange Agent will promptly distribute
certificates representing such Heldback Shares to the former Ogden shareholders
who received shares of Citizens Common Stock pursuant to Section 2.2(b) of the
Merger Agreement.
No fractional shares of Citizens Common Stock will be issued in the
Merger. Instead, any shareholder of Ogden otherwise entitled to receive a
fractional share of Citizens Common Stock will be paid an amount in cash equal
to such fraction of a share of Citizens Common Stock, multiplied by the Market
Price.
Description of Common Stock of Citizens
The holders of Citizens Common Stock are entitled to one vote for each
share on all matters voted on by stockholders. The holders of Citizens Common
Stock have no preemptive rights. The holders of Citizens Common Stock are
entitled to receive dividends when and as declared by the Board of Directors of
Citizens out of funds legally available therefor. Although there can be no
assurances as to the amount of any future dividends, cash or stock dividends
have been paid to holders of Citizens Common Stock every year without
interruption beginning in 1939. Commencing in 1990, Citizens has declared and
paid quarterly stock dividends on shares of all its outstanding Citizens Common
Stock. The stock dividend rate is based on an underlying cash equivalent.
Citizens expects that under present United States federal tax law, stock
dividends on Citizens Common Stock, if paid and received pro-rata and otherwise
in the same manner as they have been since 1990, will be free of current federal
income taxation on receipt. Such stock dividends are treated as capital
transactions when and if sold. Gain or loss is based on the difference between
sales price and adjusted basis per share. For further information, see
"Description of Citizens Common Stock" below.
Application is being made to list the shares of Citizens Common Stock
issuable in connection with the Merger on the New York Stock Exchange ("NYSE").
It is a condition to Ogden's obligation to consummate the Merger that such
shares be authorized for listing on the NYSE subject to official notice of
issuance. See "--Other Aspects of the Merger Agreement--Certain Covenants of
Citizens and C-O Tel."
Exchange Procedure
As soon as reasonably practicable after the Closing Date, the Exchange
Agent will mail to each Ogden Shareholder (other than Citizens and its
subsidiaries, C-O Tel, Ogden and the Ogden Subsidiaries, and holders of
Dissenting Shares) of record on the record date established by the Board of
Directors of Ogden with respect to the Meeting (the "Record Date") of a
certificate or certificates which immediately prior to the Closing Date
represented outstanding shares of Ogden Common Stock, a form of letter of
transmittal (the "Transmittal Form") and instructions for use in effecting the
surrender of such certificates in exchange for certificates representing shares
of Citizens Common Stock. Upon the surrender to the Exchange Agent of such
certificates, together with a duly executed Transmittal Form, the Exchange Agent
will deliver certificates evidencing shares of Citizens Common Stock, all in
accordance with the instructions set forth in the Transmittal Form. At or
promptly after the Effective Time, Citizens shall deposit or cause to be
deposited with the Exchange Agent, for the benefit of the holders of shares of
Ogden Common Stock, certificates representing the number of whole shares of
Citizens Common Stock to which holders of Ogden Common Stock are entitled
pursuant to Section 2.1(b) of the Merger Agreement.
Citizens will pay any transfer or other taxes required by reason of the
issuance of a certificate representing shares of Citizens Common Stock; provided
that such certificate is issued in the name of the person in whose name the
Ogden certificate surrendered in exchange therefor is registered (or such other
person designated by the person in whose name the Ogden certificate surrendered
in exchange therefor is registered); and provided, further, that Citizens will
not pay any transfer or other tax if the obligation to pay such tax under
applicable law is solely that of the stockholder or if payment of any such tax
by Citizens otherwise would cause the Merger to fail to qualify as a tax free
reorganization under the Code.
No fractional shares of Citizens Common Stock will be issued in the
Merger. Instead, any shareholder of Ogden otherwise entitled to receive a
fractional share of Citizens Common Stock will be paid an amount in cash equal
to such fraction of a share of Citizens Common Stock multiplied by the Market
Price.
Until such shares of Ogden Common Stock are surrendered, each
certificate for Ogden Common Stock (other than Cancelled Shares and Dissenting
Shares) that immediately prior to the Effective Time represented shares of Ogden
Common Stock shall be deemed at and after the Effective Time to represent only
the right to receive, upon such surrender, the number of shares of Citizens
Common Stock and cash in lieu of any fractional shares of Citizens Common Stock
as contemplated by Section 2.1(b) of the Merger Agreement. The holder thereof
will not be entitled to receive any dividends or other distributions payable to
holders of Citizens Common Stock with a record date after the Closing Date or to
receive certificates representing shares of Citizens Common Stock, until such
holder's certificate(s) for Ogden Common Stock has been surrendered (or, if
missing, otherwise documented) in accordance with the procedures set forth in
the Transmittal Form. All such dividends or other distributions will be accrued
and paid, without interest, to the holder of record of the Citizens Common Stock
for which certificates are delivered, upon such surrender.
Citizens' expected record date for the first quarterly dividend
expected to be payable in 1998 is March 2, 1998.
Beneficial owners of shares of Ogden Common Stock held of record by
others should contact the record owners to provide appropriate instructions for
completion of the Transmittal Form.
Conversion and Redemption of Ogden Convertible Preferred Stock and Ogden
Preferred Stock
As a condition to the Merger, Ogden has agreed to either redeem or
convert all of its issued and outstanding preferred stock to Common Stock so
that only Ogden Common Stock will remain outstanding as of the Closing Date. On
October 28, 1997, Ogden sent notices of redemption to all holders of shares of
Ogden Preferred Stock and Ogden Convertible Preferred Stock explaining certain
terms of the Merger and stating that all issued and outstanding shares of Ogden
Preferred Stock and Ogden Convertible Preferred Stock will be redeemed or
converted in accordance with their terms on November 27, 1997, 30 days after the
date of the notice of redemption.
As of the date of the Merger Agreement, the following number of shares
of Ogden Common Stock, Ogden Preferred Stock and Ogden Convertible Preferred
Stock were issued and outstanding: (i) 108,810.5 shares of Ogden Common Stock,
(ii) 5,550 shares of Ogden Preferred Stock, and (iii) 5,668 shares of Ogden
Convertible Preferred Stock. The Ogden Convertible Preferred Stock is
convertible into Common Stock at the rate of four and one-half shares of Ogden
Common Stock for each share of Ogden Convertible Preferred Stock, subject to
certain adjustments. By notice dated October 28, 1997, all issued and
outstanding shares of Ogden Preferred Stock will be redeemed effective November
27, 1997. Effective November 27, 1997, 4,940 shares of Ogden Convertible
Preferred Stock will be converted to Ogden Common Stock, while 728 shares of
Ogden Convertible Preferred Stock will be redeemed. Thus, as of November 27,
1997, 131,040.5 shares of Ogden Common Stock will be issued and outstanding.
By means of the joint application filed with the NYPSC, approval of the
NYPSC was requested in order for Ogden to issue long-term debt for the purpose
of redeeming all of the Ogden Preferred Stock and such shares of the Ogden
Convertible Preferred Stock as may elect not to be converted to Ogden Common
Stock. In its Order, the NYPSC preferred to treat the debt as short term and
placed the onus on Ogden to request long term debt if the debt issued could not
be repaid as short term debt. Ogden management anticipates that it will be
able to fund the entire redemption of $555,000 to $1,121,800 via a promissory
note under an existing loan facility with CoBank, ACB. The long-term or other
debt to be used to fund the redemption of the Ogden Preferred Stock and the
Ogden Convertible Preferred Stock shall be assumed by Ogden, as the surviving
corporation, but the issuance of any such debt shall have no effect on or cause
any adjustment to the Merger Consideration. The Ogden Net Liabilities shall
be calculated without giving effect to the redemption of the Ogden Preferred
Stock and the Ogden Convertible Preferred Stock and borrowings related to such
redemptions permitted by Section 3.1(b)(xiii) of the Merger Agreement.
However, any conversion of Ogden Convertible Preferred Stock to Ogden
Common Stock will have an effect on the number of shares of Ogden Common Stock
outstanding as of the Effective Time and thus will have an effect on the number
of shares of Citizens Common Stock to be received in exchange for each
outstanding share of Ogden Common Stock.
Other Aspects of the Merger Agreement
Certain Covenants of Ogden
Ogden has agreed that, during the period prior to the Effective Time
(except as expressly permitted by the Merger Agreement or to the extent that
Citizens shall otherwise agree), Ogden will, and will cause each Ogden
Subsidiary to, carry on its business diligently and in the ordinary and usual
course consistent with past practice; maintain all of its properties in
customary repair; maintain in the ordinary course of business contracts in
effect without any change except as expressly provided by the terms of the
Merger Agreement; take all action necessary to comply with the provisions of all
regulations, orders and permits applicable to Ogden, the Ogden Subsidiaries and
the conduct of Ogden's business; use all reasonable efforts to preserve intact
its business organization reasonably satisfactory to Citizens and maintain its
existing relations with customers, suppliers, employees and business associates;
make substantially all of the capital expenditures set forth in Ogden's capital
budget for fiscal years 1996 and 1997 (which budgets have been prepared); and
not make any capital expenditure or commitment therefor in excess of $25,000 for
any unbudgeted project or matter or in excess of $100,000 for any budgeted
project or matter without first notifying and consulting with Citizens and
taking into account any reasonable requests made by Citizens with respect
thereto. In addition, Ogden has agreed that, during the period prior to the
Effective Time, Ogden will not (except as expressly permitted by the Merger
Agreement or to the extent that Citizens shall otherwise consent): (a) increase
the benefits provided under any plans concerning employee benefits, increase the
general rates of compensation of its employees, or hire any employees, except
(i) as required by law or (ii) in the ordinary course of business; (b) amend its
Certificate of Incorporation or Bylaws; (c) acquire or agree to acquire by
merging or consolidating with or into, purchasing substantially all of the
assets or stock of, or otherwise, any corporation, partnership or other business
organization; (d) except for the conversion and redemption of Ogden Convertible
Preferred Stock and Ogden Preferred Stock described in Section 3.1(h) of the
Merger Agreement (see "--Conversion and Redemption of Ogden Convertible
Preferred Stock and Ogden Preferred Stock"), not issue, sell, purchase or redeem
any shares of its capital stock of any class or issue, or sell any securities
convertible into, or options, warrants or other rights to subscribe for, any
such shares; (e) pledge or otherwise encumber any shares of the capital stock of
any Ogden Subsidiary; (f) except for dividends normally declared and paid on the
Ogden Common Stock, the Ogden Preferred Stock and the Ogden Convertible
Preferred Stock, declare, pay or set aside for payment any dividend or other
distribution in respect of its capital stock; (g) incur, assume, or guarantee
any indebtedness or obligation not reflected in Ogden's financial statements, or
increase or decrease the indebtedness of Ogden or any of its affiliates, except
for up to $1,500,000 in short term borrowings not to exceed $100,000 per
occurrence under existing borrowing facilities or in the ordinary course of
business, or in connection with redemptions of shares occurring pursuant to
Section 3.1(h) of the Merger Agreement; (h) make any tax election or settle or
compromise or settle any federal, state, local or foreign tax liability material
to Ogden or any of the Ogden Subsidiaries; (i) pay, discharge, or satisfy any
claims, liabilities or obligations (whether accrued, absolute, contingent,
unliquidated, or otherwise, and whether asserted or unasserted), other than the
payment, discharge or satisfaction in the ordinary course of business consistent
with past practice; provided, however, that in no event shall it repay any
long-term indebtedness except to the extent required by the terms thereof; (j)
enter into any contract, commitment, arrangement or transaction outside the
ordinary course of its business consistent with past practice; (k) amend, modify
or change in any material respect any existing contract, other than in the
ordinary course of business consistent with past practice; (l) change any of the
accounting principles or practices used by it, except for any change required by
reason of a concurrent change in generally accepted accounting practices; (m)
take any action or fail to take any action that would make any of the
representations or warranties of Ogden contained in the Merger Agreement untrue
or inaccurate at any time from the date of the Merger Agreement or would result
in any of the conditions set forth in the Merger Agreement not being satisfied;
or (n) enter into any agreement to do any of the foregoing. The Merger Agreement
contains numerous representations and warranties on the part of Ogden which are
customary in acquisitions.
Other Covenants of Ogden
The Merger Agreement requires Ogden to make all ordinary course of
business filings with the NYPSC, Federal Communications Commission ("FCC") or
any other governmental authority between the date of the Merger Agreement and
the Closing Date. The Merger Agreement further requires Ogden, between the date
of the Merger Agreement and the Closing Date, to (a) discuss with Citizens, and
to obtain Citizens' prior approval (not to be unreasonably withheld) for any
proposed changes in the rates, charges, standards of service or accounting of
its businesses from those in effect on the date of the Merger Agreement prior to
making any filing with the NYPSC, FCC or any governmental authority (or any
amendment thereto), or effecting with any governmental authority any agreement,
commitment, arrangement or consent, whether written or oral, formal or informal,
with respect thereto; and (b) discuss with Citizens and obtain Citizens' prior
approval (not to be unreasonably withheld) before Ogden files any application,
petition, motion, brief, testimony, settlement agreement or other pleading in
any proceeding before the NYPSC, FCC or any other governmental authority or
appeals related thereto with respect to which Citizens or an affiliate of
Citizens has or reasonably could be expected to take a contrary position that
reasonably could be expected to have an adverse effect on the revenue, earnings
or business of Citizens.
Certain Covenants of Citizens and C-O Tel
The Merger Agreement requires Citizens (i) to use its best efforts to
cause the shares of Citizens Common Stock to be issued to the Ogden shareholders
to be listed on the NYSE, subject to official notice of issuance thereof (see
"--Description of Common Stock of Citizens" above), (ii) make all necessary Blue
Sky filings and obtain all authorizations required to carry out the transactions
contemplated by the Merger Agreement, and (iii) be responsible for making and
assume the economic burden of the filings and authorizations or regulatory
approvals required in connection with the Merger Agreement including, but not
limited to, approval of the NYPSC, the Department of State of the State of New
York, the Securities and Exchange Commission ("SEC") and the securities
commissions of necessary states of the United States.
Limitations on Other Proposals or Offers
Ogden has agreed, except in the circumstances described below, not to,
and not to permit any director, officer, agent, or other representative of
Ogden, to knowingly encourage, solicit or initiate any discussions or
negotiations with, or knowingly provide any confidential information to, any
person or group (other then to Citizens or any affiliate or associate of
Citizens and their respective directors, officers, employees, representatives
and agents) concerning any merger of Ogden, the sale of Ogden's capital stock or
assets (other than sales of assets in the ordinary course of business), or any
similar transaction involving Ogden. See the discussion of certain related
provisions in the Voting Agreement described below under the heading "Meeting of
Ogden Shareholders - Interests of Certain Persons in the Merger" and the
description of the Ogden Directors' fiduciary duties while considering
termination of the Merger Agreement described below under the heading
"Description of the Merger and Merger Agreement -Termination of the Merger
Agreement." The terms of the Merger Agreement do not prohibit the Board of
Directors of Ogden from (i) making any disclosure to the Ogden shareholders
that, in the judgment of the Board of Directors of Ogden, with the written
advice of outside counsel, may be required under applicable law, or (ii)
responding to any unsolicited proposal or inquiry and negotiating with the
person making such proposal or inquiry if (a) such person has made an offer to
purchase or acquire Ogden's assets or shares under circumstances not
constituting a breach of the foregoing provisions, (b) Ogden's Board of
Directors reasonably believes that such person has the financial ability
to consummate such an offer and such an offer would yield a higher aggregate
value to Ogden's shareholders than will the transactions contemplated by
the Merger Agreement, and (c) Ogden's Board of Directors determines in
good faith that there is a significant risk that failure to negotiate with
such person would constitute a breach of its fiduciary duties to Ogden's
shareholders. In the event Ogden's Board of Directors take any action to
facilitate any other transaction or series of transactions that, if consummated,
would impair Citizens' ability to consummate the transactions contemplated by
the Merger Agreement, then Citizens may terminate the Merger Agreement pursuant
to Section 10.1(c) of the Merger Agreement. See "Termination of the Merger
Agreement" below. In the event of termination under Section 10.1(c) of the
Merger Agreement, Ogden would be required to pay a $300,000 fee to Citizens. See
"--Certain Fees and Expenses" below. The Merger Agreement requires Ogden to
promptly communicate to Citizens the fact that it has received any proposal
or inquiry in respect of any such transaction and of any such information
requested from it or of any such negotiations or discussions being sought to
be initiated with Ogden.
Regulatory Matters
New York Public Service Commission Approval
The consent of the NYPSC pursuant to the Public Service Law of New York
is required for the acquisition by Citizens of all of the issued and outstanding
voting equity securities of Ogden. On March 17, 1997, Citizens, C-O Tel, and
Ogden filed a joint application for such authority and approval. The NYPSC's
approval of such acquisition is a condition to the parties' obligations to
consummate the Merger. The Merger Agreement requires the approval to have been
granted pursuant to a final order and to have been obtained free of any special
terms, conditions or restrictions which Citizens determines, in good faith and,
following consultation with Ogden, will materially and adversely affect the
actual, prospective operational and financial benefits to Citizens of the
transactions contemplated by the Merger Agreement and free of any special terms,
conditions or restrictions which Ogden determines, in good faith and following
consultation with Citizens, will materially and adversely affect the actual,
prospective operational and financial benefits to the Ogden shareholders as
contemplated by the Merger Agreement. Citizens and Ogden received a written
order from the NYPSC, issued and effective October 23, 1997, approving the
application. Citizens and Ogden unconditionally accepted and consented to the
Order on October 27, 1997.
Hart-Scott-Rodino Act
The Merger is subject to the requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, and the rules and regulations thereunder,
which provides that certain transactions may not be consummated until required
information has been furnished to the Antitrust Division (the "Antitrust
Division") of the Department of Justice and the Federal Trade Commission (the
"FTC") and certain waiting periods have been satisfied. Citizens and Ogden filed
the required information and material with the Antitrust Division and the FTC on
October 22, 1997. On November 3, 1997 the FTC granted early termination of the
statutory waiting period. Such early termination of the waiting period will not
preclude the Antitrust Division or the FTC from later challenging the Merger on
antitrust grounds. See "Description of the Merger and the Merger
Agreement--Regulatory Matters."
General
The respective obligations each of Citizens, C-O Tel, and Ogden to
consummate the Merger are subject to the satisfaction at or prior to the Closing
Date of certain conditions, which may be waived in whole or in part by the party
entitled to the benefit thereof, to the extent permitted by law, including the
following: (a) the Merger Agreement shall have been duly adopted and approved by
the holders of two-thirds of the outstanding shares of Ogden Common Stock; (b)
the waiting period (and any extension thereof) applicable to the consummation of
the Merger under the HSR Act, shall have expired or been terminated; (c) a
registration statement filed with the SEC with respect to the shares of Citizens
Common Stock to be issued in the Merger shall have become effective and no stop
order suspending the effectiveness of such registration statement shall have
been issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC and all necessary state Blue Sky authorizations required
to carry out the transactions contemplated by the Merger Agreement shall have
been obtained; (d) the Market Price of Citizens Common Stock shall not be less
than $2 below $11.34 (the average closing sales price during the fifteen (15)
day trading period ending five (5) trading days before the Effective Time) nor
greater than $2 above $11.34; (e) in the event any Ogden shareholders exercise
dissenters' rights which shall entitle the shareholder to an appraisal of the
fair market value of the shares of Ogden Common Stock held by such shareholder,
as contemplated by Section 2.1(c) of the Merger Agreement, the number of Ogden
shares subject to such appraisal shall not exceed five (5) percent of the total
number of shares of Ogden Common Stock then outstanding; (f) all of the shares
of Ogden Convertible Preferred Stock issued and outstanding shall have been
converted to Ogden Common Stock or redeemed in accordance with Section 3.1(h) of
the Merger Agreement and all of the shares of Ogden Preferred Stock issued and
outstanding shall have been redeemed in accordance with Section 3.1(h) of the
Merger Agreement; and (g) there shall not have been entered a preliminary or
permanent injunction, temporary restraining order or other judicial or
administrative order or decree in any jurisdiction, the effect of which
prohibits the Closing.
The obligations of Citizens and C-O Tel to consummate the Merger are
also subject to the satisfaction of certain additional conditions, including the
following, unless waived by Citizens and C-O Tel, to the extent permitted by
law: (a) except for representations and warranties specifically stated to be
made only as of a specified date, the representations and warranties of Ogden
contained in the Merger Agreement shall be true and correct at and as of the
Closing Date with the same force and effect as though the same had been made at
and as of the Closing Date (except for such changes therein permitted by the
Merger Agreement), and the obligations of Ogden under the Merger Agreement
required to be performed by Ogden at or prior to the Closing Date shall have
been duly performed in all material respects; (b) no action or proceeding shall
have been instituted or threatened against Ogden which could have a material
adverse effect on the provision by Ogden of local exchange and exchange access
telecommunications services; (c) all required regulatory approvals (including
approval by the NYPSC) shall have been obtained free of any special terms,
conditions or restrictions which Citizens determines, in good faith and
following consultation with Ogden, will materially and adversely affect the
actual, prospective operational and financial benefits to Citizens of the
transactions contemplated by the Merger Agreement (for purposes of the Merger
Agreement, all such approvals and consents shall be deemed to have been obtained
after the grant thereof has become final, non-appealable and not subject to
reconsideration); (d) consents of all persons necessary for Ogden to execute,
deliver and perform the Merger Agreement shall have been obtained; (e) from the
date of the Merger Agreement through and including the Effective Time, and
without regard to matters related to regulatory approvals or actions undertaken
pursuant to the Merger Agreement, there shall have been no material adverse
change in the assets and properties of Ogden and the Ogden Subsidiaries, or in
the business operations, liabilities, profits or financial condition of Ogden
and the Ogden Subsidiaries; (f) with respect to any long-term indebtedness
either made or guaranteed by the Rural Electrification Association ("REA") that
is to remain outstanding immediately after the Closing Date pursuant to Section
3.1(m) of the Merger Agreement, Citizens, if required by the underlying debt
instrument, shall have received the REA's consent to the transactions
contemplated by the Merger Agreement, which consent shall not have been revoked
as of the Closing Date; and (g) Citizens shall be reasonably satisfied that the
Merger will qualify for pooling-of-interests treatment for accounting purposes;
provided however, that any failure to so qualify shall not constitute a failure
of a condition precedent of closing pursuant to the Merger Agreement if such
failure is caused by any action contemplated by the Merger Agreement or
consented to by Citizens. The condition to closing of the Merger contained in
Section 4.1(n) of the Merger Agreement relating to certain trust properties has
been waived by Citizens and C-O Tel.
The obligation of Ogden to consummate the Merger is also subject to the
satisfaction of certain additional conditions, including the following, unless
waived by Ogden, to the extent permitted by law: (a) except for representations
and warranties specifically stated to be made only as of a specified date, the
representations and warranties of Citizens and C-O Tel contained in the Merger
Agreement shall be true and correct at and as of the Closing Date with the same
force and effect as though the same had been made at and as of the Closing Date
(except for such changes therein permitted by the Merger Agreement), and the
obligations of Citizens and C-O Tel under the Merger Agreement required to be
performed by Citizens or C-O Tel at or prior to the Closing Date shall have been
duly performed in all material respects; (b) all required regulatory approvals
shall have been obtained free of any special terms, conditions or restrictions
which Ogden determines, in good faith and following consultation with Citizens,
will materially and adversely affect the actual, prospective operational and
financial benefits to the Ogden shareholders as contemplated by the Merger
Agreement; (c) no action or proceeding shall have been instituted or threatened
against Citizens or C-O Tel which could have a material adverse effect on their
respective businesses; (d) the shares of Citizens Common Stock to be delivered
pursuant to Article II of the Merger Agreement shall have been duly listed on
the NYSE, subject to official notice of issuance; (e) except for persons or
entities who are designated as an "affiliate" of Ogden pursuant to Section
3.1(f) of the Merger Agreement, the former shareholders of Ogden shall,
subsequent to the Effective Time, be able to freely dispose of the Citizens
Common Stock received by them in the Merger, without compliance with Rules 144
and 145 as promulgated by the SEC; and (f) Ogden shall have received a letter
ruling issued by the Internal Revenue Service, granting to Ogden each of the
specific rulings requested with respect to the Merger, provided, however, that
if Ogden reasonably believes that the issuance of such ruling will unduly delay
the Closing it may, at its sole option, elect to instead rely upon an opinion of
counsel, in form reasonably acceptable to it, opining affirmatively that the
transactions contemplated by the Merger Agreement will constitute a tax free
reorganization pursuant to Section 368(a)(2)(E) of the Code.
The conditions to be satisfied before the parties will be obligated to
consummate the Merger are set forth in Article IV of the Merger Agreement. Any
provision of the Merger Agreement may be waived at any time, to the extent
permitted by law, by the party entitled to the benefits of the provision.
Termination of the Merger Agreement
The Merger Agreement may be terminated at any time prior to the Closing
Date: (a) by mutual written consent of the parties; (b) by Ogden, if there has
been a material misrepresentation, breach of covenant or breach of warranty on
the part of Citizens or C-O Tel in their respective representations, warranties
or covenants set forth in the Merger Agreement; (c) by Citizens, if (i) there
has been a material misrepresentation, breach of covenant or breach of warranty
on the part of Ogden in its representations, warranties or covenants set forth
in the Merger Agreement, (ii) Ogden's Board of Directors shall not recommend to
the Ogden shareholders the approval of the transactions contemplated by the
Merger Agreement; or (iii) Ogden's Board of Directors shall take any other
action to facilitate any other transaction or series of transactions that, if
consummated, would impair Citizens' ability to consummate the Merger (see
"--Other Aspects of the Merger Agreement--Limitations on Other Proposals or
Offers" above; if the Merger Agreement is terminated under this termination
provision, then Citizens would be entitled to a $300,000 termination fee,
payable to Citizens by Ogden, see "--Certain Fees and Expenses" below); (d) by
Citizens if any of the conditions provided in Section 4.1 of the Merger
Agreement have not been met at the Closing and have not been waived by Citizens;
(e) by Ogden if any of the conditions provided in Section 4.2 of the Merger
Agreement have not been met at the Closing and have not been waived by Ogden
(provided, however, that a party shall not be entitled to exercise any right of
termination pursuant to (b), (c), (d) or (e) herein if such party shall not have
performed diligently and in good faith the obligations required to be performed
by such party thereunder prior to the date of termination); (f) by Ogden or
Citizens, if the Closing has not occurred on or before March 31, 1998, unless
the failure to close shall be due to a breach of the Merger Agreement by the
party seeking to terminate the Merger Agreement; or (g) by Ogden or Citizens, if
the Ogden shareholders fail to approve the Merger Agreement at the meeting of
Ogden shareholders held pursuant to Section 3.1(d) of the Merger Agreement.
As stated above under "--General", Odgen may elect to terminate the
Merger Agreement if the Market Price of Citizens Common Stock falls below $9.34
per share. However, Ogden has reserved the right not to terminate the Merger
Agreement even if the price of Citizens' Stock shall fall below $9.34 per share.
In determining whether to elect to terminate the Merger Agreement in these
circumstances, the Ogden Board of Directors will take into account, consistent
with its fiduciary duties, all relevant facts and circumstances existing at the
time, including, without limitation, whatever action, if any, Citizens may be
prepared to take with respect to the terms of the Merger Agreement, the market
for telecommunications and utility stocks in general, the relative value of
Citizens Common Stock in the market, and the advice of its financial advisors
and legal counsel. The Ogden Board of Directors will also take into account the
provisions of the Voting Agreement described below under the heading "Meeting of
Ogden Shareholders-Interests of Certain Persons in the Merger" and the
provisions of the Merger Agreement referred to above under the heading "--Other
Aspects of the Merger Agreement-Limitations on Other Proposals or Offers." By
approving the Merger Agreement, the Ogden shareholders would be permitting the
Board of Directors to determine, in the exercise of its fiduciary duties, to
proceed with the Merger even though the Merger Consideration was less than
anticipated because the Market Price of the Citizens Common Stock was below
$9.34 per share.
Certain Fees and Expenses
If the Merger Agreement is terminated by Citizens under the termination
provisions of Section 10.1(d) as a result of the failure of Ogden to comply with
Section 4.1(a) of the Merger Agreement or if such termination is under Section
10.1(c) of the Merger Agreement, then in either case Ogden must immediately pay
Citizens a termination fee of $300,000 in cash. See "--Other Aspects of the
Merger Agreement--Limitations on Other Proposals or Offers" and "--Termination
of the Merger Agreement." If the Merger Agreement is terminated by Ogden or
Citizens under Section 10.1(g) due to the Ogden Shareholder's failure to approve
the Merger Agreement and provided that the Ogden Board of Directors recommended
to its shareholders approval of the Merger Agreement, Ogden shall immediately
pay Citizens a termination fee equal to Citizens' actual, documented
out-of-pocket expenses incurred in connection with the transactions contemplated
by the Merger Agreement, not to exceed $200,000. If the Merger Agreement is
terminated by Ogden under the termination provisions of Section 10.1 (e) as a
result of a failure of Section 4.2(a) of the Merger Agreement, Citizens shall
immediately pay Ogden a termination fee of $300,000 as liquidated damages.
Except as set forth above or elsewhere in the Merger Agreement, each
party will pay its own expenses (including, without limitation, attorneys' fees)
in connection with the Merger Agreement.
Resale of Citizens Common Stock
Shareholders of Ogden who are not Affiliates (as defined below) of
Ogden may resell the shares of Citizens Common Stock acquired by them in
connection with the Merger without restriction under Federal securities laws.
Rule 145 of the Securities Act of 1933, as amended (the "Securities Act"),
limits the rights of those shareholders of Ogden who may be deemed to control,
or be controlled by, or under common control with Ogden at the time of the
Meeting of Ogden shareholders ("Affiliates") to sell any shares of Citizens
Common Stock acquired by such person in the Merger.
MEETING OF OGDEN SHAREHOLDERS
Date, Time, Place
The Meeting of Ogden shareholders will be held on December 30, 1997 at
10:00 a.m. at the offices of Harter, Secrest & Emery, 700 Midtown Tower,
Rochester, New York 14604.
Purpose of the Meeting
At the Meeting, shareholders of Ogden will be asked to approve and
adopt the Merger Agreement, dated February 3, 1997, which provides for the
merger of C-O Tel, a newly-formed, wholly owned subsidiary of Citizens with and
into Ogden (the "Merger"), with Ogden as the surviving corporation. See
"Description of the Merger and the Merger Agreement."
Pursuant to the Merger Agreement, each share of Ogden Common Stock held
by shareholders outstanding on the effective date of the Merger, other than
those shares held by stockholders who perfect their appraisal rights under the
New York Business Corporation Law, will be converted into the right to receive
shares of Citizens Common Stock . See "Description of the Merger and Merger
Agreement-Basic Terms of Merger Agreement-Conversion of Ogden Common Stock."
The Board of Directors of Ogden approved the Merger Agreement and the
transactions contemplated thereby at a meeting on January 31, 1997 and has
determined that such transactions are in the best interests of Ogden and its
shareholders. The Board of Directors of Ogden recommends that the shareholders
of Ogden vote for the approval and adoption of the Merger Agreement. See
"Background and Reasons for the Merger and Related Matters-Recommendation."
As of the date of the Proxy Statement/Prospectus, the Board of
Directors of Ogden knows of no other business that will come before the Meeting
which is not referred to in the accompanying Notice of Meeting. If any matter
not referred to in the Notice should be presented to the Meeting for action, the
persons named in the proxy intend to take such action in regard to such matters
as in their judgment seems advisable.
Vote Required; Shares Entitled to Vote
The presence, either in person or by properly executed proxy, of the
holders of a majority of the outstanding shares of Ogden Common Stock entitled
to vote will constitute a quorum for the transaction of business at the Meeting.
APPROVAL OF THE MERGER WILL REQUIRE THE AFFIRMATIVE VOTE OF AT LEAST TWO-THIRDS
(66 2/3%) OF THE OUTSTANDING SHARES OF OGDEN COMMON STOCK ENTITLED TO VOTE. The
Board of Directors of Ogden has fixed the close of business on December 1, 1997
as the record date ("Record Date") for the determination of holders of
outstanding shares of Ogden Common Stock entitled to receive notice of, and to
vote at, the Meeting. As of February 3, 1997, the date of the Merger Agreement,
there were 108,810.5 shares of Ogden Common Stock outstanding, held by
approximately 147 shareholders of record. As of February 3, 1997, there were
5,668 shares of Ogden Convertible Preferred Stock issued and outstanding, each
of which Ogden agreed to redeem or convert to Ogden Common Stock prior to the
Meeting. Effective November 27, 1997, 4,940 shares of Ogden Convertible
Preferred Stock will be converted to Ogden Common Stock at the rate of four and
one half shares of Ogden Common Stock for each share of Ogden Convertible
Preferred Stock . Thus, on the Record Date, there will be 131,040.5 shares of
Ogden Common Stock issued and outstanding. See "Description of the Merger and
the Merger Agreement--Conversion and Redemption of Ogden Convertible Preferred
Stock and Ogden Preferred Stock." Each holder of shares of Ogden Common Stock on
the Record Date will be entitled to one vote for each share held of record by
said holder. Abstentions will be tallied as votes having been made and will be
tallied with the same effect as no votes. A broker non-vote has no effect on
the vote for or against a specified matter.
The directors and executive officers of Ogden who own or exercise
voting power over Ogden Common Stock have entered into an agreement ("Voting
Agreement") with Citizens whereby the directors and executive officers have
agreed to vote all shares which they own or over which they exercise voting
power in favor of the Merger. As of February 3, 1997, the directors and
executive officers who agreed to sign the Voting Agreement owned or exercised
control over 82,850 (approximately 76.14%) of the outstanding shares of Ogden
Common Stock. Taking into account the conversion of the issued and outstanding
shares of Ogden Convertible Preferred Stock, the directors and executive
officers who signed the Voting Agreement own or exercise control over 82,899
(approximately 63.26%) of the outstanding shares of Ogden Common Stock. See
"--Interests of Certain Persons in the Merger." The Voting Agreement is
attached as Annex D and is incorporated by reference into
this Proxy Statement/Prospectus.
Solicitation of Proxies
This solicitation of proxies is made at the direction of the Ogden
Board of Directors. In addition to this solicitation of proxies by mail,
directors, officers, employees and agents of Ogden may solicit proxies by
telephone, telegraph and personal interview. Such directors, officers, employees
and agents will not receive additional compensation for such solicitation, but
may be reimbursed for out-of-pocket expenses incurred in connection therewith.
Ogden will bear the expense of proxy solicitation, including reimbursement of
reasonable out-of-pocket expenses incurred by brokerage houses and other
custodians, nominees and fiduciaries in forwarding proxy solicitation material
to the beneficial owners of Ogden Common Stock held of record by such persons.
Printing costs and filing and registration fees for this Proxy
Statement/Prospectus, however, will be paid by Citizens.
Voting and Revocation of Proxies
Ogden's shareholders are requested to complete, date and sign the
accompanying form of proxy and return it promptly to Ogden in the enclosed
postage-paid envelope. Shares represented by proxies properly signed and
returned will be voted at the Meeting in accordance with the instructions
contained thereon, unless previously revoked prior to the vote. If a proxy is
properly signed and returned without voting instructions, the shares represented
thereby will be voted FOR the Merger, and at the discretion of the proxy holders
as to any other matters which may properly come before the Meeting. No other
matters are scheduled to be presented to the Meeting, but, if any other matters
are properly brought before the Meeting and submitted to a vote, all proxies
will be voted in accordance with the judgment of the persons authorized to vote
the proxies. A proxy may be revoked at any time before the vote by giving
written notice of such revocation to Maureen L. Howard, Secretary of Ogden, 21
West Avenue, Spencerport, New York 14559, prior to the Meeting, or by giving
written notice of such revocation at the Meeting to the Secretary of the
Meeting. A subsequently dated proxy will, if properly presented, revoke a prior
proxy. A shareholder may attend the Meeting and vote in person whether or not
such shareholder has previously given a proxy. The presence at the Meeting of a
shareholder who has given a proxy shall not revoke such proxy unless the
shareholder files a written notice of such revocation prior to the voting of
such proxy.
Dissenters' Rights of Appraisal
Holders of Ogden Common Stock who follow the procedures in Section 623
of the New York Business Corporation Law ("Section 623") will be entitled to
have their shares of Ogden Common Stock appraised by a New York court and to
receive payment of the "fair value" of such shares as determined by the court in
lieu of receiving shares of Citizens Common Stock upon consummation of the
Merger. See "Dissenting Shareholders' Appraisal Rights" below for a discussion
of the procedures to be followed.
Principal Shareholders
The following table sets forth certain information regarding the
current beneficial ownership of Ogden Common Stocas of November 27, 1997(after
giving effect to the conversion of the Ogden Convertible Stock) by (a) each
person known by Ogden to beneficially own more than 5% of the issued and
outstanding shares of Ogden Common Stock, (b) each named executive
officer, (c) each of Ogden's directors and persons who have consented to become
directors of Ogden after the Merger, and (d) all directors and executive
officers as a group. Unless otherwise noted, all persons have an address
c/o Ogden's principal executive offices.
<PAGE>
<TABLE>
<CAPTION>
Ogden Common
<S> <C> <C>
Shares Beneficially
Owned Prior to Merger
--------------- --- -------------
Name
(Address if Different from Ogden
Principal Offices) Number Percent
---------------------------------------------------------- --------------- -------------
Timothy J. Bancroft 0
Maxine B. Davison 70,942(1) 54.14
Richard M. Daly 0
Maureen L. Howard 0
Philip T. Evans 82 *
Francis M. Smith 33,203(2) 30.52
Andrew B. Davison 3,217(3) 2.96
William C. Crothers 3,142(4) 2.89
c/o Roberts Wesleyan College
2310 Westside Drive
Rochester, New York 14624
William A. Hider 0
Samuel G. Brundage 27,313 25.10
Syrun (Syracuse University Trust) 13,947 10.64
Key Trust Co.
P.O. Box 1965
Albany, New York 12201
All Executive Officers and Directors as a Group (9
persons)
82,899 63.26
- --------------------
</TABLE>
* Less than 1%.
(1) Includes a total of 27,313 shares held by Maxine B. Davison as a trustee as
follows: (i) 5,000 shares held as a co-trustee with Samuel G. Brundage and
Francis M. Smith for the benefit of Andrew B. Davison, Maxine B. Davison's
son, (ii) 5,000 shares held as a co-trustee with Samuel G. Brundage and
Francis M. Smith for the benefit of Hallie Davison, Maxine B. Davison's
daughter, and (iii) 17,313 shares held as a co-trustee with Samuel G.
Brundage and Francis M. Smith for the benefit of a Marital Deduction Trust
under the Will of Donald F. Davison. Does not include 3,736 shares held in
trust for the benefit of Maxine B. Davison, over which she has no voting or
investment power.
(2) Includes 32,009 shares held by Mr. Smith as a trustee as follows: (i) 5,000
shares held as a co-trustee with Maxine B. Davison and Samuel G. Brundage
for the benefit of Andrew B. Davison, (ii) 5,000 shares held as a
co-trustee with Maxine B. Davison and Samuel G. Brundage for the benefit of
Hallie Davison, (iii) 17,313 shares held as a co-trustee with Maxine B.
Davison and Samuel G. Brundage for a Marital Deduction Trust under the Will
of Donald F. Davison, and (iv) 3,736 shares held as a co-trustee with
Bernard M. Singer (Maxine B. Davison's husband) and Thomas W. Petrillo.
Also includes 960 shares held as sole trustee under the Davison Charitable
Remainder Trust.
(3) Does not include 5,000 shares held in trust for the benefit of Mr. Davison,
over which he has no voting or investment power. Includes 2,500 shares
owned jointly by Mr. Davison and his spouse, Ann W. Davison, as well as 374
shares owned by Ann W. Davison. Mr. Davison disclaims beneficial ownership
of the 374 shares owned by Ann W. Davison.
(4) Represents shares owned by Roberts Wesleyan College over which William C.
Crothers has voting power as President of Roberts Wesleyan College.
Interests of Certain Persons in the Merger
Voting Agreement. Concurrently with the execution of the Merger
Agreement, certain directors and officers of Ogden entered into a Voting
Agreement with Citizens, whereby the directors and officers agreed to vote all
shares which they own or over which they exercise voting power, in favor of the
Merger Agreement. The directors who entered into the Voting Agreement are Maxine
B. Davison, Francis M. Smith, William C. Crothers, and Andrew B. Davison. Philip
T. Evans, the only Ogden executive officer who owns shares of Ogden Common
Stock, also agreed to enter into the Voting Agreement. Through the Voting
Agreement, the directors and officers have also agreed to vote against any
merger, consolidation, business combination, sale of a significant amount of
assets or shares of capital stock outside the ordinary course of business,
tender or exchange offer, or other similar transaction involving Ogden or its
subsidiaries other than those transactions involving Citizens and its affiliates
and to grant irrevocable proxies and powers of attorney to Citizens or its
designee to vote their shares, to the extent the shares are entitled to vote.
The form of Voting Agreement is attached hereto as Annex D. See "Description of
the Merger and the Merger Agreement - Other Aspects of the Merger Agreement -
Limitations on Other Proposals or Offers" and " - Termination of the
Merger Agreement" for a description of other factors which impact the
ability of Ogden to initiate Merger discussions with others and consummate
the Merger. As of February 3, 1997, the directors and officers owned or
exercised voting power over 82,850 (approximately 76.14%) of the outstanding
shares of Ogden Common Stock. Taking into account the conversion of the shares
of Ogden Convertible Preferred Stock into Ogden Common Stock, the directors
and executive officers will own or exercise voting power over 82,899 (or
approximately 63.26%) shares of the issued and outstanding shares of Ogden
Common Stock on the record date. See "Meeting of Ogden Shareholders - Vote
Required; Shares Entlited to Vote."
Employment Matters. The Merger Agreement provides that, as of the
Closing Date, the Board of Directors and all of the officers of Ogden and the
Ogden Subsidiaries shall resign. The Board of Directors and officers of C-O Tel
shall become the Board of Directors and officers of Ogden, as the surviving
corporation. See "Description of the Merger and the Merger Agreement--Effective
Time and Consequences." According to the Merger Agreement, the resignation of
the Ogden officers will not have the effect of terminating their employment with
Ogden or causing a breach of their respective employment agreements. Citizens
has agreed to assume and be responsible for the employment agreements
("Employment Agreements") of the current executive officers of Ogden: Philip T.
Evans (President), Richard M. Daly (Vice President of Operations), Timothy J.
Bancroft (Vice President of Finance) and Maureen L. Howard (Secretary/Treasurer
and Director of Corporate Affairs). Citizens has agreed to amend the Employment
Agreements as of the Effective Time to reflect mutually agreeable revised job
titles of the Ogden officers.
In addition, Citizens has agreed to assume and be responsible for
certain consulting agreements between Ogden and current Ogden directors Maxine
B. Davison and Francis Smith. The Consulting Agreement between Maxine B. Davison
and Ogden provides Maxine B. Davison with a consulting fee of $4,200 per month,
plus an automobile allowance of $500 per month. Maxine B. Davison's Consulting
Agreement is terminable by either party upon 30 days prior written notice. The
Consulting Agreement between Francis M. Smith and Ogden provides Mr. Smith with
a consulting fee of $3,500 fee per month, plus an automobile allowance of $300
per month for travel from his home to the office. Mr. Smith's Consulting
Agreement also provides for mileage reimbursement for business travel other than
from home to the office. Mr. Smith's Consulting Agreement is terminable by
either party upon 30 days prior written notice.
FORWARD LOOKING STATEMENTS
Certain statements made in or incorporated in this Prospectus are
forward-looking statements, including those which relate to Citizens' future
expenses, capital expenditures, revenues, charges and earnings. Such statements
are not guarantees of future performance and are subject to risks and
uncertainities that could cause actual results to differ materially from those
expressed or implied in the forward-looking statements. These risks and
uncertainties include but are not limited to, the future consequences of the
factors reflected in Citizens' second quarter charges to earnings, Citizens'
reduction in capital expenditures and other actions, changes in the local and
overall economy, the nature's and pace of technological changes, the number and
effectiveness of competitors in Citizens' markets, the success of Citizens'
marketing and selling expenditures and efforts, weather conditions, changes in
legal and regulatory policy and the mix of products and services offered in
Citizens' target markets.
INFORMATION ABOUT CITIZENS UTILITIES COMPANY
Citizens Utilities Company is a communications and public services
company which provides, either directly or through subsidiaries,
telecommunications, electric distribution, natural gas transmission and
distribution, water and wastewater services to customers in areas of twenty
states. Subsidiaries of Citizens provide telecommunications, and divisions of
Citizens provide electric distribution and natural gas transmission and
distribution services, purchasing most of the electric power needed and all gas
supplies. Water and wastewater services are provided either by divisions of
Citizens or by its subsidiaries. Citizens Communications operates an integrated
distribution network over which it provides local, long distance, paging,
cellular, network sales and other communications products and services. Citizens
also has investments in Centennial Cellular Corp., a cellular telephone company,
and owns Electric Lightwave, Inc., a leading competitive provider of
telecommunications services for business and long distance carriers in the
western United States. A registration statement covering the sale of
8,000,000 shares of Electric Lightwave's Common Stock Series A to the
public in an initial public offering has become effective under the Securities
Act of 1933. The issuance is expected to be completed on or about December 1,
1997.
Citizens, with administrative offices at High Ridge Park, Stamford,
Connecticut 06905 (telephone (203) 614-8800), was incorporated in Delaware in
1935 to acquire the assets and business of a predecessor corporation. Since
then, Citizens has grown as a result of investment in its own operations and the
acquisition of additional operations.
As a result of its diversification, Citizens is not dependent upon any
single geographic area for its revenues. Citizens is not aware of any other
utility company as fully diversified in geographic areas served. Citizens'
operations are conducted principally in small and medium-sized communities. No
material part of Citizens' business is dependent upon a single customer or a
small group of customers. The loss of any single customer or a small group of
customers would not have a materially adverse effect upon Citizens. Citizens'
consumer connections have increased from 26,150 in 1945, to 225,389 in 1965, to
610,585 in 1985, and to over 1,600,000 as of September 30, 1997.
Citizens continually considers and is carrying out expansion through
internal investments, acquisitions and joint ventures in the rapidly evolving
telecommunications industry and in traditional public services and related
fields.
INFORMATION ABOUT C-O TEL
C-O Tel is a newly formed New York corporation and a wholly owned
subsidiary of Citizens organized for the sole purpose of effecting the Merger.
It is anticipated that C-O Tel will not have any significant assets or
liabilities (other than its rights and obligations under the Merger Agreement)
or engage in any activities other than those incidental to its formation and the
Merger. The principal executive offices of C-O Tel are located at c/o Citizens
Utilities Company, High Ridge Park, Stamford, Connecticut 06905.
INFORMATION ABOUT OGDEN TELEPHONE COMPANY
Introduction
Ogden, incorporated in New York State on December 4, 1907, is an
independent telephone company regulated by the NYPSC. Ogden provides local
exchange telephone services to approximately 20,000 customers in the Monroe
County, New York communities of Spencerport, Hilton, and North Chili. Ogden has
two wholly-owned subsidiaries, NewOp Communications Corporation ("NewOp") d/b/a
OTC Long Distance and Phone Trends, Inc. ("PTI"), each of which is described
below.
Description of Business
Ogden provides local telephone services to both residential and
commercial customers within a 104 square mile service territory encompassing the
suburban and rural areas north and west of Rochester, New York. As of September
30, 1997, Ogden had a total of 22,010 access lines, of which approximately 83%
are supplied to residences and 17% to businesses. One hundred percent of Ogden's
customers own their own telephones. Ogden maintains central offices in the Town
of Chili and in the Town of Hilton. Ogden's corporate headquarters are in
Spencerport, New York and its telephone number is (716) 352-7200.
NewOp, a wholly-owned subsidiary of Ogden, has a Certificate of Public
Convenience and Necessity to provide telecommunications services throughout New
York State. NewOp was incorporated on May 1, 1995 and began doing business in
October 1995 as "OTC Long Distance." Its offices are located in Spencerport, New
York and its telephone number is (716) 349-2000. OTC operates as a long distance
reseller marketing its product to customers within Ogden's franchised territory.
PTI, another wholly owned subsidiary of Ogden, was incorporated on June
10, 1994. Its offices are also located in Spencerport, New York and its
telephone number is (716) 349-2000. PTI is a deregulated entity which holds a
general partnership interest in New York State Independent Network ("NYSINET"),
a partnership of several independent New York State telephone companies whose
purpose was to construct, develop, and maintain a Common Channel Signaling
System No. 7 ("SS7") network within the state. The SS7 Network, which was
completed in 1996, is a digital network which routes calls more efficiently than
traditional telephone transmission methods. NYSINET sells Signaling Transfer
Point ("STP") access to its partners and other interested customers. PTI holds a
3.847% interest in NYSINET. As a holder of a general partnership interest in
NYSINET, PTI is required to make capital contributions to the partnership from
time to time. Because PTI has no operating income of its own, these capital
contributions are funded by Ogden and are treated as investments by the parent
company into PTI. NYSINET is not a subsidiary of Ogden for purposes of this
Proxy Statement-Prospectus.
Market Price and Dividend Information
As of November 24, 1997, Ogden Common Stock was held by approximately
145 shareholders. Ogden's Common Stock is listed in the Pink Sheets published by
the National Quotation Bureau and Ogden is quoted on the Bloomberg quotation
system under the symbol OGDT. Ogden Common Stock is traded sporadically through
the OTC Bulletin Board, but is not traded on an established public trading
market. The following table sets forth, for the quarterly periods indicated, the
high and low bid prices per share of Ogden Common Stock as reported on the OTC
Bulletin Board. For the quarterly periods where no bid price is indicated, no
bid information was available from the OTC Bulletin Board. To Ogden's best
knowledge, most transactions in Ogden Common Stock during the periods below have
involved bids equal to book value. Such quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
Ogden Common Stock Market Price
Year ended December 31, 1995 High Low
- -------------------------------------- -------- ---------
First Quarter ---- ----
Second Quarter ---- ----
Third Quarter $150 $105
Fourth Quarter ---- ----
Year ended December 31, 1996
- ---------------------------------------
First Quarter $155 $145
Second Quarter $150 $150
Third Quarter ---- ----
Fourth Quarter ---- ----
Year ended December 31, 1997
- ---------------------------------------
First Quarter ---- ----
Second Quarter $124 $124
Third Quarter ---- ----
As of November 24, 1997 ---- ----
Ogden pays dividends on its Common Stock on a quarterly basis. The
Rural Electrification Association, through instruments guaranteeing Ogden's long
term debt, has placed certain restrictions on the amount of dividends Ogden may
pay annually. All dividends paid by Ogden comply with these restrictions, which
are based on an adjusted net worth ratio calculation. During 1995, 1996 and
1997, the following cash dividends were declared on Ogden's Common Stock on a
per share basis:
Ogden Common Stock Dividends Per Share
Year Ended December 31, 1995
- --------------------------------
03/31/95 $0.95
06/30/95 1.03
09/30/95 1.03
12/31/95 1.03
Year Ended December 31, 1996
- --------------------------------
03/31/96 $1.03
06/30/96 1.13
09/30/96 1.13
12/31/96 1.13
Year Ended December 31, 1997
- --------------------------------
03/31/97 $1.13
06/30/97 1.13
09/30/97 1.13
<PAGE>
OGDEN TELEPHONE COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF ITS FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with the
financial statements and related notes thereto and other detailed information
regarding Ogden included elsewhere in this Proxy Statement/Prospectus.
Selected Financial Information
<TABLE>
<CAPTION>
Consolidated Selected Financial Information
($ in thousands)
Nine Months Ended
September 30, Year Ended December 31,
------------------------ --------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
Income Statement
- ----------------
Operating Revenues:
Local Service $4,074 $3,811 $5,146 $5,532 $5,383 $5,230 $5,150
Access and Long
Distance Service 3,366 3,349 4,533 3,602 3,212 3,393 2,926
Miscellaneous 560 777 918 1,220 1,213 1,286 1,282
-------- -------- ------- ------- ------ ------ ------
$8,000 $7,937 $10,597 $10,354 $9,808 $9,909 $9,358
-------- -------- ------- ------- ------ ------ ------
Operating Expenses:
Plant $1,863 $1,854 $2,561 $2,390 $2,205 $2,266 $2,002
Depreciation 1,414 1,358 1,907 2,001 1,818 1,730 1,601
Other 1,745 1,910 2,625 2,584 2,370 1,955 3,035
Operating Taxes 691 716 867 753 961 990 910
-------- -------- ------- ------- ------ ------ ------
$5,713 $5,838 $7,960 $7,728 $7,354 $6,941 $7,548
-------- -------- ------- ------- ------ ------ ------
Operating Income $2,287 $2,099 $2,637 $2,626 $2,454 $2,968 $1,810
-------- -------- ------- ------- ------ ------ ------
Other Income/Interest
Expense/Income Taxes:
Other Income/Expense ($52) ($65) ($45) ($20) ($75) ($217) ($200)
Interest Expense $418 $445 $590 $628 $738 $973 $1,017
Income Taxes $646 $569 $676 $636 $571 $686 $305
Extraordinary Items (Net of
Taxes) $0 $0 $0 $0 $0 $437 $0
------- -------- ------- -------- ------- ------- ------
$1,012 $949 $1,221 $1,244 $1,234 $1,879 $1,122
------- -------- ------- -------- ------- ------- ------
Net Income $1,275 $1,150 $1,416 $1,382 $1,220 $1,089 $688
======= ======== ======= ======== ======= ======= ======
Earnings per Share $11.13 $10.02 $12.27 $12.05 $10.58 $9.36 $5.63
======= ======== ======= ======== ======= ======= ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
At At December 31,
September 30, ------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
Balance Sheet
- -------------
Current Assets $ 3,750 $ 2,729 $ 2,660 $ 2,872 $ 2,290 $ 2,150
Other Assets 1,915 1,992 2,409 2,639 2,514 449
Property, Plant & Equipment (Net) 21,779 22,161 22,611 22,226 22,410 20,772
-------- -------- -------- -------- -------- -------
Total Assets $27,444 $26,882 $27,680 $27,737 $27,214 $23,371
======== ======== ======== ======== ======== `======
Current Liabilities $ 2,547 $ 2,592 $ 3,323 $ 3,747 $ 3,819 $ 2,212
Long Term Debt 8,049 8,418 9,004 9,475 9,849 10,258
Deferred Credits & Other Liabilities 4,474 4,340 4,672 4,695 4,459 2,438
Stockholders' Equity 12,374 11,532 10,681 9,820 9,087 8,463
------- -------- -------- -------- -------- -------
Total Liabilities & Stockholders'
Equity $27,444 $26,882 $27,680 $27,737 $27,214 $23,371
======== ======== ======== ======== ======== =======
<PAGE>
Supplementary Financial Information
<CAPTION>
Quarterly Financial Data
($ in thousands) Earnings Per
Revenues Net Income Share
--------------------- ----------- ------------
1997
<S> <C> <C> <C>
First quarter $ 2,599 $ 413 $ 3.60
Second quarter 2,716 403 3.51
Third quarter 2,685 459 4.02
1996
First quarter 2,656 400 3.50
Second quarter 2,574 305 2.62
Third quarter 2,707 445 3.90
Fourth quarter 2,660 266 2.25
1995
First quarter 2,540 457 4.06
Second quarter 2,658 349 3.05
Third quarter 2,603 402 3.52
Fourth quarter 2,553 174 1.42
</TABLE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
Ogden and its subsidiary OTC Long Distance provide network access,
local network, long distance, and other communication services to business and
residential customers in the Rochester metropolitan area of western New York
State. Throughout its 90-year history, Ogden's goal has been to offer services
that provide its customers with access to advanced technology designed to
enhance their profitability and productivity.
Results of Operations
Nine Months Ended September 30, 1997 Compared to Nine Months Ended
September 30, 1996
Revenues. Operating revenues for the nine months of 1997 were up
$63,000 or 1% from 1996. Local service revenues were up $263,000 or 7% due to
growth in access lines and enhanced calling features. Access and long distance
service was up $17,000 or 1% primarily due to interstate usage. Miscellaneous
revenues were down $217,000 or 28% primarily due to restructuring of Ogden's
directory advertising business. Lower directory advertising revenues are
substantially offset by lower directory commissions expenses.
Operating Expenses. Operating expenses for the nine months of 1997 were
down $125,000 or 2% from last year. Plant expenses were roughly the same while
depreciation expense was up $56,000 or 4% due to higher average depreciable
plant. This was the result of restructuring Ogden's network in 1996 to increase
its efficiency by requiring lower capital investment. Other expenses decreased
$165,000 or 9% from 1996 due to lower directory commissions. Operating taxes
were down $25,000 or 3% due primarily to lower gross revenue taxes.
Operating Income. Operating income increased $188,000 or 9% over
1996 due to the changes in operating revenues and operating expenses as
described above.
Other Income. Other income was down $13,000 or 20% from 1996 due
primarily to lower interest charged to construction.
Interest Expense. Interest expense decreased $27,000 or 6% from
1996 due to the reduction in long term debt outstanding.
Income Taxes. Income taxes increased $77,000 or 14% over 1996 due to
higher taxable income.
Net Income and Earnings Per Share. Net income and earnings per
share increased 11% over 1996 due primarily to the increase in operating
income and the decrease in interest expense.
1996 Compared to 1995
Revenues. Operating revenues for the year 1996 increased $243,000 or 2%
over 1995. Local service revenues were down $386,000 or 7% due to a
restructuring of local rates to be price competitive. Access and long distance
service revenues increased $931,000 or 26% due to increased access usage by
interexchange carriers and growth in Ogden's long distance subsidiary, OTC Long
Distance. Miscellaneous revenues decreased by $302,000 or 25% primarily due to a
restructuring of Ogden's directory advertising business. Lower directory
advertising revenues are substantially offset by lower directory commissions
expenses.
Operating Expenses. Operating expenses for 1996 were up $232,000 or 3%.
Plant expenses increased $171,000 or 7% due to expenditures related to network
software upgrades which allow Ogden to offer the latest products and services.
Depreciation was down $94,000 or 5% due to a restructuring of Ogden's network
which increases its efficiency by requiring lower capital investment. Other
operating expenses were up $41,000 or 2% due to higher expenses related to
merger activities substantially offset by lower directory commissions expenses.
Operating taxes were up $114,000 or 15% due primarily to higher gross revenue
taxes and property taxes.
Operating Income. Operating income increased $11,000 or less than
1% over 1995 due to the changes in operating revenues and operating expenses as
described above.
Other Income. Other income for 1996 increased $25,000 or 125%
primarily due to greater interest charged to construction.
Interest Expense. Interest expense decreased $38,000 or 6% due to
the reduction in long term debt outstanding.
Income Taxes. Income taxes increased $40,000 or 6% due to higher
taxable income.
Net Income and Earnings Per Share. Net income and earnings per share
increased 2% due to the increases in operating income and other income and the
reduction in interest expense as described above.
1995 Compared to 1994
Revenues. Operating revenues for the year 1995 increased $546,000 or 6%
over 1994. Local service revenue was up $149,000 or 3% due to growth in access
lines. Access and long distance service increased $390,000 or 12% due to
increased access usage by interexchange carriers and the startup in the fourth
quarter of 1995 of Ogden's long distance service subsidiary, OTC Long Distance.
Miscellaneous revenues were up $7,000 or 1%.
Operating Expenses. Operating expenses for 1995 were up $374,000 or 5%.
Plant expenses increased $185,000 or 8% due primarily to expenses related to
upgrading the network. Depreciation was up $183,000 or 10% due to higher
depreciation rates and increases in plant investment. Other expenses were up
$214,000 or 9% primarily due to startup costs associated with OTC Long Distance.
Operating taxes were down $208,000 or 22% due to lower gross revenue taxes and
property taxes.
Operating Income. Operating income increased $172,000 or 7% over
1994 due to the changes in operating revenues and operating expenses as
described above.
Other Income. Other income was down $55,000 or 73% primarily
due to lower interest charged to construction.
Interest Expense. Interest expense for 1995 was down $110,000 or 15%
due to lower short term borrowings and the reduction in long term debt.
Income Taxes. Income taxes increased $65,000 in 1995 due to higher
taxable income.
Net Income and Earnings Per Share. Net income and earnings per share
increased 13% due primarily to the increase in operating income and the decrease
in interest expense as described above.
Liquidity and Capital Resources
For the periods presented herein, Ogden used cash flows from operations
to fund capital expenditures. Short-term lines of credit are routinely used to
meet seasonal borrowing requirements.
Growth in customer base and increasing demand for communications
products as well as for new services require Ogden to continue to incur capital
expenditures to expand and upgrade the network to keep pace with technological
changes and requirements. It is currently anticipated that capital expenditures
will continue to be funded by cash flows from operations with seasonal borrowing
requirements covered by short-term lines of credit.
Ogden's operating cash flows and its lines of credit are principal
indicators of its liquidity. Ogden has lines of credit totaling $6.5 million
with the following institutions: CoBank, M&T Bank and the Rural Telephone
Finance Cooperative. There were no amounts outstanding under these borrowing
facilities at September 30, 1997.
In accordance with the Merger Agreement, Ogden has called its two
outstanding issues of preferred stock effective November 27, 1997. Holders of
Ogden Convertible Preferred Stock were given the option of converting their
shares to Ogden Common Stock. Holders of 4,940 shares of Ogden Convertible
Preferred Stock elected to convert their shares to Ogden Common Stock, while
728 shares of Ogden Convertible Preferred Stock will be redeemed effective
November 27, 1997. The redemption of Ogden Convertible Preferred Stock and
Ogden Preferred Stock will be funded by utilizing the lines of credit.
New Accounting Pronouncement
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Accounting Standards (SFAS) No. 128, "Earnings Per Share,"
which will be effective for Ogden's year ended December 31, 1997. SFAS No. 128
will modify the methodology used to compute earnings per share (EPS), requiring
calculation of "basic" and "diluted" EPS. The adoption of SFAS No. 128 and
resulting computation is not expected to have a significant impact on Ogden's
earnings per share as currently determined.
DESCRIPTION OF CITIZENS COMMON STOCK
General
Until August 25, 1997 Citizens' Common Stock consisted of two series:
Common Stock Series A and Common Stock Series B. On that date all outstanding
shares of Common Stock Series A were exchanged for shares of Common Stock Series
B on a share-for-share basis and Common Stock Series B became the only Common
Stock outstanding. As of October 31, 1997 Citizens had outstanding 247,001,409
shares of Common Stock. As of October 31, 1997 there were 51,493 record holders
of Citizens Common Stock. The holders of Citizens Common Stock are entitled to
one vote for each share on all matters voted on by stockholders. The holders of
Citizens Common Stock have no preemptive rights.
The holders of Citizens Common Stock are entitled to receive dividends
when and as declared by the Board of Directors of Citizens out of funds legally
available therefor. Although there can be no assurances as to the amount of any
future dividends, cash or stock dividends have been paid to holders of Citizens
Common Stock every year without interruption beginning in 1939. Commencing in
1990, Citizens has declared and paid quarterly stock dividends on shares of all
its outstanding Citizens Common Stock. The stock dividend rate is based on an
underlying cash equivalent. Citizens expects that under present United States
federal tax law, stock dividends on Citizens Common Stock, if paid and received
pro-rata and otherwise in the same manner as they have been since 1990, will be
free of current federal income taxation on receipt. Such stock dividends are
treated as capital transactions when and if sold. Gain or loss is based on the
difference between sales price and adjusted basis per share.
Under Citizens' Restated Certificate of Incorporation, 50,000,000
shares of preferred stock have been authorized and may be issued by the Board of
Directors without further stockholder authorization. Such preferred stock could
include provisions which limit the ability of the Company to declare and pay
dividends or otherwise affect the rights of the holders of Citizens Common
Stock.
Stock Dividend Sale Plan
Citizens has a Stock Dividend Sale Plan (the "Plan") which enables
Citizens Common Stock stockholders to elect to have their future stock dividends
sold and the cash proceeds of the sale (minus a per share commission, currently
2 cents) distributed to them quarterly. If a Citizens Common Stock stockholder's
account is held by a broker or custodial institution participating in the Plan,
the cash proceeds are sent to the broker or custodial institution. Generally,
for United States federal income tax purposes, the differences between the
proceeds from the sale of the stock dividends (the net cash received) and the
adjusted basis of the shares sold are treated as a capital transaction.
Citizens Common Stock stockholders may enroll throughout the year in
the Plan. After a Citizens Common Stock stockholder's account has been enrolled
in the Plan, future stock dividends in that account will be sold quarterly,
unless Citizens' Transfer Agent receives written notification from a stockholder
to withdraw that account from the Plan. Stockholders who withdraw an account
from the Plan will then receive quarterly stock dividends and are not eligible
to re-enroll that account in the Plan for 12 months. Citizens has reserved the
right to terminate the Plan at any time.
Transfer Agent
The transfer agent for Citizens Common Stock is Illinois Stock Transfer
Company.
Resale of Citizens Common Stock by Affiliates
The shares of Citizens Common Stock to be issued in the Merger have
been registered under the Securities Act, and will be freely transferrable,
except for shares received by persons who may be deemed to control, be
controlled by, or be under common control with Ogden Affiliates as set forth in
Rule 145 of the Securities Act. Rule 145 places certain restrictions on the
transfer of Citizens shares received by Affiliates pursuant to the Merger. As a
condition to the consummation of the Merger, each Affiliate will be required to
deliver an Affiliates Agreement, the form of which is annexed as Annex C, under
which the Affiliate agrees not to sell, transfer or otherwise dispose of such
shares of Citizens Common Stock except in accordance with the applicable
provisions of said Rule 145 or pursuant to a transaction exempt from
registration under the Securities Act.
COMPARATIVE RIGHTS OF SHAREHOLDERS OF CITIZENS AND OGDEN
General
Ogden is incorporated in the State of New York. Citizens is
incorporated in the State of Delaware. The rights of stockholders of Citizens
are currently governed by the Delaware General Corporation Law ("DGCL") and by
Citizens' Restated Certificate of Incorporation and By-laws. Shareholders of
Ogden who receive Citizens Common Stock pursuant to the Merger will become
stockholders of Citizens and their rights as such will be governed by the DGCL
and Citizens' Certificate of Incorporation and By-laws, as the same may be
amended from time to time.
Certain differences between the rights of Ogden shareholders and
Citizens stockholders are summarized below. This summary does not purport to be
complete and is qualified in its entirety by reference to the full text of the
law discussed and the Certificate of Incorporation and By-laws of Ogden and the
Restated Certificate of Incorporation and By-laws of Citizens. For information
as to how Citizens' documents may be obtained, see "Available Information."
Business Combinations
Ogden. Under the New York Business Corporation Law ("NYBCL"), the
affirmative vote of the holders of two-thirds of all outstanding shares of stock
of a New York corporation entitled to vote thereon is required to approve
mergers and consolidations, and for sales, leases, exchanges or other
dispositions of all or substantially all the assets of a corporation, if not
made in the usual or regular course of the business actually conducted by such
corporation.
Citizens. Generally, under the DGCL, the affirmative vote of the
holders of a majority of the outstanding shares entitled to vote on the matter
is required to approve mergers, consolidations, and any sales, leases or
exchanges of all or substantially all of the assets of a corporation.
Dissenting Shareholders' Appraisal Rights
Ogden. Under Sections 806(b)(6) and 910 of the NYBCL, shareholders of a
New York corporation have the right to dissent and receive payment of the fair
value of their shares, except as otherwise provided by the NYBCL, in the event
of certain amendments or changes to the certificate of incorporation adversely
affecting their shares, certain mergers or consolidations, certain sales,
exchanges or other dispositions of all or substantially all of the corporation's
assets and certain share exchanges. A shareholder intending to enforce such
right must comply with the procedures set forth in Section 623 of the NYBCL.
Citizens. Under Section 262 of the DGCL, except as otherwise provided
by the DGCL, stockholders who continuously hold their shares through the
effective date of a merger or consolidation which is consummated, who perfect
their appraisal rights under Section 262(d) of the DGCL, and who neither vote in
favor of the merger or consolidation nor otherwise consent thereto in writing
are entitled upon petition to receive payment of the fair value of their stock,
as determined by the Delaware Court of Chancery.
State Takeover Legislation
Ogden. The NYBCL contains provisions which prohibit any business
combination (defined to include a variety of transactions, including mergers,
consolidations, sales or dispositions of assets, issuances of stock,
liquidations, reclassifications and the receipt of certain benefits from the
corporation, including loans or guarantees) between a domestic corporation and
an "interested shareholder" for five years after the date that the interested
shareholder became an interested shareholder unless prior to that date the board
of directors of the domestic corporation approved the business combination or
the transaction that resulted in the interested shareholder becoming an
interested shareholder. Even after five years, such a business combination is
permitted only if: (i) it is approved by a majority of the shares not owned by,
or by an affiliate of, the interested shareholder, or (ii) certain statutory
fair price requirements are met. An "interested shareholder" is any person who
(i) beneficially owns, directly or indirectly, 20% or more of the outstanding
voting stock of the corporation, or (ii) is an affiliate or associate of the
corporation and at any time within the five year period in question was the
beneficial owner, directly or indirectly, of 20% or more of the then outstanding
voting stock of the corporation.
Citizens. Section 203 of the DGCL prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date such person became an
interested stockholder, unless (i) prior to such date, the business combination
or the transaction which resulted in the stockholder becoming an interested
stockholder is approved by the board of directors of the corporation, (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
outstanding voting stock of the corporation outstanding at the time the
transaction commenced, or (iii) on or after such date the business combination
is approved by the board of directors of the corporation and by the affirmative
vote, not by written consent, of at least 66% of the voting stock which is not
owned by the interested stockholder. A "business combination" includes mergers,
consolidations, asset transfers (including any sale, lease, exchange, mortgage,
pledge or other disposition of assets) and other transactions resulting in a
financial benefit to the interested stockholder. An "interested stockholder" is
a person who (i) owns 15% or more of the outstanding voting stock of the
corporation or (ii) is an affiliate or associate of a corporation that was the
owner of 15% or more of the outstanding voting stock at any time within the past
three years.
Stockholder Rights Plans
Neither Ogden nor Citizens has a stockholder rights plan.
Amendments to Certificate of Incorporation
Ogden. Under Section 803 of the NYBCL, amendments to the certificate of
incorporation may be authorized by vote of the board, followed by a vote of the
holders of a majority of all outstanding shares entitled to vote thereon at a
meeting of shareholders. Section 804 of the NYBCL provides that certain
categories of amendments which adversely affect the rights of any holders of
shares of a class or series of stock require the affirmative vote of the holders
of a majority of all outstanding shares of such class or series, voting
separately.
Citizens. Under Section 242 of the DGCL, an amendment to the
certificate of incorporation proposed by the board requires an affirmative vote
of a majority of the outstanding stock entitled to vote thereon.
Amendments to By-laws
Ogden. Under Section 601 of the NYBCL, except as otherwise provided in
the certificate of incorporation, by-laws may be amended, repealed or adopted by
the holders of shares entitled to vote in the election of any director. When so
provided in the certificate of incorporation or a by-law adopted by the
shareholders, by-laws may also be amended, repealed or adopted by the board by
such vote as may be therein specified, which may be greater than the vote
otherwise prescribed by law, but any by-law adopted by the shareholders may only
be amended or repealed by the shareholders entitled to vote thereon. Pursuant to
Ogden's By-laws, the Ogden By-laws may be amended, repealed or adopted by the
holders of voting shares or the Ogden Board, but any by-law adopted by the Ogden
Board may be amended or repealed by the shareholders in accordance with the
NYBCL.
Citizens. As permitted by the DGCL, the Citizens Certificate of
Incorporation provides that the Citizens By-laws may be made, altered or
repealed by the Citizens Board, subject to the power of the stockholders to
change or repeal any By-laws by a majority vote of the stockholders present and
represented at any meeting. The Board may not repeal or alter any By-laws
adopted by the stockholders except certain of the By-laws adopt procedures to be
followed in the case of claims for indemnification.
Preemptive Rights
No holder of shares of either Citizens or Ogden Common Stock has any
preemptive rights to purchase any shares or other securities of Citizens or
Ogden, respectively.
Dividend Sources
Ogden. Under Section 510 of the NYBCL, except as otherwise provided in
the NYBCL, dividends may be declared or paid and other distributions may be made
out of surplus only, so that the net assets of the corporation remaining after
such declaration, payment or distribution must at least equal the amount of its
stated capital. When any dividend is paid or any other distribution is made from
sources other than earned surplus, a written notice must accompany such payment
or distribution as provided by the NYBCL. A corporation may declare and pay
dividends or make other distributions except when currently the corporation is
insolvent or would thereby be made insolvent, or when the declaration, payment
or distribution would be contrary to any restrictions contained in the
corporation's certificate of incorporation.
Citizens. Section 170 of the DGCL permits the payment of dividends on
capital stock, subject to any restrictions contained in the certificate of
incorporation, out of a corporation's surplus (the excess of net assets over
capital). In case there is no surplus, dividends may be paid out of its net
profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year. If the capital of the corporation is diminished to an
amount less than the aggregate amount of capital represented by the outstanding
stock having a preference on the distribution of assets, then dividends may not
be declared and paid out of such net profits until the deficiency in the amount
of capital represented by the shares having a preference on the distribution of
assets shall have been repaired. The Citizens Certificate of Incorporation and
By-laws do not restrict the sources of payment of dividends on Citizens Common
Stock. Citizens, however, is a party to certain agreements and is currently
subject to the Federal Power Act, either of which could limit the amount of
dividends that can be paid by Citizens.
Duration of Proxies
Ogden. Under Section 609 of the NYBCL, no proxy is valid after the
expiration of eleven months from the date thereof unless otherwise provided in
the proxy. Irrevocable proxies may be created for (i) a pledgee, (ii) a person
who has purchased or agreed to purchase the shares, (iii) a creditor of the
corporation who extends or continues credit in consideration of the proxy, (iv)
a person who has contracted to perform services as an officer of the corporation
it the proxy is required by the employment contract and (v) a person designated
under a voting agreement.
Citizens. Under Section 212 of the DGCL, no proxy is valid for more
than three years after its date unless provided otherwise in the proxy.
Stockholder Action
Ogden. Under Section 615 of the NYBCL, any action required or permitted
to be taken by shareholder vote may be taken without a meeting by written
consent, setting forth the action so taken, signed by the holders of all
outstanding shares entitled to vote thereon, provided that the certificate of
incorporation may contain a provision requiring the written consent of the
holders of less than all outstanding shares. The Ogden Certificate of
Incorporation does not contain such a provision.
Citizens. Under Section 228 of the DGCL, unless otherwise provided in
the certificate of incorporation, any action required or permitted to be taken
at any meeting of stockholders may instead be taken without a meeting, without
prior notice and without a vote, if a written consent setting forth the action
taken is signed by holders of outstanding stock having not less than the minimum
number of votes that would be required to authorize such action at a meeting of
stockholders at which all shares entitled to vote thereon were present and
voting. If action is taken by written consent, a prompt notice of the action so
taken must be provided to those stockholders who have not consented in writing.
The Citizens Certificate of Incorporation does not prohibit or limit action by
written consent.
Special Stockholder Meetings
Ogden. Under Section 602 of the NYBCL, a special meeting of
shareholders may be called by the board of directors or by such person or
persons as may be authorized by the certificate of incorporation or by-laws. The
Ogden By-laws provide that special meetings of the shareholders may be called at
any time by the President or by the Board of Directors. In addition, Section 603
of the NYBCL provides that if, for a period of one month after the date fixed by
or under the by-laws for the annual meeting of shareholders, or if no date has
been so fixed for a period of thirteen months after the last annual meeting,
there is a failure to elect a sufficient number of directors to conduct the
business of the corporation, the board shall call a special meeting for the
election of directors. If such special meeting is not called by the board within
two weeks after the expiration of such period or if it is called but there is a
failure to elect such directors for a period of two months after the expiration
of such period, holders of ten percent of the shares entitled to vote in an
election of directors may, in writing, demand the call of a special meeting for
the election of directors.
Citizens. Under Section 211 of the DGCL, a special meeting of
stockholders may be called only by the board of directors or by such person or
persons as may be authorized by the certificate of incorporation or by-laws. The
Citizens By-laws provide that a special meeting of stockholders may be called by
the Chief Executive Officer, a majority of the Board, or by the stockholders of
record of 33% of the outstanding capital stock.
Removal of Directors
Ogden. Section 706 of the NYBCL provides that any or all of the
directors may be removed for cause by vote of the shareholders and, if the
certificate of incorporation or the specific provisions of a by-law adopted by
the shareholders provide, directors may be removed by action of the board of
directors. If the certificate of incorporation or the by-laws so provide, any or
all of the directors may be removed without cause by vote of the shareholders.
The removal of directors, with or without cause, is subject to the following:
(i) in the case of a corporation having cumulative voting, no director may be
removed when the votes cast against such director's removal would be sufficient
to elect the director if voted cumulatively and (ii) if a director is elected by
the holders of shares of any class or series, such director may be removed only
by the applicable vote of the holders of the shares of that class or series
voting as a class. An action to procure a judgment removing a director for cause
may be brought by the attorney-general or by the holders of ten percent of the
outstanding shares, whether or not entitled to vote. The Ogden By-laws provide
that any or all of the directors may be removed without cause only by vote of
the shareholders.
Citizens. Except as otherwise provided in certificate of
incorporation, under Section 141(k) of the DGCL, the entire board of directors
or any individual director may be removed from office, with or without cause,
by the holders of a majority of the shares then entitled to vote at an
election of directors. The Citizens Certificate of Incorporation does not
limit the provision.
Number of Directors; Vacancies on the Board
Ogden. Under Section 702 of the NYBCL, the number of directors may not
be less than three, and any higher number may be fixed by the by-laws or by
action of the shareholders or of the board of directors under specific
provisions of a by-law adopted by the shareholders. The number of directors may
be increased or decreased by amendment of the by-laws or by action of the
shareholders or of the board of directors under the specific limitation of a
by-law adopted by the shareholders, subject to certain limitations. The Ogden
By-laws fix the number of directors at six (6). Under Section 705 of the NYBCL,
newly created directorships resulting from an increase in the number of
directors and vacancies occurring in the board for any reason except the removal
of directors without cause may be filled by vote of the board. However, the
certificate of incorporation or by-laws may provide that such newly created
directorships or vacancies are to be filled by vote of the shareholders. Unless
the certificate of incorporation or the specific provision of a by-law adopted
by the shareholders provide that the board may fill vacancies occurring in the
board by reason of the removal of directors without cause, such vacancies may be
filled only by vote of the shareholders. A director elected to fill a vacancy,
unless elected by the shareholders, will hold office until the next meeting of
shareholders at which the election of directors is in the regular order of
business and until his or her successor has been elected and qualified. The
Ogden By-laws provide that any vacancy in the Ogden Board (other than removal
without cause) may be filled by a majority vote of the remaining directors.
Citizens. The Citizens By-laws provide that number of Directors
comprising the Board is fixed by resolution of the Board within the limits of
not less than seven or more than thirteen. As permitted under Section 223 of the
DGCL, the Citizens By-laws provide that the Citizens Board may fill any vacancy
on the Citizens Board, including vacancies resulting from an increase in the
number of directors.
Indemnification of Directors
Ogden. Under Section 722 of the NYBCL, a corporation may indemnify any
person made, or threatened to be made, a party to any action or proceeding,
except for shareholder derivative suits, by reason of the fact that he or she
was a director or officer of the corporation, provided such director or officer
acted in good faith for a purpose which he or she reasonably believed to be in
the best interests of the corporation and, in criminal proceedings, in addition,
had no reasonable cause to believe his or her conduct was unlawful. In the case
of shareholder derivative suits, the corporation may indemnify any person by
reason of the fact that he or she was a director or officer of the corporation
if he or she acted in good faith for a purpose which he or she reasonably
believed to be in the best interests of the corporation, except that no
indemnification may be made in respect of (i) a threatened action, or a pending
action which is settled or otherwise disposed of, or (ii) any claim, issue or
matter as to which such person has been adjudged to be liable to the
corporation, unless and only to the extent that the court on which the action
was brought, or, if no action was brought, any court of competent jurisdiction,
determines upon application that, in view of all the circumstances of the case,
the person is fairly and reasonably entitled to indemnity for such portion of
the settlement amount and expenses as the court deems proper.
The indemnification described above under the NYBCL is not exclusive of
other indemnification rights to which a director or officer may be entitled,
whether contained in the certificate of incorporation or by-laws, or, when
authorized by (i) such certificate of incorporation or by-laws, (ii) a
resolution of shareholders, (iii) a resolution of directors, or (iv) an
agreement providing for such indemnification, provided that no indemnification
may be made to or on behalf of any director or officer if a judgment or other
final adjudication adverse to the director or officer establishes that his or
her acts were committed in bad faith or were the result of active and deliberate
dishonesty and were material to the cause of action so adjudicated, or that he
or she personally gained in fact a financial profit or other advantage to which
he or she was not legally entitled.
Section 723 of the NYBCL provides that any person who has been
successful on the merits or otherwise in the defense of a civil or criminal
action or proceeding will be entitled to indemnification. Except as provided in
the preceding sentence, unless ordered by a court pursuant to the NYBCL, any
indemnification under the NYBCL pursuant to the above paragraphs may be made
only if authorized in the specific case and after a finding that the director or
officer met the requisite standard of conduct (i) by the disinterested directors
if a quorum is available, or (ii) in the event a quorum of disinterested
directors is not available or so directs by either (A) the board upon the
written opinion of independent legal counsel, or (B) by the shareholders.
Citizens. The By-Laws of Citizens require it to the fullest extent
permitted by applicable law to indemnify any person who is or was threatened
with any investigation, claim, action, suit or proceeding by reason of the fact
that he or she is or was a director or officer of Citizens, or serving at the
request of Citizens as a director or officer of another corporation or other
entity for expenses, liabilities or loss actually and reasonably incurred by
such person in connection with such proceeding. The DGCL provides that a
corporation may indemnify a person if such person acted in good faith and in a
manner he or she reasonably believed to be in or 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 or her conduct was unlawful.
Under Citizens' By-laws the determination of whether a director, officer,
employee or agent has met the applicable standard of conduct is made (i) by a
majority vote of a quorum of directors not a material party to the proceeding,
or (ii) by an independent legal counsel in a written opinion if there is no
disinterested director or if a majority of the disinterested directors so direct
or in the case of a change in control, (iii) by the shareholders or (iv) by a
court arbitral panel. In the case of shareholder derivative suits, the DGCL
provides that a corporation may indemnify any person who is or was threatened
with any action or suit by reason of the fact that he or she is or was a
director, officer, employee or agent if such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged liable to the corporation unless and only to the extent that the Court
of Chancery or the court in which the action was brought determined upon
application that, in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper. Citizens' By-laws sets forth procedures for advancing expenses to
directors, officers and others without the need for a case-by-case determination
of eligibility, so long as in the case of officers and directors they undertake
to repay the amounts advanced if it is ultimately determined that the officer or
director was not entitled to be indemnified against expenses. The aforementioned
provisions relating to indemnification and advancement of expenses are not
exclusive and a corporation may provide additional rights to those seeking
indemnification or advancement of expenses.
Limitation of Personal Liability of Directors
Ogden. Section 402(b) of the NYBCL provides that a corporation's
certificate of incorporation may contain a provision eliminating or limiting the
personal liability of directors to the corporation or its shareholders for
damages for any breach of duty in such capacity. Ogden has not adopted such a
provision.
Citizens. The Certificate of Incorporation of Citizens provides that a
director shall not be personally liable to the corporation or its stockholders
for monetary liability for breaches of fiduciary duty except for liability (i)
for any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or stock purchases or redemption, or (iv) for any
transaction from which the director derived an improper personal benefit.
ACCOUNTING TREATMENT
Citizens presently anticipates that it will account for the Merger
under the pooling-of-interests method of accounting. Application of this
accounting treatment is dependent upon evaluation of the facts and circumstances
existing at the time the Merger is consummated. Under pooling-of-interests
accounting, the combination of the ownership interests of the two companies is
recognized and, therefore, recorded values of assets and liabilities of the
companies are carried forward at existing amounts to the combined financial
statements; no goodwill or other asset or liability adjustments are recorded.
Financial statements of the separate companies for prior periods are combined
and restated to present the financial position and results of operations as if
the companies had always been a single entity.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain federal income tax
consequences of the Merger to the holders of Ogden Common Stock. The discussion
does not address all aspects of federal income taxation that may be relevant to
particular shareholders and may not be applicable to shareholders who are not
citizens or permanent residents of the United States, or who will acquire their
Citizens Common Stock pursuant to the exercise or termination of employee stock
options or otherwise as compensation, nor does the discussion address the effect
of any applicable foreign, state, local, or other tax laws. This discussion
assumes that Ogden shareholders hold their Ogden Common Stock as capital assets
within the meaning of Section 1221 of the Code.
In the opinion of Harter, Secrest & Emery, counsel to Ogden, the Merger
will, under current law, constitute a tax-free reorganization under Section
368(a) of the Code, and Citizens, C-O Tel and Ogden will each be a party to the
reorganization within the meaning of Section 368(b) of the Code. In rendering
such opinion, counsel has relied upon written representations and covenants of
Citizens, Ogden, and certain Ogden shareholders. No ruling has been sought from
the Internal Revenue Service as to the federal income tax consequences of the
Merger, and the opinion of counsel set forth below is not binding on the
Internal Revenue Service ("IRS") or any court.
As a tax-free reorganization, the Merger will have the following
federal income tax consequences for shareholders of Ogden, Ogden and Citizens:
(1) No gain or loss will be recognized by the holders of Ogden Common
Stock as a result of the exchange of such shares for shares of Citizens Common
Stock pursuant to the Merger, except that gain or loss will be recognized on the
receipt of cash, if any, received in lieu of fractional shares. Any cash
received by a shareholder of Ogden in lieu of a fractional share will generally
be treated as received in exchange for such fractional share and not as a
dividend, and any gain or loss recognized as a result of the receipt of such
cash will be capital gain or loss equal to the difference between the cash
received and the portion of the shareholder's basis in Ogden Common Stock
allocable to such fractional share interest.
(2) The tax basis of the shares of Citizens Common Stock received by
each shareholder of Ogden will equal the tax basis of such shareholder's shares
of Ogden Common Stock (reduced by the amount allocable to any fractional share
interest for which cash is received) exchanged in the Merger.
(3) The holding period for shares of Citizens Common Stock received by
each shareholder of Ogden will include the holding period of such shareholder
for the shares of Ogden Common Stock exchanged in the Merger.
(4) Neither Citizens, C-O Tel nor Ogden will recognize gain or loss as
a result of the Merger.
The federal income tax discussion set forth above is included herein
for general information only and is based in large part upon principles adopted
by the IRS in published rulings which have been stated to be applicable in
transactions of this type. The tax consequences of the Merger will depend on the
facts and circumstances applicable to each shareholder. Each shareholder of
Ogden is advised to consult with such shareholder's own tax advisor regarding
the tax consequences of the Merger, including the applicability and effect of
foreign, state, local and other tax laws.
DISSENTING SHAREHOLDERS' APPRAISAL RIGHTS
Holders of Ogden Common Stock who follow the procedures in Section 623
of the NYBCL ("Section 623") will be entitled to have their shares of Ogden
Common Stock appraised by New York court and to receive payment of the "fair
value" of such shares as determined by the court in lieu of receiving shares of
Citizens Common Stock upon consummation of the Merger.
The Merger Agreement provides that any issued and outstanding shares of
Ogden Common Stock held by persons who object to the Merger and comply with all
provisions of Section 623 concerning their right to dissent from the Merger and
demand appraisal of their shares ("Dissenting Holders") shall be deemed to be
converted, as of the Effective Time, into the right to receive the number of
shares of Citizens Common Stock calculated in accordance with Section 2.1(b) of
the Merger Agreement. The shares of Citizens Common Stock to be received by such
Dissenting Holders shall be held back and not issued by Citizens until such
time, and in any event not prior to the Effective Time, as such Dissenting
Holder has withdrawn demand for appraisal or lost his or her right for
appraisal, in either case pursuant to the NYBCL. The provisions relating to
Dissenting Holders are set forth in Section 2.1(c) of the Merger Agreement.
The following description of Section 623 is only a summary of the
procedures to be followed by Dissenting Holders and is not intended to be a
complete statement of Section 623's provisions. The full text of Section 623 is
set forth in Annex B to this Proxy Statement/Prospectus, and the following
summary of Section 623 is qualified in its entirety by reference thereto.
An Ogden shareholder electing to exercise appraisal rights must file
with Ogden, before the vote on the proposal to adopt and approve the Merger
Agreement, a written objection to the Merger. As set forth in Section 623(a),
the objection shall include a notice of such shareholder's election to dissent,
his or her name and residence address, the number and class of shares as to
which he or she dissents and a demand for payment of the "fair value" of his or
her shares. Neither a vote against adoption and approval of the Merger, nor a
proxy directing such vote, nor a blank proxy abstention will constitute the
written objection required by Section 623. A shareholder may not dissent as to
less than all of such shareholder's shares. Written objections may be filed with
Ogden at the following address: Ogden Telephone Company, 21 West Avenue,
Spencerport, New York 14559, Attention: Maureen L. Howard, Secretary.
Only a holder of record of shares of Ogden Common Stock is entitled to
assert appraisal rights. An objection should be executed by or for the holder of
record, fully and correctly, as the holder's name appears on the holder's stock
certificates. An authorized agent may execute the demand for appraisal for a
holder of record; however, the agent must identify the record owner or owners
and expressly disclose the fact that the agent is acting as agent for the record
owner.
Ogden will give written notice, by registered mail, within ten (10)
days after adoption and approval of the Merger to each shareholder who has filed
a written objection to, and has not voted to approve, the Merger Agreement.
Within twenty (20) days after the giving of such notice, any shareholder from
whom written objection was not required who elects to dissent from the Merger
must file written notice of such election, together with such shareholder's
name, residence address, the number and class of shares as to which he or she
dissents, and a demand for payment of "fair value" of the shares. A shareholder
may not dissent as to less than all shares he or she owns.
At the Effective Time, each Dissenting Holder who complies with all the
provisions of Section 623 of the NYBCL shall have the right to receive the
number of shares of Citizens Common Stock calculated in accordance with Section
2.1(b) of the Merger Agreement, without interest, which shares shall be issued
only after the Dissenting Holder has withdrawn his demand or lost his right to
appraisal in accordance with the NYBCL. No shares of Citizens Common Stock shall
be issued prior to the Effective Time.
A notice of election to dissent may be withdrawn by a Dissenting Holder
at any time prior to his acceptance in writing of an offer to pay the "fair
value" of his Ogden Common Stock, but not later than 60 days after the Effective
Time, unless Citizens shall fail to make an offer to pay the "fair value" of the
dissenter's shares within 15 days after the Effective Time, in which case such
dissenter shall have 60 days from the date on which such offer was made to
withdraw his election.
At the time of filing a notice of election to dissent, or within one
month thereafter, a Dissenting Holder must submit certificates representing his
Ogden Common Stock to Ogden or its Transfer Agent, who shall note conspicuously
thereon that a notice of election to dissent has been filed and will return the
certificates to such shareholder or person who submitted the certificates on his
behalf. Failure to submit the certificates may result in the loss of dissenter's
appraisal rights.
Within 15 days after the expiration of the period within which
shareholders may file their notices of election to dissent, or within 15 days
after the consummation of the Merger, whichever is later (but not later than 90
days after the shareholder vote authorizing the Merger), Citizens will make a
written offer, by registered mail, to pay for the dissenting shareholders'
shares at the price which Citizens considers to be their "fair value." If the
Merger has not been consummated within 90 days after the Meeting, the offer may
be conditioned upon such consummation.
If Citizens and the Dissenting Holder are unable to agree as to value,
Section 623 provides a procedure for the judicial determination of value.
Ogden shareholders who seek to exercise appraisal rights should not
assume that Ogden or Citizens will initiate any negotiations with respect to the
"fair value" of their Ogden Common Stock. Ogden has agreed to provide Citizens
with notice of any demands by Dissenting Holders and Citizens has the right to
participate in any negotiations or proceedings with respect to such demands. In
addition, Ogden shall not, without prior written consent of Citizens,
voluntarily make payment or settle any demand for payment.
Failure to follow the steps required by Section 623 for perfecting
appraisal rights may result in the loss of such rights.
Citizens and Ogden will not be required to consummate the Merger if
holders of more than 5% of the outstanding shares of Ogden Common Stock elect to
exercise appraisal rights pursuant to the NYBCL and have not voted in favor of
the Merger. See "Description of the Merger and the Merger Agreement--
General." The Ogden Board of Directors has
determined that the Merger is fair to, and is in the best interests of, Ogden's
shareholders and Ogden hopes that no shareholder will exercise dissenter's
rights. See "Background and Reasons for the Merger and Related Matters."
EXPERTS
The consolidated financial statements of Citizens as of December 31,
1996, 1995 and 1994, and for each of the years then ended, incorporated by
reference in this Prospectus from Citizens' Annual Report on Form 10-K for the
year ended December 31, 1996 have been so incorporated by reference in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The consolidated balance sheets of Ogden as of December 31, 1996 and
1995 and the consolidated statements of income, retained earnings and cash flows
for each of the three years ended December 31, 1996, 1995 and 1994 have been
audited by Coopers and Lybrand, LLP, independent public accountants, as set
forth in their report set forth elsewhere in this Proxy Statement/Prospectus and
are included herein in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
LEGAL OPINIONS
The validity of the Common Stock will be passed upon by Winthrop,
Stimson, Putnam & Roberts, One Battery Park Plaza, New York, New York, counsel
for Citizens.
<PAGE>
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS OF OGDEN
Page
<S> <C>
Report of Independent Accountants..............................................................................F-1
Consolidated Balance Sheets as of December 31, 1996 and 1995...................................................F-2
Consolidated Statements of Income for each of the years ended
December 31, 1996, 1995 and 1994............................................................................F-4
Consolidated Statements of Retained Earnings for each of the years ended
December 31, 1996, 1995 and 1994............................................................................F-5
Consolidated Statements of Cash Flows for each of the years ended
December 31, 1996, 1995 and 1994............................................................................F-6
Notes to Consolidated Financial Statements.....................................................................F-7
Consolidated Condensed Balance Sheets as of September 30, 1997 (unaudited)
and December 31, 1996 .....................................................................................F-15
Consolidated Condensed Statements of Income for the nine months ended
September 30, 1997 and 1996 (unaudited)....................................................................F-16
Consolidated Condensed Statements of Income for the three months ended
September 30, 1997 and 1996 (unaudited)....................................................................F-17
Consolidated Condensed Statements of Cash Flows for the nine months ended
September 30, 1997 and 1996 (unaudited)....................................................................F-18
Notes for Consolidated Condensed Financial Statements (unaudited).............................................F-19
</TABLE>
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders
Ogden Telephone Company and Subsidiary
Spencerport, New York
We have audited the consolidated balance sheets of Ogden Telephone Company and
Subsidiary as of December 31, 1996 and 1995, and the related consolidated
statements of income, retained earnings, and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Ogden Telephone
Company and Subsidiary as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Coopers & Lybrand LLP
Rochester, New York
February 25, 1997, except for Note 8,
as to which the date is October 23, 1997
<PAGE>
<TABLE>
<CAPTION>
Ogden Telephone Company and Subsidiary
Consolidated Balance Sheets
December 31, 1996 and 1995
Assets 1996 1995
------ --------- ----------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 722,795 $ 387,789
Accounts receivable 1,339,986 1,448,181
Materials and supplies 379,881 378,829
Prepaid expenses and other current assets 286,073 342,347
Refundable income taxes --- 102,827
--------- ----------
2,728,735 2,659,973
--------- ----------
Noncurrent assets:
Investments
Nonaffiliated companies 197,684 185,313
Rural Telephone Bank 110,910 131,800
Cash surrender value of life insurance, net of loans of $30,540 in 76,349 64,783
1996 and 1995
Deferred charges, net of accumulated amortization of $172,644 and 1,447,899 1,671,860
$161,884 in 1996 and 1995, respectively
Deferred pension expense 159,102 355,037
--------- ----------
1,991,944 2,408,793
--------- ----------
Property, plant and equipment
Telephone plant in service 34,015,888 32,389,235
Telephone plant under construction 376,047 646,996
--------- ----------
34,391,935 33,036,231
Less: Accumulated depreciation 12,230,805 10,424,821
--------- ----------
22,161,130 22,611,410
---------- ----------
$ 26,881,809 $ 27,680,176
========== ==========
<PAGE>
Ogden Telephone Company and Subsidiary
Liabilities and Shareholders' Equity 1996 1995
------------------------------------ ----------- -----------
Current liabilities:
Accounts payable $ 1,059,120 $ 1,641,960
Current portion of long-term debt 494,906 470,428
Current portion of employee benefits liability 400,000 500,000
Accrued vacation 228,415 225,782
Income taxes payable 124,650 --
Other accrued taxes 27,437 26,267
Other accrued liabilities 257,750 458,577
--------- ----------
2,592,278 3,323,014
--------- ----------
Long-term debt 8,417,964 9,003,863
--------- ----------
Deferred credits and other liabilities:
Unamortized investment tax credits 329,018 384,507
Deferred income taxes, net 3,284,544 3,477,754
Employee benefits liability 725,611 810,230
--------- ----------
4,339,173 4,672,491
--------- ----------
Shareholders' equity:
Common stock, no par value, authorized 134,900 shares; issued and 1,513,695 1,496,394
outstanding 108,811 shares in 1996 and 108,032 shares in 1995
7% cumulative preferred stock, $100 par value; authorized, issued 555,000 555,000
and outstanding 5,550 shares
8% cumulative convertible preferred stock, $100 par value; 566,800 584,100
authorized 9,500 shares; issued and outstanding 5,668 in 1996
and 5,841 shares in 1995
Retained earnings 8,896,899 8,045,314
---------- ----------
11,532,394 10,680,808
---------- ----------
$ 26,881,809 $ 27,680,176
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
Ogden Telephone Company and Subsidiary
Consolidated Statements of Income
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1996 1995 1994
Operating revenues: -------------- -------------- -------------
Local service $5,145,974 $5,531,387 $5,383,486
Access and long distance service 4,532,800 3,602,257 3,211,779
Miscellaneous 946,174 1,256,595 1,249,961
Less: Uncollectibles (28,247) (36,723) (36,937)
------------ ------------ ------------
10,596,701 10,353,516 9,808,289
---------- ---------- ------------
Operating expenses:
Plant specific 1,845,153 1,680,863 1,534,758
Plant nonspecific 715,919 709,038 670,283
Depreciation 1,907,008 2,000,655 1,817,562
Customer operations 1,067,846 1,284,016 1,076,450
Corporate operations 1,556,581 1,299,585 1,293,812
Operating taxes 867,224 753,332 960,744
------------ ------------ ------------
7,959,731 7,727,489 7,353,609
------------ ------------ ------------
Operating income 2,636,970 2,626,027 2,454,680
------------ ------------ ------------
Interest and related charges 589,948 627,376 738,462
Interest charged to construction (42,917) (13,876) (72,429)
Other income, net (1,620) (5,782) (3,014)
------------ ------------ ------------
545,411 607,718 663,019
------------ ------------ ------------
Income before income taxes 2,091,559 2,018,309 1,791,661
------------ ------------ ------------
Federal income taxes:
Current 607,548 335,239 404,500
Deferred 68,003 300,989 166,677
------------ ------------ ------------
675,551 636,228 571,177
------------ ------------ ------------
Net income $1,416,008 $1,382,081 $1,220,484
========== ========== ==========
Earnings per common share $12.27 $12.05 $10.58
====== ====== ======
Weighted average common shares outstanding 108,482 107,514 107,111
======= ======= =======
Earnings per common share assuming full $10.25 $10.00 $8.80
====== ====== =====
dilution
Weighted average of common shares 134,317 134,317 134,317
======= ======= =======
outstanding assuming full dilution
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
Ogden Telephone Company and Subsidiary
Consolidated Statements of Retained Earnings
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1996 1995 1994
----------------- ------------------ ----------------
Balance, January 1 $ 8,045,314 $ 7,184,342 $ 6,451,672
Net income 1,416,008 1,382,081 1,220,484
------------------ ------------------ -------------------
9,461,322 8,566,423 7,672,156
------------------ ------------------ -------------------
Less dividends:
7% cumulative preferred stock 38,850 38,850 38,850
8% cumulative convertible preferred stock 45,836 47,502 48,288
------------------ ------------------ -------------------
84,686 86,352 87,138
Common stock, $4.42 per share in 1996, $4.04 per share 479,737 434,757 400,676
in 1995, and $3.74 per share in 1994
---------------- ------------------ ------------------
564,423 521,109 487,814
------------------ ------------------ -------------------
Balance, December 31 $ 8,896,899 $ 8,045,314 $ 7,184,342
================== ================= ====================
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
Ogden Telephone Company and Subsidiary
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
------------------ ----------------- ------------------
Cash flows from operating activities:
Net income $ 1,416,008 $ 1,382,081 $ 1,220,484
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,917,768 2,011,415 1,828,322
Accounts receivable 108,195 (20,457) 93,210
Materials and supplies (1,052) (48,713) (90,542)
Prepaid expenses and other current assets 56,274 (130,292) (2,196)
Refundable income taxes 102,827 (102,827) --
Deferred pension expense 195,935 200,923 (134,096)
Accounts payable (582,840) 582,581 (586,357)
Income taxes and other accrued taxes 125,820 (70,329) (6,168)
Accrued vacation and other accrued liabilities (198,194) (155,779) (204,246)
Deferred credits and other liabilities (220,116) 276,253 179,714
------------------ ----------------- ------------------
Net cash provided by operating activities 2,920,625 3,924,856 2,298,125
------------------ ----------------- ------------------
Cash flows from investing activities:
Purchase of property, plant and equipment, net (1,456,728) (2,386,120) (1,633,195)
Decrease (increase) in investments 8,519 (17,802) --
Decrease (increase) in cash surrender value of
life insurance (11,566) 9,898 (2,271)
------------------ ----------------- ------------------
Net cash used in investing activities (1,459,775) (2,394,024) (1,635,466)
------------------ ----------------- ------------------
Cash flows from financing activities:
Repayment of notes payable -- (900,000) (2,600,000)
Additions to notes payable -- -- 3,300,000
Increase in long-term debt -- -- 124,067
Repayment of long-term debt (561,421) (438,894) (473,534)
Dividends paid (564,423) (521,109) (487,814)
------------------ ----------------- ------------------
Net cash used in financing activities (1,125,844) (1,860,003) (137,281)
------------------ ----------------- ------------------
Increase (decrease) in cash and cash equivalents
for the year 335,006 (329,171) 525,378
Cash and cash equivalents - beginning of year 387,789 716,960 191,582
------------------ ----------------- ------------------
Cash and cash equivalents - end of year $ 722,795 $ 387,789 $ 716,960
================== ================= ==================
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
Ogden Telephone Company and Subsidiary
Notes to Consolidated Financial Statements
1. Business Organization
Ogden Telephone Company and subsidiary OTC Long Distance ("Ogden") are
engaged principally in the provision of local exchange and long distance
services to residential and business customers in the Towns of Ogden and
Parma, Monroe County, New York.
2. Significant Accounting Policies
Basis of Accounting
Ogden's accounting and reporting policies are in conformity with
generally accepted accounting principles. Ogden's financial records are
maintained on the accrual basis of accounting.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of Ogden and
its wholly-owned subsidiary. All significant intercompany transactions
have been eliminated.
Uniform System of Accounts
Ogden utilizes the Uniform System of Accounts (USOA) in accordance with
regulations mandated by the Federal Communications Commission and the New
York State Public Service Commission (PSC).
Materials and Supplies
Materials and supplies, used primarily for repairs and maintenance, are
stated at the lower of cost, on a first-in, first-out method, or market.
Investments
Ogden's investments are carried at cost, which approximates market. Ogden
has classified these investments as available-for-sale. The investment in
the Rural Telephone Bank (the Bank) is collateral for a loan payable to
the Bank with a balance of $1,542,836 as of December 31, 1996.
Telephone Plant
Telephone plant in service is carried in the financial statements at
cost. The cost of assets retired is charged to accumulated depreciation
together with cost of removal, net of salvage.
Depreciation
Depreciation is calculated on the straight-line method for financial
reporting purposes. Depreciation is provided generally under accelerated
methods for federal income tax purposes.
Investment Tax Credits
Investment tax credits are amortized over the productive lives of the
related assets.
Earnings Per Common Share
Primary earnings per common share has been computed using a weighted
average number of common shares outstanding during each year. Fully
diluted earnings per common share has been computed based on the
assumption that all of the convertible preferred shares are converted
into common shares at the beginning of each year.
Statements of Cash Flows
For purposes of the statements of cash flows, Ogden considers all highly
liquid instruments purchased with a maturity of three months or less to
be cash equivalents.
Interest paid (net of amounts capitalized of $16,740, $25,654, and
$79,526) was $682,526, $603,058, and $597,712 in 1996, 1995 and 1994,
respectively. Federal income taxes paid were $399,000, $418,000 and
$469,209 in 1996, 1995 and 1994, respectively.
Advertising
Advertising expenses are charged to operations during the year in which
they are incurred. Advertising expenses incurred and charged to
operations were approximately $79,000, $147,000 and $18,000 for the years
ended December 31, 1996, 1995 and 1994, respectively.
Impairment of Long-Lived Assets
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of", Ogden reviews long-lived assets and certain
identifiable intangibles for possible impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset
may not be recoverable.
3. Short-Term Borrowings
Ogden has an unused $2,500,000 revolving line of credit with the Rural
Telephone Finance Cooperative at December 31, 1996. Advances bear
interest at the bank's prime rate plus 1.5% per annum or such lesser
interest rate as may be fixed by the bank from time to time. Interest is
payable quarterly on the first day of each calendar quarter. The line of
credit expires in November 1998. The credit agreement contains a
condition which states that the combined principal amount outstanding at
any one time on all lines of credit shall not exceed $2,500,000.
Ogden has an unused demand note from CoBank for $1,500,000 at December
31, 1996. Advances on the demand note will be collateralized by real or
personal property of Ogden and will generally bear interest at 8.0%, or
at other rates agreed to by CoBank and Ogden. The note expires in
September 1997. The note agreement contains covenants requiring a minimum
net worth ratio, and minimum working capital levels with which Ogden must
comply regardless of whether any advances are outstanding.
The Company has an unused grid note with a bank for $2,500,000 at
December 31, 1996. Advances on the note bear interest at the bank's prime
rate plus .5% which is payable monthly. The note has no stated maturity
date.
4. Long-Term Debt
Ogden has the following loan contracts which require monthly principal
and interest payments, with the Rural Telephone Bank and the Federal
Financing Bank:
<TABLE>
<CAPTION>
Outstanding
Balance Interest Rate Final Due Date
--------------- -------------- ----------------
<S> <C> <C> <C>
$ 1,542,836 7.000% April 7, 2004
2,815,546 5.999% December 31, 2011
2,656,958 5.999% December 31, 2011
627,081 6.100% December 31, 2013
1,237,299 6.179% December 31, 2015
------------------------
$ 8,879,720
========================
</TABLE>
The above loans are guaranteed by the Rural Electrification Association
(REA) and are collateralized by a mortgage on all land, plant, works,
structures, buildings, fixtures and improvements of Ogden.
The mortgage agreement also places certain restrictions on the amount of
dividends that may be paid annually. Dividends paid during the year are
in compliance with this restriction.
Ogden also has a capital lease obligation for computer equipment. The
lease has a term of 36 months, beginning September 1994, with an
effective interest rate of 7.71%. Lease payments in the amount of $3,880
are made monthly for principal, interest and executory costs. The
outstanding balance at December 31, 1996 was $33,150.
Annual maturities of the long-term debt, including capitalized lease
obligations, are as follows:
1997 $ 494,906
1998 487,431
1999 519,447
2000 552,428
2001 589,947
Thereafter 6,268,711
-------------------
$ 8,912,870
===================
5. Preferred and Common Stock
The preferred stock is callable at par at the option of Ogden. In the
event that two semi-annual dividends totaling 7% shall not have been paid
upon the 7% preferred series, the deficiency shall be made up before any
dividends shall be paid on the common stock of any class.
The 8% convertible preferred stock is convertible into common stock at
the rate of four and one half shares of common stock for each share of
the 8% convertible preferred stock, subject to adjustment in certain
events. During 1996, 1995 and 1994, 173, 190 and 40 shares of 8%
convertible preferred stock were converted into 779, 855 and 180 shares
of common stock, respectively.
At December 31, 1996, there were 25,507 shares of common stock restricted
for conversion privileges of the 8% convertible preferred stock.
In addition to the preferred and common stock issued and outstanding,
there were 57,000 shares of Class A Common Stock, no par value, of which
no shares were issued and outstanding; 5,000 shares of 5% Preferred
Stock, par value $100 per share, of which no shares were issued and
outstanding; 2,500 shares of 6% Preferred Stock, par value $100 per
share, of which no shares were issued and outstanding; and 5,500 shares
of 6% Preferred Stock, par value of $100 per share authorized, of which
no shares were issued and outstanding.
6. Federal Income Taxes
Income taxes are recorded in accordance with Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes". The original
adoption, in 1993, was made on a revenue neutral basis and required the
recognition of a regulatory asset for the cumulative effect of this
change in accounting principle as required by the Public Service
Commission (PSC).
Deferred income tax provisions of Ogden are based upon amounts recognized
for rate-making purposes. Ogden recognizes a deferred tax liability and
establishes a corresponding regulatory asset for tax benefits previously
flowed through to rate payers. The major temporary difference that gave
rise to the net deferred tax liability is depreciation which for income
tax purposes is determined based on accelerated methods and shorter
lives.
Statement of Financial Accounting Standards No. 71, "Accounting for the
Effects of Certain Types of Regulation", requires Ogden to reflect the
additional deferred income taxes as regulatory assets to the extent that
they will be recovered in the rate-making process. In accordance with the
normalization provisions under federal tax law, Ogden reverses excess
deferred taxes relating to depreciation of regulated assets over the
regulatory lives of those assets. For other excess deferred taxes, the
regulatory agencies generally allow amortization of excess deferred taxes
over the reversal period of the temporary differences giving rise to the
deferred taxes.The Tax Reform Act of 1986 repealed the investment tax
credit ("ITC"), effective January 1, 1986. As required by tax law, ITC
for the Company was deferred and is amortized as a reduction of income
tax expense over the estimated service lives of the related assets giving
rise to the ITC's. Amounts so recognized in the tax provision were
$37,000, $40,000 and $42,000 for 1996, 1995 and 1994, respectively.
Deferred federal income tax expense results principally from timing
differences between depreciation expense for income tax purposes and
depreciation expense reflected in the accompanying financial statements,
the amortization of investment tax credits over the life of the plant
which gave rise to the credits and the early retirement liability.
The components of deferred income taxes are as follows at December 31:
<TABLE>
<CAPTION>
1996 1995
--------------------------------- ---------------------------------
Assets Liabilities Assets Liabilities
--------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Depreciation $ -- $ 4,022,144 $ -- $ 4,072,201
Unamortized ITC -- 329,018 -- 384,507
Employee benefits 500,908 -- 308,669 --
Other 236,692 -- 285,778 --
--------------- ---------------- ---------------- ----------------
$ 737,600 $ 4,351,162 $ 594,447 $ 4,456,708
=============== ================ ================ ================
</TABLE>
Ogden has approximately $1,258,000 and $1,497,000 in deferred taxes at
December 31, 1996 and 1995, respectively, representing the cumulative
effect of income taxes on temporary differences that were previously
flowed through to rate payers. Ogden recorded a corresponding regulatory
asset in deferred charges for these items representing amounts that will
be recovered through the rate-making process. These deferrals have been
increased for the tax effect of future revenue requirements and are being
amortized over the lives of the related depreciable assets concurrently
with their recovery in rates.
The effective federal income tax rate as a percentage of income before
income taxes differs from the expected statutory rate of 34% mainly due
to the effect of the amortization of investment tax credits.
7. Postretirement Benefits
Pension Plan
Ogden has a defined benefit pension plan (the Plan) covering
substantially all employees.
It is Ogden's policy to make contributions for pension benefits based on
actuarial computations reflecting the long-term nature of the Plan.
However, under Statement of Financial Accounting Standards No. 87 (SFAS
87), "Employers' Accounting for Pensions", the development of the
projected benefit obligation is computed for financial reporting purposes
and differs from the actuarial determination for funding due to varying
assumptions and methods of computation.
The PSC directed Ogden to record SFAS 87, but required the deferral of
any effect on Ogden's results of operations. Accordingly, Ogden had
recorded a regulatory asset which represented this deferral. During 1995,
Ogden adopted the full effects of SFAS 87 and is amortizing the
regulatory asset deferral over 15 years. The regulatory asset was
$159,102 and $171,342, net of accumulated amortization of $24,479 and
$12,239 at December 31, 1996 and 1995, respectively.
The net cost of the Plan, including amounts charged to construction was:
<TABLE>
<CAPTION>
1996 1995 1994
---------------- ---------------- ----------------
<S> <C> <C> <C>
Current service cost $ 155,592 $ 130,775 $ 90,600
Interest on projected benefit obligations 369,495 350,748 280,814
Actual return on plan assets (337,331) (310,358) (4,787)
Net amortization and deferral 226,078 245,084 (143,974)
---------------- ---------------- ----------------
Net periodic pension costs 413,834 416,249 222,653
Adjustment to conform with regulatory -- -- (10,805)
agency requirements
---------------- --------------- ----------------
---------------- ---------------- ----------------
Net periodic pension cost recognized $ 413,834 $ 416,249 $ 211,848
================ ================ ================
</TABLE>
The following table presents a reconciliation of the funded status of
the Plan at December 31:
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1995
---------------- ----------------
Actuarial present value of accumulated
benefit obligation:
Vested benefits $ 3,611,561 $ 3,504,310
Nonvested benefits 9,481 6,705
---------------- ----------------
$ 3,621,042 $ 3,511,015
================ ================
Projected benefit obligation $ 4,982,099 $ 4,694,179
Plan assets at fair value 2,952,577 2,431,763
---------------- ----------------
Unfunded status 2,029,522 2,262,416
Unrecognized prior service cost (230,044) (253,012)
Unrecognized net actuarial loss (989,211) (1,114,408)
Remaining unrecognized net asset existing at
date of initial application 503 561
Additional liability -- 183,695
---------------- ----------------
Accrued pension cost recognized $ 810,770 $ 1,079,252
================ ================
</TABLE>
The actuarial assumptions used in 1996, 1995 and 1994 in determining
pension cost and funded status as shown above were a discount rate on the
projected benefit obligation of 8.0% in 1996 and 1995 and 7.5% in 1994, a
rate of return on plan assets of 9.0% in 1996 and 1995 and 8.5%, in 1994,
and a rate of increase in future compensation levels of 5.0% in 1996 and
1995 and 3.0% in 1994. Plan assets are comprised primarily of fixed
income obligations, equity stocks and other pooled investments.
Postretirement Benefits Other Than Pensions
Ogden provides certain health care benefits for substantially all
retirees who retire at age 55 or later with 20 years of service at
retirement or at age 65 or later. These benefits provide full coverage
for employees at Ogden's expense under the company sponsored plans
available, and provide that such coverage will continue until the
employee's death. Spousal coverage exists only for those eligible
employees who elected early retirement in 1992. This coverage ceases at
the employees attainment of age 65. The plan is unfunded.
In 1995, Ogden adopted Statement of Financial Accounting Standards No.
106 "Employers' Accounting for Postretirement Benefits Other Than
Pensions" ("SFAS 106"). Under SFAS 106, the annual provision for
postretirement benefits other than pensions required to be recorded
represents an incurred cost calculation rather than the cash cost method
previously utilized by Ogden. SFAS 106 requires a liability to be
recorded for accumulated postretirement benefits at the time of adoption
which Ogden elected to amortize over 20 years. Cash paid to provide these
benefits amounted to $40,129 and $41,545 in 1996 and 1995, respectively.
The following table sets forth the funded status of the plans, reconciled
to the accrued postretirement benefit obligation recognized in Ogden's
balance sheet at December 31:
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1995
------------------ -------------------
Accumulated postretirement benefit obligation (APBO):
Retirees $ 417,847 $ 490,235
Fully eligible active plan participants 76,575 56,029
Other active participants 118,006 277,770
------------------ -------------------
612,428 824,034
Unamortized net transition obligation (713,598) (753,242)
Unamortized net gain 211,336 --
------------------ -------------------
Accrued postretirement benefit obligation $ 110,166 $ 70,792
================== ===================
</TABLE>
<PAGE>
The components of net periodic postretirement benefit costs are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1995
----------------- ---------------
Service cost $ 7,639 $ 14,954
Interest cost 46,182 57,739
Amortization of transition obligation 39,644 39,644
Amortization of gain (10,829) --
---------------- ----------------
Net periodic postretirement benefit cost $ 82,636 $ 112,337
================ ================
</TABLE>
The weighted-average discount rate used in determining the APBO was 8%
and 7.5% at December 31, 1996 and 1995, respectively.
If the health care cost trend rate were increased 1.0%, the APBO as of
December 31, 1996 would increase by approximately $86,000 and the expense
for 1996 would have increased by approximately $14,000.
Tax Deferred Savings Retirement Plan and Trust
Ogden has a defined contribution 401(k) plan which covers all employees
with at least six months of service. Participants may elect to make
voluntary contributions up to 20% of their annual compensation subject to
certain limitations. Ogden may contribute a discretionary amount to the
401(k) plan annually. Such contributions, if any, shall be determined by
the board of directors and allocated to participants based on the ratio
of a participants contributions to total participant contributions for
the year. Ogden has made no contribution in any of the years included in
these financial statements. Participants are fully vested in their
contributions and Ogden's contributions, if any, at all times.
8. Subsequent Event
On February 3, 1997, Ogden signed an agreement providing for the
acquisition of all the outstanding shares by Citizens Utilities. Approval
of the sale by both the New York State Public Service Commission ("PSC")
and Ogden shareholders is required. Approval from the PSC was received on
October 23, 1997. The transaction will now be submitted for shareholder
approval.
Additionally, on August 8, 1997, the demand note from CoBank in the
amount of $1,500,000 (see Note 3) was extended until September 1998.
9. New Accounting Pronouncement
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Accounting Standards (SFAS) No. 128, "Earnings Per Share",
which will be effective for Ogden's year ended December 31, 1997. SFAS
No. 128 will modify the methodology used to compute earnings per share
(EPS), requiring calculation of "basic" and "diluted" EPS. The adoption
of SFAS No. 128 and resulting computation is not expected to have a
significant impact on Ogden's earnings per share as currently determined.
<PAGE>
Ogden Telephone Company and Subsidiary
Consolidated Condensed Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
Assets September 30,
1997 December 31,
(Unaudited) 1996
--------------- ------------
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 1,347 $ 723
Accounts receivable 1,591 1,340
Other current assets 812 666
--------------- ------------
3,750 2,729
--------------- ------------
Noncurrent assets:
Investments 302 309
Other noncurrent assets 1,613 1,683
--------------- ------------
1,915 1,992
--------------- ------------
Property, plant and equipment:
Telephone plant and equipment 35,299 34,392
Less: Accumulated depreciation 13,520 12,231
--------------- ------------
21,779 22,161
--------------- ------------
$ 27,444 $ 26,882
=============== =============
Liabilities and Shareholders' Equity September 30, December 31,
1997 1996
(Unaudited)
--------------- -------------
Current liabilities:
Accounts payable $ 929 $ 1,059
Current portion of long-term debt 491 495
Other current liabilities 1,127 1,038
--------------- -------------
2,547 2,592
--------------- -------------
Long-term debt 8,049 8,418
Deferred credits and other liabilities:
Deferred income taxes, net 3,877 3,614
Employee benefits liability 597 726
--------------- ------------
4,474 4,340
--------------- ------------
Shareholders' equity:
Common stock, no par value, 1,514 1,514
authorized 134,900 shares; issued
and outstanding 108,811 shares
7% cumulative preferred stock, $100 555 555
par value; authorized, issued and
outstanding 5,550 shares
8% cumulative convertible preferred 567 567
stock, $100 par value; authorized
9,500 shares; issued and
outstanding 5,668
Retained earnings 9,738 8,896
-------------- ----------
12,374 11,532
-------------- ----------
$ 27,444 $ 26,882
============== ==========
The accompanying notes are an integral part of the consolidated condensed
financial statements
<PAGE>
Ogden Telephone Company and Subsidiary
Consolidated Condensed Statements of Income
For the Nine Months Ended September 30, 1997 and 1996
(In thousands, except per-share amounts)
1997 1996
(Unaudited) (Unaudited)
------------- ------------
Operating revenues:
Local service $ 4,074 $ 3,811
Access and long distance service 3,366 3,349
Miscellaneous 560 777
------------ -------------
8,000 7,937
------------ -------------
Operating expenses:
Plant 1,863 1,854
Depreciation 1,414 1,358
Other 1,745 1,910
Operating taxes 691 716
------------ -------------
5,713 5,838
------------ -------------
Operating income 2,287 2,099
Other income, net (52) (65)
Interest expense 418 445
----------- -------------
Income before income taxes 1,921 1,719
Income taxes 646 569
----------- -------------
Net Income $ 1,275 $ 1,150
================= =============
Earnings per common share $ 11.13 $ 10.02
================ =============
Weighted average common shares outstanding 108,811 108,374
================ =============
Earnings per common share assuming full dilution $ 9.27 $ 8.35
================ ==============
Weighted average of common shares outstanding assuming full 134,317 134,317
dilution ================ ===============
<PAGE>
Ogden Telephone Company and Subsidiary
Consolidated Condensed Statements of Income
For the Three Months Ended September 30, 1997 and 1996
(In thousands, except per-share amounts)
1997 1996
(Unaudited) (Unaudited)
---------------- ---------------
Operating revenues:
Local service $ 1,388 $ 1,310
Access and long distance service 1,096 1,092
Miscellaneous 200 305
---------------- ---------------
2,684 2,707
---------------- ---------------
Operating expenses:
Plant 617 600
Depreciation 471 395
Other 589 696
Operating taxes 196 230
---------------- ---------------
1,873 1,921
---------------- ---------------
Operating income 811 786
Other income, net (19) (25)
Interest expense 138 144
---------------- ---------------
Income before income taxes 692 667
Income taxes 233 222
---------------- ---------------
Net Income $ 459 $ 445
================ ===============
Earnings per common share $ 4.02 $ 3.90
================ ===============
Weighted average common shares outstanding 108,811 108,800
================ ===============
Earnings per common share assuming full dilution $ 3.34 $ 3.24
================ ===============
Weighted average of common shares outstanding assuming full 134,317 134,317
dilution ================ ===============
<PAGE>
Ogden Telephone Company and Subsidiary
Consolidated Condensed Statements of Cash Flows
For the Nine Months Ended September 30, 1997 and 1996
(in thousands)
1997 1996
(Unaudited) (Unaudited)
Net cash provided by operating activities $ 2,330 $ 1,357
------------- -------------
Cash flows from investing activities:
Decrease (increase) in investments 7 (13)
Purchase of property, plant and equipment (907) (915)
-------------- ---------------
Net cash used in investing activities (900) (928)
-------------- ---------------
Cash flows from financing activities:
Short-term borrowings 331
Repayment of long-term debt (373) (423)
Dividends paid (433) (402)
-------------- --------------
Net cash used in financing activities (806) (494)
-------------- --------------
Increase (decrease) in cash and cash equivalents 624 (65)
Cash and cash equivalents - at January 1 723 388
------------- -------------
Cash and cash equivalents - at September 30 $ 1,347 $ 323
============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated condensed finan-
cial statements
<PAGE>
Ogden Telephone Company and Subsidiary
Notes to Consolidated Condensed Financial Statements
September 30, 1997
Unaudited
1. Consolidated Financial Statements
The consolidated condensed balance sheets, statements of income and
statements of cash flows for the nine and three month periods ended
September 30, 1997, and September 30, 1996, have been prepaid by the
Company without audit. In the opinion of management, all adjustment
necessary to present fairly the financial position, results of
operations, and changes in cash flows at September 30, 1997 (which
include only normal recurring adjustments) have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principals have been condensed or omitted. It is suggested
that these consolidated condensed financial statements be read in
conjunction with the financial statements and notes thereto included in
the Company's December 31, 1996 annual report to shareholders. The
results of operations for the nine and three months ended September 30,
1997 are not necessarily indicative of the operating results for the
full year.
ANNEXES
Annex A - Agreement and Plan of Reorganization
Annex B - New York Business Corporation Law ss. 623
Annex C - Affiliates Agreement
Annex D - Form of Voting Agreement
Annex A
AGREEMENT
AND
PLAN OF REORGANIZATION
BY AND AMONG
CITIZENS UTILITIES COMPANY,
CITIZENS-OGDEN TELECOMMUNICATIONS COMPANY
AND
OGDEN TELEPHONE COMPANY
Dated: February 3, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE TRANSACTION 1
1.1 Effective Time of the Merger 1
----------------------------
1.2 Effects of the Merger 1
---------------------
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES 2
2.1 Effect on Capital Stock 2
-----------------------
(a) Cancellation of Treasury Stock and Citizens-Owned Stock 3
(b) Exchange Ratio for Ogden Common Stock 3
(c) Shares of Dissenting Holders 3
(d) Adjustment of Merger Consideration 4
(e) Conversion of Sub Common Stock 7
2.2 Exchange of Certificates 7
------------------------
(a) Exchange Agent 7
(b) Exchange Procedures 7
(c) Distributions with Respect to Citizens A Stock 8
(d) No Further Ownership Rights in Ogden Common Stock 8
(e) No Fractional Shares 9
(f) Termination of Exchange Fund 9
(g) No Liability 9
ARTICLE III
COVENANTS PENDING COMPLETION OF MERGER 9
3.1 Ogden's Pre-Closing Covenants 9
-----------------------------
(a) Access to Ogden by Citizens 9
(b) Operation of the Business 10
(c) Satisfaction of Conditions; Cooperation. 13
(d) Approval of Merger. 13
(e) Notification as to Certain Matters 13
(f) Securities Laws 13
(g) Delivery of Shareholder Lists 14
(h) Conversion/Redemption of Convertible Preferred Stock and Preferred
Stock 14
(i) Initial Adjustment Certificate 14
(j) Amendment of Schedules 14
(k) NYPSC/FCC Filings 15
(l) No Solicitation 15
(m) Long Term Debt 16
(n) Pooling Accounting 16
(o) No Purchase of Citizens Common Stock 16
3.2 Citizens' and Sub's Pre-Closing Covenants 16
-----------------------------------------
(a) Citizens as Sole Shareholder of Sub; Approval of Merger 16
(b) Blue Sky Filings 16
(c) Filings 16
(d) Satisfaction of Conditions; Cooperation 17
(e) Notification as to Certain Matters 17
3.3 Mutual Pre-Closing Covenants 17
----------------------------
(a) Confidentiality 17
(b) Hart-Scott-Rodino Filing 17
(c) Further Assurances 17
(d) Application to the New York Public Service Commission and Related
Expenses 17
(e) Meeting of Ogden's Shareholder, Proxy Materials 18
ARTICLE IV
CONDITIONS PRECEDENT TO THE CLOSING 19
4.1 Conditions Precedent to Obligations of Citizens and Sub 19
-------------------------------------------------------
(a) No Misrepresentation or Breach of Covenants and Warranties 20
(b) Board and Shareholder Approval 20
(c) Regulatory Approvals 20
(d) Market Price 21
(e) Proceedings 21
(f) Opinion of Counsel 21
(g) Affiliates Agreement 21
(h) Registration Statement; Blue Sky Laws 21
(i) Consents 21
(j) Conversion/Redemption of Preferred Stock 21
(k) Certified Charter Documents 22
(l) Certified By-Laws 22
(m) Certificate of Good Standing 22
(n) Certificate of Incumbency 22
(o) Adverse Changes 22
(p) Dissenting Shareholders 22
(q) Resignation of Officers and Directors 22
(r) Trust Properties 22
(s) REA Consent 23
(t) Pooling Accounting 23
(u) Employee Matters 23
(v) Additional Documents 23
4.2 Conditions Precedent to Obligations of Ogden 23
--------------------------------------------
(a) No Misrepresentation or Breach of Covenants and Warranties 23
(b) Board and Shareholders Approval 23
(c) Delivery of Consideration 24
(d) Approval of Merger/Dissenters 24
(e) Regulatory Approvals 24
(f) Market Price 24
(g) Proceedings 24
(h) Opinion of Counsel 25
(i) Affiliates Agreement 25
(j) New York Stock Exchange Listing 25
(k) Disposition of Citizens A Stock 25
(l) Registration Statement; Blue Sky Laws 25
(m) Conversion/Redemption of Preferred Stock 25
(n) Tax Assurances 25
(o) Certified Charter Documents 26
(p) Certified By-Laws 26
(q) Certificates of Good Standing 26
(r) Certificates of Incumbency 26
(s) Additional Documents 26
(t) Employment Agreements 26
4.3 Mutual Conditions to Obligations of Ogden, Citizens and Sub 26
-----------------------------------------------------------
(a) HSR Waiting Period 26
ARTICLE V
THE CLOSING 27
5.1 Closing Date, Time and Place 27
----------------------------
5.2 Delivery of Documents by Ogden. 27
------------------------------
5.3 Deliver of Documents by Citizens 27
--------------------------------
ARTICLE VI
REPRESENTATIONS AND WARRANTIES 27
6.1 Representations and Warranties of Ogden 27
---------------------------------------
(a) Corporate Organization 27
(b) Authorization and Effect of Agreement 27
(c) Ogden Subsidiaries 28
(d) Capitalization of Ogden 29
(e) No Restrictions Against Merger 29
(f) Consents and Approvals of Governmental Authorities 29
(g) No Violation of Law 30
(h) Brokers 30
(i) Title to Property 30
(j) Tangible Assets 30
(k) Financial Statements 30
(l) No Adverse Change 31
(m) Contracts and Commitments 31
(n) No Material Claims 32
(o) Tax Matters 32
(p) Employee Matters 33
(q) Bank Accounts 36
(r) Dealings with Affiliates 36
(s) Absence of Undisclosed Liabilities 37
(t) Compliance with Applicable Laws, Regulations and Orders 37
(u) Insurance 37
(v) Intellectual Property 37
(w) Permits and Reports 38
(x) Environmental Matters 38
(y) Charter and Bylaws 39
(z) Access Lines 39
(aa) Price Caps 39
(bb) Rate Base 39
(cc) Tariffs 39
(dd) FCC Licenses 40
(ee) Non-FCC Authorizations 40
(ff) Capital Improvements Required by NYPSC 40
(gg) Condition of Tangible Assets 40
(hh) Materials and Supplies 41
(ii) Schedules of the Telephone Plant 41
(jj) Correct Records 41
(kk) Approval of Transactions 41
(ll) Accounts Receivable 41
(mm) Disclosure 41
(nn) Information Supplied 42
6.2 Representations and Warranties of Citizens 42
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(a) Organization, Standing and Power 42
(b) Authority and Effect of Agreement 42
(c) SEC Documents 43
(d) Capitalization of Sub 43
(e) Information Supplied 43
(f) Brokers 43
(g) Citizens A Stock 44
(h) Ogden Capital Stock. 44
(i) Stock Dividend Sale Plan. 44
(j) Approval of Transactions 44
(k) Disclosure 44
ARTICLE VII
ADDITIONAL COVENANTS 45
7.1 Sales and Similar Taxes 45
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7.2 Press Releases 45
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7.3 Expenses 45
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7.4 Filing of Financial and Other Information 45
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ARTICLE VIII
EMPLOYEE MATTERS 46
8.1 Ogden Transferred Employees 46
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8.2 Employee Benefit Plans 46
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ARTICLE IX
SURVIVAL AND TERMINATION OF REPRESENTATION AND WARRANTIES 49
9.1 Representations and Warranties of Citizens 49
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9.2 Termination of Ogden's Representations and Warranties 49
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ARTICLE X
TERMINATION 50
10.1 Termination Rights 50
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10.2 Effect of Termination 50
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ARTICLE XI
MISCELLANEOUS 51
11.1 Definitions 51
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11.2 Notices 56
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11.3 Successors and Assigns 57
----------------------
11.4 Amendments 57
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11.5 Captions 57
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11.6 Entire Agreement 57
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11.7 Certain Interpretive Matters and Definitions 58
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11.8 No Construction Against Draftsman 58
---------------------------------
11.9 Waiver 58
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11.10 Third Parties 58
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11.11 Counterparts 58
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11.12 Governing Law 58
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11.13 Further Assurances 59
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INDEX TO SCHEDULES 62
INDEX TO EXHIBITS 64
<PAGE>
AGREEMENT
AND
PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of the 3rd day of February, 1997 ("Execution Date"), by and
among CITIZENS UTILITIES COMPANY, a Delaware corporation ("Citizens"),
CITIZENS-OGDEN TELECOMMUNICATIONS COMPANY, a New York corporation ("Sub"), and
OGDEN TELEPHONE COMPANY, a New York corporation ("Ogden"). Citizens, Ogden and
Sub are each referred to individually as a "party" and collectively as the
"parties".
RECITALS
WHEREAS, Citizens intends to acquire all of the issued and outstanding
voting equity securities of Ogden through a merger (the "Merger") of Sub with
and into Ogden, in a tax free transaction pursuant to Sections 368(a)(1)(A) and
368(a)(2)(E) of the Internal Revenue Code of 1986 (the "Code"), as amended and
as more fully described in this Agreement; and
WHEREAS, the Boards of Directors of Citizens, Sub and Ogden have
approved this Agreement, and the Board of Directors of Ogden has directed that
this Agreement be submitted to the holders of Ogden's Common Stock (the "Ogden
Shareholders") for their approval; and
WHEREAS, certain shareholders of Ogden who collectively hold
approximately 76.13% of the outstanding shares of Ogden's Common Stock on the
Execution Date have entered into a Voting Agreement in the form attached hereto
as Exhibit A, dated as of the date of this Agreement, among Citizens, and the
Ogden Shareholders named therein (the "Voting Agreement"), pursuant to which
such shareholders have agreed to vote to adopt and approve this Agreement, the
Merger, and the other transactions contemplated by this Agreement.
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
ARTICLE I
THE TRANSACTION
1.1 Effective Time of the Merger. Subject to the provisions of this
Agreement, the Merger shall be consummated by the filing with the Secretary of
State of the State of New York, on the Closing Date (as hereafter defined), of a
Certificate of Merger, in substantially the form attached hereto as Exhibit B,
signed and attested in accordance with the relevant provisions of the New York
Business Corporation Law (the "BCL") (the time of such filing or such later time
and date as is specified in such filing being the "Effective Time").
1.2 Effects of the Merger. By virtue of the Merger and without the
necessity of any action by or on behalf of the Constituent Corporations (as
hereafter defined), or either of them:
(a) At the Effective Time, (i) the separate existence of Sub
shall cease and Sub shall be merged with and into Ogden (Sub and Ogden
are sometimes referred to herein as the "Constituent Corporations" and
Ogden is sometimes referred to herein as the "Surviving Corporation");
and (ii) the By-laws of Sub as in effect immediately prior to the
Effective Time shall be adopted as the By-laws of the Surviving
Corporation until thereafter amended; (iii) the Certificate of
Incorporation of Ogden immediately prior to the Effective Time shall be
the Certificate of Incorporation of the Surviving Corporation until
thereafter amended in accordance with law; (iv) the directors of Sub at
the Effective Time shall, from and after the Effective Time, be the
directors of the Surviving Corporation and shall hold office from the
Effective Time until their respective successors are duly elected or
appointed and qualified in the manner provided in the Certificate of
Incorporation and By-laws of the Surviving Corporation, or otherwise
provided by law; and (v) the officers of Sub at the Effective Time
shall, from and after the Effective Time, be the officers of the
Surviving Corporation and shall hold office from the Effective Time
until their respective successors are duly elected or appointed and
qualified in the manner provided in the Certificate of Incorporation and
By-Laws of the Surviving Corporation, or as otherwise provided by law.
(b) At and after the Effective Time, the Surviving Corporation
shall possess all the rights, privileges, powers and franchises of a
public and of a private nature, and be subject to all the restrictions,
disabilities and duties of each of the Constituent Corporations; and all
of the rights, privileges, powers and franchises of each of the
Constituent Corporations, and all property, real, personal and mixed,
and all debts due to either of the Constituent Corporations on whatever
account, as well for stock subscriptions, and all other things in action
or belonging to each of the Constituent Corporations shall be vested in
the Surviving Corporation; and all property, rights, privileges, powers
and franchises, and all and every other interest shall thereafter
effectually be the property of the Surviving Corporation as they were of
the respective Constituent Corporations, and the title to any real
estate vested, by deed or otherwise, in either of the Constituent
Corporations, shall not revert or be in any way impaired; but all rights
of creditors and all liens upon any property of either of the
Constituent Corporations shall be preserved unimpaired, and all debts,
liabilities and duties of the respective Constituent Corporations shall
thereafter attach to the Surviving Corporation, and may be enforced
against it to the same extent as if said debts and liabilities had been
incurred or contracted by it.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of any holder of shares of Ogden's
common stock, no par value per share (the "Ogden Common Stock"), or shares of
the capital stock of Sub:
(a) Cancellation of Treasury Stock and Citizens-Owned Stock.
All shares of Ogden Common Stock that are owned, as of the Effective
Time, by Ogden as treasury stock and all shares of Ogden Common Stock
owned, as of the Effective Time, by Citizens, Sub or any other
Subsidiary of Citizens, if any, shall be cancelled and retired and shall
cease to exist (collectively the "Cancelled Shares") and no stock of
Citizens or other consideration shall be delivered in exchange therefor.
As used in this Agreement, a "Subsidiary" (including with correlative
meaning, "Subsidiaries") of any person means any corporation,
partnership, joint venture, business trust or other legal entity more
than 50% of the outstanding voting stock of which is owned, directly or
indirectly, by such person, by one or more other Subsidiaries of such
person or by such person and one or more other Subsidiaries of such
person.
(b) Exchange Ratio for Ogden Common Stock. At the Effective Time,
subject to Section 2.2(e) hereof, each issued and outstanding share of
Ogden Common Stock (other than the Cancelled Shares), shall be converted
into the right to receive that number of fully paid, non-assessable
shares of Citizens Series A Common Stock (the "Citizens A Stock") equal
to (i) the quotient resulting from $23,000,000 (as adjusted pursuant to
Section 2.1(d) hereof, the "Merger Consideration") divided by the Market
Price (as hereinafter defined), divided by (ii) the number of shares of
Ogden Common Stock then outstanding, after giving effect to the
cancellation of the Cancelled Shares.
The "Market Price" means the average of the per share closing sale
prices of Citizens A Stock on the New York Stock Exchange ("NYSE") for a
period of fifteen trading days ending on the fifth day on which the NYSE
is open for trading immediately preceding the Effective Time. In the
event of any stock dividend (other than quarterly stock dividends paid
or declared in the ordinary course of business and consistent with past
practice), subdivision, reclassification, recapitalization, combination,
exchange of shares or the like affecting shares of Citizens A Stock
between the date on which the Market Price calculation commences and the
Effective Time, the number of shares of Citizens A Stock to be issued in
the Merger shall be appropriately adjusted so that each holder of Ogden
Common Stock shall receive in the Merger the number of shares of
Citizens A Stock such holder would have been entitled to receive if the
Effective Time had been immediately prior to such event. As of the
Effective Time, and except as otherwise provided in Section 2.1(c),
Ogden Common Stock shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and
each holder of a certificate representing any shares of Ogden Common
Stock shall cease to have any rights with respect thereto, except the
right to receive the number of shares of Citizens A Stock issuable
therefor upon the surrender of such certificate in accordance with
Section 2.2 hereof, without interest.
(c) Shares of Dissenting Holders. Any issued and outstanding
shares of Ogden Common Stock held by persons who object to the Merger
and comply with all provisions of the BCL concerning the right of such
holders to dissent from the Merger and demand appraisal of their shares
("Dissenting Holders") shall be deemed to be converted, as of the
Effective Time, into the right to receive the number of shares of
Citizens A Stock calculated in accordance with Section 2.1(b). The
shares of Citizens A Stock to be received by such Dissenting Holders
shall be heldback and not issued by Citizens until such time, and in any
event not prior to the Effective Time, that such Dissenting Holder has
withdrawn his demand for appraisal or lost his right of appraisal, in
either case pursuant to the BCL. After the Dissenting Holder has
withdrawn his demand for appraisal or lost his right of appraisal and
upon surrender, in the manner provided by Section 2.2(b) hereof, of the
certificate or certificates that formerly evidenced the shares of Ogden
Common Stock of the Dissenting Holder, such Dissenting Holder shall be
entitled to receive from Citizens the number of shares of Citizens A
Stock calculated in accordance with Section 2.1(b), without interest. If
any Dissenting Holder shall be entitled to receive payment of the fair
value of such shares held by them in accordance with BCL, such payment
shall be made by Citizens in full satisfaction of the Dissenting
Holder's right to receive the number of shares of Citizens A Stock
calculated in accordance with Section 2.1(b) and Citizens shall have no
obligation to issue to any of the holders of Ogden Common Stock the
shares of Citizens A Stock calculated in accordance with Section 2.1(b)
that were to be received by any Dissenting Holder who received payment
of the fair value of such shares held by such Dissenting Holders. Prior
to the Effective Time, Ogden shall give to Citizens notice of any
demands by Dissenting Holders and Citizens shall have the right to
participate in all negotiations and proceedings with respect to any such
demands. Ogden shall not, except with the prior written consent of
Citizens, voluntarily make any payment with respect to, or settle or
offer to settle, any such demand for payment.
(d) Adjustment of Merger Consideration.
(i) The following definitions apply to this Section
2.1(d):
"Ogden 12/31/95 Net Liabilities" means, with
respect to Ogden and the Ogden Subsidiaries as of December
31, 1995, that amount obtained by subtracting (x) the sum
of the current assets and the deferred pension expenses of
Ogden and the Ogden Subsidiaries on a consolidated basis
from (y) the sum of the current liabilities, the long term
debt and the employee benefits liabilities (other than the
accrued post-retirement benefit obligation) of Ogden and
the Ogden Subsidiaries as shown on the balance sheet on a
consolidated basis. The parties agree that the amount of
Ogden 12/31/95 Net Liabilities is $10,051,305, as
calculated pursuant to Schedule 2.1(d)(i).
"Ogden Net Liabilities" means, with respect to
Ogden and the Ogden Subsidiaries, that amount obtained by
subtracting (x) the sum of the current assets (after
adjustment to exclude (i) accounts receivable that are
more than 90 days past due and (ii) any other current
asset of Ogden and the Ogden Subsidiaries to the extent
the Surviving Corporation will not realize the full value
of such asset after the Closing Date) and the deferred
pension expenses of Ogden and the Ogden Subsidiaries on a
consolidated basis from (y) the sum of the current
liabilities, a reserve for potential tax liability (to the
extent not otherwise included in current liabilities) with
an account credit balance reasonably satisfactory to
Citizens and Ogden, the long term debt and the employee
benefits liabilities (other than the accrued
post-retirement benefit obligation) of Ogden and the Ogden
Subsidiaries on a consolidated basis as shown on the
balance sheet, in each case as of the Closing Date and
determined in accordance with GAAP. The parties agree that
the Ogden Net Liabilities shall be calculated without
giving effect to the transactions of the type described in
Schedule 2.1(d)(ii) or actions taken pursuant to written
requests made by or of Ogden or any Ogden Subsidiary and
signed by the Vice President and Treasurer of Citizens.
"Ogden Adjusted Net Liabilities" means, with
respect to Ogden and the Ogden Subsidiaries, that amount
obtained by either (x) subtracting from the Ogden Net
Liabilities the amount by which expended capital
expenditures described in Section 3.1(b)(ii) exceed
budgeted capital expenditures on a pro-rata basis, or (y)
adding to the Ogden Net Liabilities the amount by which
expended capital expenditures described in Section
3.1(b)(ii) are exceeded by budgeted capital expenditures
on a pro rata basis.
(ii) The Merger Consideration shall be decreased by an
amount equal to the amount by which the Ogden Adjusted Net
Liabilities is greater than $10,051,305, and shall be increased
by an amount equal to the amount by which the Ogden Adjusted Net
Liabilities is less than $10,051,305. The change to the Merger
Consideration is hereinafter referred to as the "Initial Merger
Consideration Adjustment," and the resulting amount is
hereinafter referred to as the "Initial Merger Consideration."
(iii) Ogden Adjusted Net Liabilities shall be estimated in
good faith by Ogden and set forth, together with a detailed
statement of the calculation thereof, in a certificate (the
"Initial Adjustment Certificate") to be delivered to Citizens not
later than five (5) business days prior to the Closing Date. The
Initial Adjustment Certificate shall constitute the basis on
which the Initial Merger Consideration shall be calculated.
(iv) On or before 90 days after the Closing Date, Citizens
shall deliver to the Ogden Shareholders Representative its
proposed final calculation of Ogden Adjusted Net Liabilities,
together with such supporting documentation as the Ogden
Shareholders Representative may reasonably request, in a
certificate (the "Final Adjustment Certificate"), which shall
evidence in reasonable detail the nature and extent of any
variances between the amounts estimated in the Initial Adjustment
Certificate and the amounts set forth in the Final Adjustment
Certificate. The Ogden Shareholders Representative shall review
the Final Adjustment Certificate and shall give written notice to
Citizens of any objections to the calculations shown in such
certificate within 10 days after its receipt thereof. If no
notice of such dispute is received by Citizens by such date,
Citizens and the Ogden Shareholders Representative shall be
deemed to have accepted the calculations shown on the Final
Adjustment Certificate. Citizens and the Ogden Shareholders
Representative shall endeavor in good faith to resolve any
objections within 30 days after the receipt by Citizens of such
objections. If all objections or disputes have not been resolved
at the end of such thirty-day period, the disputed portion shall
be determined within the following 45 days by a partner in a
major independent accounting firm that is mutually agreeable to
the parties and is not the auditor of Citizens or Ogden or an
Affiliate or former Affiliate of Citizens, Ogden, or the Ogden
Shareholders Representative (the "Qualified Auditor") and a
determination of such Qualified Auditor shall be final and
binding upon the parties. Citizens shall be solely responsible
for the expenses arising in connection with such determination by
the Qualified Auditor.
(v) At the Effective Time, Citizens, in accordance with
Section 2.2(a), shall be obligated to deposit with the Exchange
Agent for immediate distribution to Ogden Shareholders,
certificates representing that number of shares of Citizens A
Stock equal to 95% of the Initial Merger Consideration (the
"Gross Shares Distributable"), less that number of shares of
Citizens A Stock attributable to Dissenting Holders, with the
balance of shares of Citizens A Stock to be held back and not
distributed by Citizens (the "Heldback Shares") pending
determination of Final Merger Consideration (as hereinafter
defined).
(vi) If the final Merger Consideration calculated in
accordance with this Section 2.1(d) as set forth in the Final
Adjustment Certificate (as finalized by the parties or by the
Qualified Auditor) (the "Final Merger Consideration") is not
greater than or less than the Initial Merger Consideration by an
amount in excess of $100,000, then Citizens shall deposit with
the Exchange Agent, for the benefit of the holders of shares of
Ogden Common Stock, additional certificates representing all of
the Heldback Shares, less that number of shares of Citizens A
Stock attributable to Dissenting Holders. If the Final Merger
Consideration is greater than the Initial Merger Consideration by
an amount in excess of $100,000, then Citizens shall deposit with
the Exchange Agent, for the benefit of holders of Ogden Common
Stock, additional certificates representing all of the Heldback
Shares plus such number of additional shares of Citizens A Stock
equal to the number obtained by dividing the total amount of such
difference by the Market Price, less that number of shares of
Citizens A Stock attributable to Dissenting Holders. If the Final
Merger Consideration is less than the Initial Consideration by an
amount in excess of $100,000, then the number of Heldback Shares
shall be reduced by the number obtained by dividing the total
amount of such difference by the Market Price, and Citizens
promptly shall deposit with the Exchange Agent, for the benefit
of the holders of shares of Ogden Common Stock, additional
certificates representing such reduced number of the Heldback
Shares, less that number of shares of Citizens A Stock
attributable to Dissenting Holders. Following the deposit of
Heldback Shares (and additional shares, if any) by Citizens with
the Exchange Agent, the Exchange Agent shall promptly distribute
certificates representing such Heldback Shares to the former
Ogden Shareholders who received shares of Citizens A Stock
pursuant to Section 2.2(b) hereof. Citizens shall be released
from any further obligation to issue additional shares of
Citizens A Stock to the holders of Ogden Common Stock upon
Citizens full compliance with the foregoing requirements.
(vii) Schedule 2.1(d)(vii) sets forth, for illustrative
purposes only, hypothetical calculations of the necessary
adjustments to the Merger Consideration and the numbers of shares
of Citizens A Stock to be issued to the holders of Ogden Common
Stock upon Closing and upon determination of the Final Merger
Consideration and Dissenting Holders.
(e) Conversion of Sub Common Stock. Each of the one hundred (100)
shares of issued and outstanding shares of the common stock, no par
value of Sub, shall be converted into one share of the common stock of
the Surviving Corporation and shall constitute the only issued and
outstanding common shares of the Surviving Corporation.
2.2 Exchange of Certificates.
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(a) Exchange Agent. As soon as necessary and practicable to
permit the Exchange Agent to perform its obligations hereunder, but in
no event later than the Closing Date, Citizens shall deposit with
Illinois Stock Transfer Company or such other bank or trust company
agreed to by Citizens and Ogden (the "Exchange Agent"), for the benefit
of the Ogden Shareholders, for exchange in accordance with this
Article II, certificates representing the aggregate number of shares of
Citizens A Stock issuable, calculated in accordance with Sections 2.1(b)
and 2.1(d) hereof (such shares of Citizens A Stock, together with any
dividends or distributions with respect thereto, as so deposited, being
hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedures. As soon as reasonably practicable after
the Closing Date, the Exchange Agent shall mail to each holder of record
on the Record Date (as hereinafter defined) of a certificate or
certificates which immediately prior to the Closing Date represented
outstanding shares of Ogden Common Stock (the "Ogden Certificates")
whose shares were converted into the right to receive Citizens A Stock
pursuant to Section 2.1(b), (i)a letter of transmittal to be executed
by the holder (which shall specify that delivery of the Ogden
Certificates shall be effected, and risk of loss and title to the Ogden
Certificates shall pass, only upon delivery of the Ogden Certificates to
the Exchange Agent and which shall be in such form and have such other
provisions as Citizens and Ogden may reasonably specify) and (ii)
instructions for surrender of the Ogden Certificates in exchange for
certificates representing shares of Citizens A Stock. The "Record Date"
shall be the Record Date established by the Board of Directors of Ogden,
with respect to the Special Meeting of Stockholders called to approve
the Merger. Upon surrender to the Exchange Agent of an Ogden Certificate
for cancellation, together with such letter of transmittal, duly
executed by the holder, the holder of such Ogden Certificate shall be
entitled to receive in exchange therefor a certificate or certificates
representing the number of shares of Citizens A Stock which such holder
has the right to receive pursuant to Section 2.1(b), (together with any
cash payable in lieu of any fractional share of Citizens A Stock in
accordance with Section 2.2(e)), and the Ogden Certificate so
surrendered shall forthwith be canceled. Citizens shall pay any transfer
or other taxes required by reason of the issuance of a certificate
representing shares of Citizens A Stock; provided that such certificate
is issued in the name of the Person in whose name the Ogden Certificate
surrendered in exchange therefor is registered (or such other Person
designated by the Person in whose name the Ogden Certificate surrendered
in exchange therefor is registered); and provided, further, that
Citizens shall not pay any transfer or other tax if the obligation to
pay such tax under applicable law is solely that of the stockholder or
if payment of any such tax by Citizens otherwise would cause the Merger
to fail to qualify as a tax free reorganization under the Code. In the
event a transfer of ownership of Ogden Common Stock has not been
registered in the transfer records of Ogden, certificates representing
the proper amount of shares of Citizens A Stock may be issued to a
transferee if the Ogden Certificate representing such Ogden Common Stock
is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. In the case of any lost,
mislaid, stolen or destroyed Ogden Certificate, the holder thereof may
be required, as a condition precedent to the delivery to such holder of
Certificates representing Citizens A Stock, to deliver to Citizens an
affidavit and personal indemnity (or a bond in a reasonably sufficient
amount) with reference to the circumstances of such loss or destruction
as Citizens may reasonably request. Until surrendered as contemplated by
this Section 2.2, each Ogden Certificate shall be deemed at any time
after the Closing Date to represent only the right to receive upon such
surrender the number of shares of Citizens A Stock and cash in lieu of
any fractional shares of Citizens Common Stock as contemplated by this
Section 2.2.
(c) Distributions with Respect to Citizens A Stock. Subject to
the effect of applicable Laws and following surrender of an Ogden
Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Citizens A Stock issued in
exchange therefor, (i)at the time of such surrender, the amount of any
dividends or other distributions with a record date after the Closing
Date theretofore paid with respect to such whole shares of Citizens A
Stock, without interest, and (ii)at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Closing Date but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of Citizens A Stock,
without interest.
(d) No Further Ownership Rights in Ogden Common Stock. All shares
of Citizens A Stock issued upon the surrender for exchange of shares of
Ogden Common Stock in accordance with the terms hereof (including any
cash paid pursuant to Section 2.2(c) or Section 2.2(e) hereof) shall be
deemed to have been issued in full satisfaction of all rights pertaining
to such shares of Ogden Common Stock, and there shall be no further
registration of transfers of shares of Ogden Common Stock after the
Closing Date. If, after the Closing Date, Ogden Certificates are
presented to the Surviving Corporation or its transfer agent for any
reason, such Ogden Certificates shall be cancelled and exchanged as
provided in this Article II.
(e) No Fractional Shares. No fractional shares of Citizens A
Stock shall be issued in the Merger. Each holder of Ogden Common Stock
shall be entitled to receive in lieu of any fractional share of Citizens
A Stock to which such holder otherwise would have been entitled pursuant
to Sections 2.1(b) and 2.1(d) hereof (after taking into account all
shares of Ogden Common Stock then held of record by such holder) cash
payable by check in lieu of any such fractional share of Citizens A
Stock computed on the basis of the Market Price. Citizens shall deliver
to the Exchange Agent cash in an amount sufficient to make the payments
in lieu of fractional shares as described above.
(f) Termination of Exchange Fund. Provided that there remains no
dispute between the parties regarding Heldback Shares, any portion of
the Exchange Fund which remains undistributed to holders of Ogden
Certificates at the end of six months after the Closing Date shall be
delivered to Citizens upon demand by Citizens, and any holders of Ogden
Certificates who have not theretofore complied with this Article II
shall thereafter look only to Citizens for payment of their claim for
Citizens A Stock, any cash in lieu of fractional shares of Citizens A
Stock and any dividends or distributions with respect to Citizens A
Stock.
(g) No Liability. None of Citizens, Sub or Ogden shall be liable
to any holder of shares of Ogden Common Stock or Citizens A Stock, as
the case may be, for shares of Citizens A Stock (and (i) dividends or
distributions thereon (ii) or cash payable with respect to fractional
shares thereof) delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
ARTICLE III
COVENANTS PENDING COMPLETION OF MERGER
3.1 Ogden's Pre-Closing Covenants. Ogden covenants and agrees that from
------------------------------
the Execution Date to and including the Effective Time, unless Citizens provides
its prior agreement to the contrary in writing:
(a) Access to Ogden by Citizens. Prior to the Closing, upon
reasonable notice from Citizens to Ogden given in accordance with this
Agreement and subject to approval by Ogden (which approval shall not be
unreasonably withheld), Ogden will afford to the authorized
representatives of Citizens reasonable access during normal business
hours to the books and records and personal and real property of Ogden
and the Ogden Subsidiaries. Citizens will be permitted to make extracts
from or copies of such books and records as may be reasonably necessary.
With the consent of Ogden (which consent will not be unreasonably
withheld), Citizens and its representatives shall have access to all
interexchange carriers having business relationships with Ogden and the
Ogden Subsidiaries, to all customers of Ogden and the Ogden
Subsidiaries, and to all officers, employees and agents of Ogden and the
Ogden Subsidiaries having knowledge or information concerning the
operations of Ogden and the Ogden Subsidiaries so as to afford Citizens
the opportunity to make such review, examination and investigation of
Ogden and the Ogden Subsidiaries and the Business, and to enable
Citizens to assimilate Ogden, the Ogden Subsidiaries and the Business
into Citizens' operations as soon as practicable after the Effective
Time. Notwithstanding the foregoing, no information learned as a result
of such examination and investigation shall constitute a failure of a
condition precedent to Citizens' and Sub's obligations hereunder unless
such information constitutes a failure of a condition as set forth in
Section 4.1 of this Agreement. To the extent it so desires, Ogden may
accompany Citizens on all of Citizens' access to interexchange carriers,
customers and agents of Ogden or any Ogden Subsidiary undertaken
pursuant to this Section 3.1(a). Citizens will be permitted to make
extracts from or copies of such books and records as may be reasonably
necessary. Citizens will not contact any employee, customer or supplier
of Ogden as to this Agreement or the matters involved herein except in
accordance with this Section 3.1(a). Ogden will promptly furnish such
financial and operating data and other information pertaining to the
business of Ogden and the Ogden Subsidiaries as Citizens may reasonably
request; provided, however, that nothing herein will obligate Ogden to
take actions that would unreasonably disrupt the normal course of the
business of Ogden or violate the terms of any applicable Law or any
Contract to which Ogden or any of its Subsidiaries or their respective
Affiliates is a party or to which Ogden or any of its assets is subject.
Notwithstanding the foregoing, Ogden shall, at Citizens reasonable
request, seek waivers of provisions in any Contract which would have the
effect of prohibiting Citizens from exercising the rights described in
this Section 3.1(a), provided that any extraordinary expenses of
obtaining such waivers shall be borne equally by Ogden and by Citizens.
Any information or document provided to Citizens or acquired by Citizens
during this investigation shall be deemed to be "Information", as
defined in and subject in all cases to the terms of the Confidentiality
Agreement.
(b) Operation of the Business. Except as contemplated by this
Agreement, Ogden will, and will cause each Ogden Subsidiary to:
(i) Operate the Business diligently and in good faith,
consistent with past management practices; maintain all of its
properties in customary repair, order and condition; maintain in
the ordinary course of business Contracts in effect without any
change except as expressly provided herein; comply with the
provisions of all regulations, orders and permits applicable to
Ogden, the Ogden Subsidiaries and the conduct of the Business;
and comply, without modification, with all Contracts and manage
receivables and liabilities consistent with past management
practices.
(ii) (a) Make substantially all of the capital
expenditures set forth in Ogden's capital budget for fiscal years
1996 and 1997 (the "Capital Budget"), it being understood and
agreed that to the extent Ogden's appropriate fiscal year capital
expenditures made up to the Closing Date (exclusive of any
capital expenditures related to any casualty loss or damage that
are not specifically included in the Capital Budget) are more or
less than the portion of the capital expenditures budgeted for
such fiscal year in the Capital Budget that should have been
expended had such budgeted capital expenditures been made on a
pro-rata basis throughout such fiscal year, then the Merger
Consideration will be adjusted upwards or downwards, as
appropriate, on a dollar-for-dollar basis equal to such excess or
deficiency (subject to the adjustment limitation set forth in
Section 2.1(d)(vi)); or (b)not make any capital expenditure or
commitment therefor in excess of $25,000 for any unbudgeted
project or matter or in excess of $100,000 for any budgeted
project or matter without first notifying and consulting with
Citizens and taking into account any reasonable requests made by
Citizens with respect thereto.
(iii) Not increase the benefits provided under any plans
concerning employee benefits, increase the general rates of
compensation of its employees, or hire any employees, except (a)
as required by Law, or (b) in the ordinary course of business.
(iv) Not amend its Certificate of Incorporation or Bylaws.
(v) Not acquire or agree to acquire by merging or
consolidating with or into, purchasing substantially all of the
assets or stock of, or otherwise, any corporation, partnership or
other business organization.
(vi) Maintain all corporate records, including its minute
book, financial and accounting records, in the ordinary course of
business.
(vii) Maintain current its insurance policies with the
coverage and in the amounts set forth in Schedule 6.1(u).
(viii) Promptly notify Citizens of any action, written
claim, complaint, lawsuit, written demand, suit, notice of a
violation, litigation, proceeding, arbitration or other dispute
noticed in writing, whether civil, criminal, administrative or
otherwise, by any Governmental Authority or Person.
(ix) Except for the conversion and redemption of Ogden
Convertible Preferred Stock and Ogden Preferred Stock described
in Section 3.1(h) hereof, not issue, sell, purchase or redeem any
shares of its capital stock of any class or issue, or sell any
securities convertible into, or options, warrants or other rights
to subscribe for, any such shares.
(x) Not pledge or otherwise encumber any shares of the
capital stock of any Ogden Subsidiary.
(xi) Except for dividends normally declared and paid on
the Ogden Common Stock, the Ogden Preferred Stock and the Ogden
Convertible Preferred Stock, not declare, pay or set aside for
payment any dividend or other distribution in respect of its
capital stock.
(xii) Supply Citizens with a copy of Ogden's internal
unaudited monthly financial statements promptly after they become
available and audited 1996 financial statements no later than
April 1, 1997.
(xiii) Not incur, assume or guarantee any indebtedness or
obligation not reflected in the Financial Statements, or increase
or decrease the indebtedness of Ogden or any of its Affiliates,
except for up to $1,500,000 in short term borrowings not to
exceed $100,000 per occurrence under existing borrowing
facilities or in the ordinary course of business, or in
connection with redemptions of shares occurring pursuant to
Section 3.1(h) hereof.
(xiv) Not make any tax election or settle or compromise
any federal, state, local, or foreign tax liability material to
Ogden or any of the Ogden Subsidiaries.
(xv) Not pay, discharge, or satisfy any claims,
liabilities, or obligations (whether accrued, absolute,
contingent, unliquidated, or otherwise, and whether asserted or
unasserted), other than the payment, discharge, or satisfaction
in the ordinary course of business consistent with past practice,
or in accordance with their terms, of (a) liabilities reflected
or reserved against in the Financial Statements or (b) incurred
since December 31, 1995 in the ordinary course of business
consistent with past practice; provided, however, that in no
event shall it repay any long-term indebtedness except to the
extent required by the terms thereof.
(xvi) Not enter into any Contract, commitment,
arrangement, or transaction outside the ordinary course of its
business consistent with past practice.
(xvii) Not amend, modify, or change in any material
respect any existing Contract, other than in the ordinary course
of its business consistent with past practice.
(xviii) Not waive, release, grant, or transfer any rights
of value, other than in the ordinary course of its business
consistent with past practice.
(xix) Not change any of its banking or safe deposit
arrangements other than in the ordinary course of its business
consistent with past practice.
(xx) Not change any of the accounting principles or
practices used by it, except for any change required by reason of
a concurrent change in GAAP and notice of which is given in
writing to Citizens.
(xxi) Not take any action or fail to take any action that
would make any of the representations or warranties of Ogden
contained in this Agreement untrue or inaccurate at any time from
the date of this Agreement or would result in any of the
conditions set forth in this Agreement not being satisfied.
(xxii) Not make any commitment to take any actions
prohibited by the provisions of this Section 3.1.
(c) Satisfaction of Conditions; Cooperation. Ogden will use its
commercially reasonable efforts to satisfy promptly all conditions
required to be satisfied prior to the Closing, provided however, that
this provision shall not require Ogden to waive any condition to its
obligations hereunder. Ogden will cooperate with Citizens in providing
any required notices to any appropriate Governmental Authority regarding
any issues of ownership or control or change thereof (including, without
limitation, any such issues relating to Permits).
(d) Approval of Merger. Assuming NYPSC approval of the
transactions contemplated by this Agreement has been obtained, Ogden
shall cause a special meeting of its shareholders to be held as soon as
practicable following June 30, 1997 for the purpose of approving and
adopting this Agreement, and all actions contemplated hereby which
require the approval of such shareholders. Ogden will, through its Board
of Directors, recommend to its shareholders approval of the transactions
contemplated by this Agreement, provided such recommendation is
consistent with the fiduciary duties of such Board of Directors. Ogden
shall use commercially reasonable efforts to secure the vote of its
shareholders required by Law and Ogden's Certificate of Incorporation to
effect such transactions. Through the Voting Agreement, the Ogden
Shareholders parties thereto who collectively hold approximately 76.13%
of the outstanding voting shares of Ogden Common Stock on the Execution
Date have agreed to vote, or cause to be voted, all of the shares of
Ogden Common Stock owned by such shareholders in favor of this
Agreement, the Merger and the other transactions contemplated by this
Agreement.
(e) Notification as to Certain Matters. Ogden will promptly
notify Citizens of any information of which it becomes aware on or
before the Closing Date that would cause any representation or warranty
of Ogden contained in this Agreement not to be true and correct as of
the date on which it was made or as of the Closing Date.
(f) Securities Laws. Ogden will take all reasonable action
requested by Citizens to permit the Merger and other transactions
contemplated herein to be consummated without violating the securities
laws of the United States or of any State or Commonwealth and, in
connection therewith, will use its commercially reasonable efforts to
cause to be delivered to Citizens, prior to the Effective Date, an
Affiliates Agreement, in substantially the form annexed hereto as
Exhibit C (the "Affiliates Agreement"), from each holder of Ogden's
Common Stock who could be deemed to be an "affiliate" of Ogden within
the meaning of Rule 145 under the Act.
Ogden shall prepare and deliver to Citizens, no less than
15 days prior to the Effective Time, a list designating all persons
which, in Ogden's opinion, with the advice of counsel, may be deemed to
be an "affiliate" of Ogden within the meaning of Rule 145 under the Act.
For the purposes of this Agreement, each such person shall be deemed an
"affiliate" of Ogden subject to execution and delivery of the Affiliates
Agreement.
(g) Delivery of Shareholder Lists. Ogden has heretofore delivered
to Citizens a true and complete list setting forth the identity of its
common shareholders, their addresses of record and their holdings of
Ogden Common Stock. Prior to the Effective Time, and concurrently with
the delivery of the Initial Adjustment Certificate, Ogden will deliver
an updated list which will also set forth the total amount of Citizens A
Stock which will be issuable to each such shareholder as a result of the
Merger, and such other information as Citizens may reasonably request.
In making the exchange of certificates provided for in Article II of
this Agreement, Citizens may rely on such updated list of shareholders.
(h) Conversion/Redemption of Convertible Preferred Stock and
Preferred Stock. Assuming NYPSC approval of the transactions
contemplated by this Agreement has been obtained, or if the parties
otherwise agree that such approval is forthcoming, Ogden shall send a
notice of redemption to all holders of shares of Ogden's 7% preferred
stock (the "Ogden Preferred Stock") and Ogden's 8% convertible preferred
stock (the "Ogden Convertible Preferred Stock") on or prior to June 1,
1997 stating that all issued and outstanding shares of Ogden Preferred
Stock and Ogden Convertible Preferred Stock shall be redeemed or
converted in accordance with their terms on June 30, 1997. If such
notices of redemption are sent by Ogden on or prior to June 1, 1997,
then on or about June 30, 1997, Ogden shall (i) complete the redemption
of all of the issued and outstanding shares of Ogden Preferred Stock and
(ii) complete the redemption (or conversion to Ogden Common Stock for
shareholders of Ogden Convertible Preferred Stock so electing at any
time prior to June 20, 1997) of all of the issued and outstanding shares
of Ogden Convertible Preferred Stock so that only Ogden Common Stock is
outstanding as of July 1, 1997 and as of the Closing Date. If such
notices of redemption have not been sent by Ogden on or prior to June 1,
1997, and assuming that NYPSC approval of the transactions contemplated
by this Agreement has been obtained on or prior to December 1, 1997, or
if the parties otherwise agree that such approval is forthcoming, Ogden
shall send such notices of redemption on or prior to December 1, 1997,
stating that all issued and outstanding shares of Ogden Preferred Stock
and Ogden Convertible Preferred Stock shall be redeemed or converted in
accordance with their terms on December 30, 1997, in which event Ogden
shall: (i) complete the redemption of all of the issued and outstanding
shares of Ogden Preferred Stock and (ii) complete the redemption (or
conversion to Ogden Common Stock for shareholders of Ogden Convertible
Preferred Stock so electing at any time prior to December 20, 1997) of
all of the issued and outstanding shares of Ogden Convertible Preferred
Stock so that only Ogden Common Stock is outstanding as of December 31,
1997 and as of the Closing Date.
(i) Initial Adjustment Certificate. No less than five business
days prior to the Closing Date, Ogden shall furnish Citizens with an
Initial Adjustment Certificate prepared by Ogden in good faith.
(j) Amendment of Schedules. Ogden shall have the continuing
obligation until the Closing to supplement or amend promptly the
Schedules hereto with respect to any matter hereafter arising or
discovered which, if existing and known at the date of this Agreement,
would have been required to be set forth or described in the Schedules.
(k) NYPSC/FCC Filings. Ogden shall make all ordinary course of
business filings as may be necessary with the NYPSC, FCC or any other
Governmental Authority between the date of this Agreement and the
Closing Date. Ogden shall discuss with Citizens, and shall obtain
Citizens' prior approval (not to be unreasonably withheld) for any
proposed changes in the rates, charges, standards of service or
accounting of their respective businesses from those in effect on the
date of this Agreement prior to making any filing with the NYPSC, FCC or
any other Governmental Authority (or any amendment thereto), or
effecting with any Governmental Authority any agreement, commitment,
arrangement or consent, whether written or oral, formal or informal,
with respect thereto. Between the date of this Agreement and the Closing
Date, Ogden shall discuss with Citizens and shall obtain Citizens' prior
approval (not to be unreasonably withheld) before Ogden files any
application, petition, motion, brief, testimony, settlement agreement or
other pleading in any proceeding before the NYPSC, FCC or any other
Governmental Authority or appeals related thereto with respect to which
Citizens or an Affiliate of Citizens has or reasonably could be expected
to take a contrary position that reasonably could be expected to have an
adverse effect on the revenue, earnings, or business of Citizens.
(l) No Solicitation. Neither Ogden nor any of its officers,
directors, representatives, or agents shall, directly or indirectly,
knowingly encourage, solicit or initiate any discussion or negotiations
with, or knowingly provide any confidential information to, any Person
or group (other than Citizens or any Affiliate or associate of Citizens
and their respective directors, officers, employees, representatives,
and agents) concerning any merger of Ogden, the sale of Ogden's capital
stock or assets (other than sales of assets in the ordinary course of
business), or any similar transaction involving Ogden; provided,
however, that nothing contained in this Section 3.1(l) shall prohibit
the Board of Directors of Ogden from (i) making any disclosure to the
Ogden shareholders that, in the judgment of the Board of Directors of
Ogden, with the written advice of outside counsel, may be required under
applicable law, or (ii) responding to any unsolicited proposal or
inquiry and negotiating with the Person making such proposal or inquiry
if (a) such Person has made an offer to purchase or acquire Ogden's
assets or shares under circumstances not constituting a breach of the
foregoing provisions, (b)Ogden's Board of Directors reasonably believes
that such Person has the financial ability to consummate such an offer
and such offer would yield a higher aggregate value to Ogden's
shareholders than will the transactions contemplated by this Agreement,
and (c) Ogden's Board of Directors determines in good faith that there
is a significant risk that failure to negotiate with such Person would
constitute a breach of its fiduciary duties to Ogden's shareholders.
Ogden will promptly communicate to Citizens the fact that it has
received any proposal or inquiry in respect of any such transaction and
of any such information requested from it or of any such negotiations or
discussions being sought to be initiated with Ogden.
(m) Long Term Debt. With respect to Ogden's long-term
indebtedness (the "Long Term Indebtedness") either made or guaranteed by
the Rural Electrification Association (the "REA"), where required by the
underlying debt instruments, as soon as practicable after the date of
this Agreement, Ogden and Citizens shall cooperate with each other and
shall contact the REA to request, and use their commercially reasonable
efforts to obtain, the REA's consent ("REA Consent") to the transfer of
control of Ogden and any other consents required to avoid the occurrence
of any event of default under any Long Term Indebtedness upon the
consummation of the Merger. Ogden and Citizens acknowledge that all Long
Term Indebtedness for which REA Consent has been obtained before the
Closing Date and all other Long Term Indebtedness for which REA Consent
is not required shall remain outstanding immediately after the Closing
Date. Each party shall bear their own costs and expenses in obtaining
such REA Consent.
(n) Pooling Accounting. Neither Ogden nor any Ogden Subsidiary
will take any action of the type described on Schedule 3.1(n), unless
such action is specifically contemplated pursuant to this Agreement,
without the prior approval of Citizens, which shall not be withheld
unless such action would reasonably be expected to preclude Citizens
from accounting for the Merger as a pooling of interests. If pooling
accounting treatment is available to Citizens, Ogden will cause the
Affiliates Agreement to contain language stating that the "affiliates"
of Ogden will not transfer shares of Citizens A Stock prior to the date
Citizens first publishes consolidated financial statements which reflect
at least 30 days of combined operations of Citizens and Ogden.
(o) No Purchase of Citizens Common Stock. During the fifteen day
trading period ending on the fifth day on which the NYSE is open for
trading immediately preceding the Effective Time, Ogden and its
Affiliates will not purchase or sell any shares of Citizens A Stock, or
any other shares of Citizens common stock, in the open market or through
negotiated purchases.
3.2 Citizens' and Sub's Pre-Closing Covenants. Citizens and Sub covenant
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and agree, jointly and severally, that from the Execution Date to and including
the Closing Date, unless Ogden provides its contrary agreement in writing:
(a) Citizens as Sole Shareholder of Sub; Approval of Merger.
Citizens will continue to be the sole shareholder of Sub and shall
maintain the capitalization set forth in Section 6.2(d) and, as soon as
practicable following execution of this Agreement, will adopt and
approve by written consent, as the sole shareholder of Sub, this
Agreement and all actions contemplated hereby which require approval of
shareholders.
(b) Blue Sky Filings. Citizens will make all necessary Blue Sky
filings and obtain all authorizations required to carry out the
transactions contemplated by this Agreement.
(c) Filings. With cooperation of Ogden to provide all requested
information, Citizens shall be responsible for making, and assumes the
economic burden of, the filings and authorizations or regulatory
approvals required in connection with the execution, delivery, and
performance of this Agreement including, but not limited to, approval of
the NYPSC, the Department of State of the State of New York, the New
York State Department of Taxation and Finance, the SEC and the
securities commissions of necessary states of the United States.
(d) Satisfaction of Conditions; Cooperation. Citizens and Sub
will use their commercially reasonable efforts to satisfy promptly all
conditions required to be satisfied prior to the Closing, provided
however, that this provision shall not require Citizens or Sub to waive
any condition to their obligations hereunder. Citizens and Sub will
cooperate with Ogden in providing any required notices to the
appropriate Governmental Authorities regarding any issues of ownership
or control or change thereof (including, without limitation, any such
issues relating to the Permits).
(e) Notification as to Certain Matters. Citizens will promptly
notify Ogden of any information of which it becomes aware on or before
the Closing Date that would cause any representation or warranty of
Citizens contained in this Agreement not to be true and correct as of
the date on which it was made or as of the Closing Date.
3.3 Mutual Pre-Closing Covenants. Each party to this Agreement covenants
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and agrees that from the Execution Date to and including the Closing Date,
unless the other parties provide their contrary agreement in writing:
(a) Confidentiality. Each party acknowledges and agrees that the
Confidentiality Agreement remains in full force and effect with respect
to all Information (as that term is defined in the Confidentiality
Agreement).
(b) Hart-Scott-Rodino Filing. As soon as practicable following
the Execution Date, Citizens and Ogden shall each file Notification and
Report Forms under the HSR Act with the Federal Trade Commission and the
Antitrust Division of the Department of Justice. The filing fee
associated with such filing shall be paid in its entirety by Citizens.
(c) Further Assurances. Subject to the terms and conditions of
this Agreement, each party hereto agrees to use its commercially
reasonable efforts to take, or cause to be taken, all action, and to do,
or cause to be done, all things necessary, proper or advisable under
applicable Laws, to consummate and make effective the transactions
contemplated by the Merger and this Agreement, including but not limited
to, using its commercially reasonable efforts to obtain all necessary
waivers, consents, authorizations and approvals of or exemptions by any
Governmental Authority or Person, and effecting all necessary
registrations and filings.
(d) Application to the New York Public Service Commission and
Related Expenses. As soon as practicable following the Execution Date,
Citizens and Ogden shall apply to the New York State Public Service
Commission ("NYPSC") requesting its approval of and authorization to
effect the transactions contemplated by this Agreement. Ogden, Citizens
and Sub shall cooperate with each other and shall take such actions as
are necessary and proper to obtain expeditious, favorable action by the
NYPSC. Citizens or Sub shall make all filings and bear all NYPSC fees
charged in connection with the filing and processing of the application.
(e) Meeting of Ogden's Shareholder, Proxy Materials. Ogden
covenants that, subject to the timely preparation of the Proxy Materials
(as hereinafter defined), it will, as soon as practicable following June
30, 1997 (but in any event after the receipt of approval of the
transaction by the NYPSC and after the Registration Statement has been
declared effective by the SEC and following conversion and redemption of
the Ogden Convertible Preferred Stock and Ogden Preferred Stock) or at
such other time as may be agreed upon by Ogden and Citizens, call and
hold a meeting of Ogden's shareholders for the purpose of approving this
Agreement.
Citizens and Ogden contemplate that a registration
statement on Form S-4 (the "Registration Statement") will be filed with
the SEC under the Act for the registration of the Citizens A Stock to be
issued to the holders of Ogden Common Stock in connection with the
Merger. Citizens and Ogden shall cooperate with each other in the
preparation of the Registration Statement and the related
prospectus/proxy statement forming a part of the Registration Statement,
to be mailed to shareholders of Ogden in connection with the meeting of
shareholders referred to above (the Registration Statement and the
prospectus/proxy statement for primary distributions are hereinafter
referred to, collectively, as the "Proxy Materials"), and any related
filings as shall be necessary under the securities laws of any state.
Citizens covenants to prepare and file the Registration Statement as
soon as practicable after both Citizens and Ogden have become reasonably
satisfied that all Regulatory Approvals are forthcoming (provided
however, the Citizens shall not be obligated to file the Registration
Statement prior to the time it has filed its Form 10-K for the year
ended December 31, 1996) and to use its commercially reasonable efforts
to cause it to become effective as soon thereafter as possible.
Citizens and Ogden will furnish all information relating
to Citizens or Ogden, as the case may be, necessary or desirable in
order to prepare the Proxy Materials. Citizens shall indemnify Ogden and
its directors, officers, agents and attorneys against any liability,
damage, cost, loss or expense to them or any of them arising out of any
untrue statement or alleged untrue statement of a material fact
furnished, or caused by any omission or alleged omission to furnish a
material fact concerning Citizens which is required to be stated therein
or which is necessary to make the statements furnished by Citizens not
misleading in light of the circumstances in which they are made; and
Ogden shall indemnify Citizens, and its directors, officers, agents and
attorneys against any liability, damage, cost, loss or expense to them
or any of them arising out of any untrue statement or alleged untrue
statement or alleged untrue statement of a material fact furnished, or
caused by any omission or alleged omission to furnish a material fact
concerning Ogden which is required to be stated therein or which is
necessary to make the statements furnished by Ogden not misleading in
light of the circumstances in which they are made; provided, however,
that no such party shall have any obligation of indemnification with
respect to any such liability, damage, cost, loss or expense unless
(A)Eprompt written notice is given to such party of the making of any
claim and the commencement of any suit, action or proceeding from which
any such liability, damage, loss, cost or expense may arise, and (B)
such indemnifying party is permitted at its own expense to participate
in the defense of such claim, suit, action or proceeding through
attorneys of its own choosing, or if it so elects, to assume the defense
thereof, with counsel who shall be satisfactory to the indemnified party
who is the defendant in such action, and upon notice from the
indemnifying party to the indemnified party of its election to assume
the defense thereof and the retaining of such counsel, the indemnifying
party shall not be liable to the indemnified party for any legal or
other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation.
Citizens will advise Ogden, promptly after it receives
notice thereof, of (i)the time when the Registration Statement has
become effective or any supplement or amendment has been filed, (ii) the
issuance of any stop order by the SEC or by any securities regulatory
commission of any state, (iii)the suspension of the qualification of
Citizens A Stock which is issuable in connection with the Merger for
offering and sale in any jurisdiction, or the initiation or threat of
any proceeding for any such purpose, or (iv)any request by the SEC or
any state commission for the amendment or supplement of the Registration
Statement or for additional information.
Ogden shall not transmit the Proxy Materials to its
shareholders until the following conditions have been satisfied:
(i) The Registration Statement has been declared effective
by the SEC.
(ii) Citizens and Ogden shall each have received from
their respective accountants, a letter (in the case of Citizens,
prepared in accordance with past practice for the underwriting of
the sale of securities) dated the date of the Proxy Materials
with respect to the compliance with the Act of those financial
statements contained in the Proxy Materials to which their
respective opinions pertain and with respect to changes in the
respective financial conditions of Citizens and Ogden since the
date of those financial statements.
ARTICLE IV
CONDITIONS PRECEDENT TO THE CLOSING
4.1 Conditions Precedent to Obligations of Citizens and Sub. The
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obligations of Citizens and Sub to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction, at or prior to the Closing,
of each of the following conditions, any one or more of which may be waived at
the option of Citizens and Sub:
(a) No Misrepresentation or Breach of Covenants and Warranties.
There shall have been no material breach by Ogden of any of its
covenants to be performed in whole or in part prior to the Closing, and
the representations and warranties of Ogden in Section 6.1 hereof shall
be true and correct as of the Closing in all material respects as if
made again as of the Closing Date, except for such representations or
warranties that are made expressly as of some other date, which shall be
true and correct in all material respects as of such other date; and
Ogden shall have delivered to Citizens a certificate dated the Closing
Date and signed by its President and Secretary, in form reasonably
satisfactory to Citizens, certifying each of the foregoing, or
specifying those respects in which such covenants have not been
performed in all material respects or in which such representations and
warranties are not true and correct in all material respects (in which
event, if the Closing occurs, any claim with respect to matters so
specified shall be waived by Citizens). Citizens agrees and acknowledges
that any further federal or state regulation or deregulation, or any
changes in Laws applicable to federal or state regulation of the
Business occurring between the Execution Date and the Closing Date, even
if such changes have or are reasonably expected to have a negative
effect on the Business and its results of operations, shall not
constitute a breach of the representations and warranties contained in
Section 6.1(l) or any other Section and shall not constitute a failure
of a condition precedent to Citizens' and Sub's obligations hereunder;
(b) Board and Shareholder Approval. Ogden shall have delivered to
Citizens the following documents, in form and substance reasonably
acceptable to Citizens and its counsel:
(i) A certified copy of the resolutions adopted by Ogden's
Board of Directors approving of this Agreement, the Merger and
all transactions contemplated by this Agreement; and
(ii) A certified copy of the resolutions adopted by the
holders of Ogden Common Shares holding, in the aggregate, no
fewer than 2/3 of the voting power of such shares, approving of
this Agreement, the Merger and all transactions contemplated by
this Agreement.
(c) Regulatory Approvals. All required Regulatory Approvals shall
have been obtained free of any special terms, conditions or restrictions
which Citizens determines, in good faith and following consultation with
Ogden, will materially and adversely affect the actual, prospective
operational and financial benefits to Citizens of the transactions
contemplated by this Agreement. For purposes of this Agreement, all such
approvals and consents shall be deemed to have been obtained after the
grant thereof has become final, non-appealable and not subject to
reconsideration. In addition there shall not have been entered a
preliminary or permanent injunction, temporary restraining order or
other judicial or administrative order or decree in any jurisdiction,
the effect of which prohibits the Closing.
(d) Market Price. The Market Price of Citizens A Stock shall not
be less than $2 below the average closing sales price during the 15 day
trading period ending 5 trading days before Execution Date nor greater
than $2 above the average closing sales price during the 15 trading day
period ending 5 days before the Execution Date.
(e) Proceedings. No action or proceeding shall have been
instituted or threatened against Ogden which could have a material
adverse effect on the Business; no action or proceeding shall have been
instituted or threatened against any of the parties to this Agreement or
their directors or officers, before any court or governmental
department, agency or commission to restrain or prohibit, or to obtain
substantial damages in respect of, this Agreement or the consummation of
the transactions contemplated hereby; and neither Citizens nor Sub shall
have received written notice from any court or governmental department,
agency or commission of its intention to institute any action or
proceeding to restrain or enjoin or commence any investigation (other
than a routine letter of inquiry) into the consummation of this
Agreement and the transactions contemplated hereby or to nullify or
render ineffective this Agreement or such transactions if consummated,
which in the opinion of Citizens would make it inadvisable to consummate
such transactions; provided that in the event such an investigation
(other than a routine letter of inquiry) is instituted, this Agreement
may not be abandoned by Citizens or Sub for such reason but the
consummation of the transactions provided for in this Agreement shall be
delayed for such period, not in excess of 120 days, as may be necessary
to determine whether such investigation is likely to result in an action
or proceeding of the type described in the second clause of this
subparagraph.
(f) Opinion of Counsel. Citizens shall have received an opinion
of Harter, Secrest & Emery, counsel for Ogden, in form reasonably
satisfactory to Citizens.
(g) Affiliates Agreement. Citizens shall have received an
executed Affiliates Agreement from all Persons who have been designated
as "affiliates" pursuant to Section 3.1(f) hereof.
(h) Registration Statement; Blue Sky Laws. The Registration
Statement shall have been declared effective by the SEC and on the
Closing Date shall remain effective and shall not be subject to a stop
order or any threatened stop orders. All necessary state securities and
Blue Sky authorizations required to carry out the transactions
contemplated by this Agreement shall have been obtained.
(i) Consents. Citizens shall have received copies of consents of
all Persons necessary for Ogden to execute, deliver and perform this
Agreement, including consents required pursuant to those Contracts
identified on Schedule 4.1(i).
(j) Conversion/Redemption of Preferred Stock. All of the shares
of Ogden Convertible Preferred Stock and Ogden Preferred Stock presently
issued and outstanding shall have been converted to Ogden Common Stock
or redeemed in accordance with Section 3.1(h) hereof.
(k) Certified Charter Documents. Ogden shall have furnished to
Citizens a copy of its Certificate of Incorporation, including all
amendments thereto, which shall have been certified by the New York
State Department of State as of a date reasonably near the Effective
Time.
(l) Certified By-Laws. Ogden shall have furnished to Citizens a
copy of the By-laws of Ogden which shall have been certified as true,
correct and complete by the Secretary of Ogden as of the Effective Time.
(m) Certificate of Good Standing. Ogden shall have furnished to
Citizens a Certificate of Good Standing with respect to Ogden which
shall have been certified by the New York State Department of State as
of a date reasonably near the Effective Time.
(n) Certificate of Incumbency. Ogden shall have furnished to
Citizens a Certificate of the Secretary of Ogden, certified as of the
Effective Time, as to the incumbency and signatures of the officers of
Ogden executing this Agreement and any document contemplated or
delivered under this Agreement.
(o) Adverse Changes. From the Execution Date through and
including the Effective Time, and without regard to matters related to
Regulatory Approvals or actions undertaken pursuant to this Agreement,
there shall have been (i) no material adverse change in the assets and
properties of Ogden and the Ogden Subsidiaries, the business operations,
liabilities, profits or financial condition of Ogden and the Ogden
Subsidiaries and (ii) no material damage to the assets or properties of
Ogden and the Ogden Subsidiaries by fire, flood, casualty, act of God or
the public enemy or other cause, the loss of any of which is not
adequately covered by insurance.
(p) Dissenting Shareholders. In the event any of the shareholders
of Ogden exercise dissenters' rights which shall entitle the shareholder
to an appraisal of the fair value of the shares of Ogden Common Stock
held by such shareholder, as contemplated by Section 2.1(c) of this
Agreement, the number of Ogden Shares subject to such appraisal shall
not exceed five percent of the total number of shares of Ogden Common
Stock then outstanding.
(q) Resignation of Officers and Directors. All directors and
officers of Ogden and of each Ogden Subsidiary shall have delivered
their written resignations as directors and from such offices effective
as of the Closing Date.
(r) Trust Properties. Citizens shall be reasonably satisfied that
good and marketable indefeasible fee simple title (both legal and
equitable) to the Trust Properties, free and clear of any Liens (except
those which Citizens agrees to assume pursuant to the agreement
providing for the acquisition of such Trust Properties) will be
transferred to the Surviving Corporation or another affiliate of
Citizens concurrently with the Closing of the Merger.
(s) REA Consent. With respect to any Long-Term Indebtedness to
remain outstanding immediately after the Closing Date pursuant to
Section 3.1(m), Citizens, if required by the underlying debt instrument,
shall have received REA Consent, which consent shall not have been
revoked as of the Closing Date, and shall have entered into any other
necessary agreements with the REA in form and substance reasonably
acceptable to Citizens.
(t) Pooling Accounting. Citizens and its independent accounting
firm shall be reasonably satisfied that the Merger will qualify for
pooling-of-interests treatment for accounting purposes; provided
however, that any failure to qualify for pooling of interest treatment
shall not constitute a failure of the condition precedent to closing
pursuant to this Section 4.1(t) if such failure is caused by any action
contemplated by this Agreement or consented to by Citizens.
(u) Employee Matters. Citizens shall have received evidence, in
form satisfactory to Citizens, that the covenants of Ogden specified in
Sections 8.1(a), 8.2(a), 8.2(b), 8.2(d), 8.2(g), 8.2(i), 8.2(l) and
8.2(m) shall have been performed in all respects.
(v) Additional Documents. Ogden shall have furnished to Citizens
such additional documents, certificates or instruments as shall be
reasonably requested by Citizens or its counsel.
4.2 Conditions Precedent to Obligations of Ogden. The obligation of
-----------------------------------------------
Ogden to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, any one or more of which may be waived at the option of
Ogden:
(a) No Misrepresentation or Breach of Covenants and Warranties.
There shall have been no material breach by Citizens or Sub of any of
their respective covenants to be performed in whole or in part prior to
the Closing, and the representations and warranties of Citizens and Sub
in Section 6.2 shall be true and correct as of the Closing Date in all
material respects as if made again as of the Closing Date, except for
representations or warranties made expressly as of some other date,
which shall be true and correct in all material respects as of such
other date; and Citizens shall have delivered to Ogden a certificate
dated the Closing Date and signed by a Vice-President and Secretary, in
form reasonably satisfactory to Ogden, certifying each of the foregoing
or specifying those respects in which such covenants have not been
performed in all material respects or in which such representations and
warranties are not true and correct in all material respects (in which
event, if the Closing occurs, any claim with respect to matters so
specified shall be waived by Ogden).
(b) Board and Shareholders Approval. Citizens or Sub shall have
delivered to Ogden the following documents, in form and substance
reasonably acceptable to Ogden and its counsel:
(i) A certified copy of the resolutions adopted by
Citizens' and Sub's Boards of Directors approving of this
Agreement, the Merger and all transactions contemplated hereby;
and
(ii) A certified copy of the resolutions adopted by
Citizens as Sub's sole shareholder, approving of this Agreement,
the Merger and all transactions contemplated by this Agreement.
(c) Delivery of Consideration. Citizens shall have delivered to
the Exchange Agent certificates representing the Citizens A Stock to be
issued pursuant to Section 2.1(d)(v) along with all cash consideration
to be delivered pursuant to Section 2.2(e).
(d) Approval of Merger/Dissenters. The Merger and all of the
transactions contemplated by this Agreement shall have been approved by
Ogden Shareholders holding, in the aggregate, no less than two-thirds of
the total voting power of the Ogden Common Stock, and not more than five
percent (5%) of the Ogden Shareholders shall have given notice pursuant
to BCL Section 623 of their intent to claim dissenters' rights as of the
Effective Time.
(e) Regulatory Approvals. All required Regulatory Approvals shall
have been obtained free of any special terms, conditions or restrictions
which Ogden determines, in good faith and following consultation with
Citizens, will materially and adversely affect the actual, prospective
financial benefits to the Ogden Shareholders as contemplated by this
Agreement. For purposes of this Agreement, all such approvals and
consents shall be deemed to have been obtained after the grant thereof
has become final, non-appealable and not subject to reconsideration. In
addition there shall not have been entered a preliminary or permanent
injunction, temporary restraining order or other judicial or
administrative order or decree in any jurisdiction, the effect of which
prohibits the Closing.
(f) Market Price. The Market Price of Citizens A Stock shall not
be less than $2 below the average closing sales price during the 15 day
trading period ending 5 trading days before Execution Date nor greater
than $2 above the average closing sales price during the 15 trading day
period ending 5 days before the Execution Date.
(g) Proceedings. No action or proceeding shall have been
instituted against Citizens or Sub which could have a material adverse
effect on their respective businesses; no action or proceeding shall
have been instituted or threatened against any of the parties to this
Agreement, or their directors or officers, before any court or
governmental department, agency or commission to restrain or prohibit,
or to obtain substantial damages in respect of, this Agreement or the
consummation of the transactions contemplated hereby; and Ogden shall
not have received written notice from any court or governmental
department, agency or commission of its intention to institute any
action or proceeding to restrain or enjoin or commence any investigation
(other than a routine letter of inquiry) into the consummation of this
Agreement and the transactions contemplated hereby or to nullify or
render ineffective this Agreement or such transactions if consummated,
which in the opinion of Ogden would make it inadvisable to consummate
such transactions; provided that in the event such an investigation
(other than a routine letter of inquiry) is instituted, this Agreement
may not be abandoned by Ogden for such reason, but the consummation of
the transactions provided for in this Agreement shall be delayed for
such period not in excess of 120 days, as may be necessary to determine
whether such investigation is likely to result in an action or
proceeding of the type described in the second clause of this
subparagraph.
(h) Opinion of Counsel. Ogden shall have received an opinion of
L. Russell Mitten, II, Esq., Vice President-General Counsel, counsel for
Citizens and Sub, in form reasonably satisfactory to Ogden.
(i) Affiliates Agreement. Each of the Persons designated as an
"affiliate" pursuant to Section 3.1(f) hereof shall have received from
Citizens an executed Affiliates Agreement.
(j) New York Stock Exchange Listing. The shares of Citizens A
Stock to be delivered pursuant to Article II of this Agreement shall
have been duly listed on the New York Stock Exchange, subject to
official notice of issuance.
(k) Disposition of Citizens A Stock. Except for persons or
entities who have been designated as an "affiliate" of Ogden pursuant to
Section 3.1(f) hereof, the former shareholders of Ogden shall,
subsequent to the Effective Time, be able to freely dispose of the
Citizens A Stock received by them in the Merger, without compliance with
Rules 144 and 145 as promulgated by the SEC. Without limiting the
generality of the foregoing, all of the certificates representing
Citizens A Stock issued in connection with the Merger, regardless of
whether issued to affiliates, shall be issued without any restrictive
legend of any type, nor shall any stop order be placed against them.
(l) Registration Statement; Blue Sky Laws. The Registration
Statement shall have been declared effective by the SEC and on the
Closing Date shall remain effective and shall not be subject to a stop
order or any threatened stop orders. All necessary state securities and
Blue Sky authorizations required to carry out the transactions
contemplated by this Agreement shall have been obtained.
(m) Conversion/Redemption of Preferred Stock. All of the shares
of Ogden Preferred Stock issued and outstanding shall have been redeemed
and all of the shares of Ogden Convertible Preferred Stock shall have
been redeemed or converted to Ogden Common Stock prior to the Effective
Time.
(n) Tax Assurances. Ogden shall have received, at its own
expense, a letter ruling issued by the IRS, granting to Ogden each of
the specific rulings requested with respect to the Merger, provided,
however, that if Ogden reasonably believes that the issuance of such
ruling will unduly delay the Closing it may, at its sole option, elect
to instead rely upon an opinion of counsel, in form reasonably
acceptable to it, opining affirmatively that the transactions
contemplated hereby will constitute a tax free reorganization pursuant
to Section 368(a)(2)(E) of the Code. Citizens covenants and agrees to
deliver to Ogden certificates and representation letters as are
reasonably requested by Ogden, setting forth and certifying the matters
set forth on Schedule 4.2(n) attached hereto.
(o) Certified Charter Documents. Citizens shall have furnished to
Ogden a copy of the Certificates of Incorporation of Citizens and Sub,
including all amendments thereto, each of which shall have been
certified by the Delaware Secretary of State or New York Secretary of
State as of a date reasonably near the Effective Time.
(p) Certified By-Laws. Citizens shall have furnished to Ogden
copies of the By-laws of Citizens and Sub, which shall have been
certified as true, correct and complete by their respective Secretaries
as of the Effective Time.
(q) Certificates of Good Standing. Citizens shall have furnished
to Ogden Certificates of Good Standing with respect to Citizens and Sub,
which shall have been certified by the Delaware and New York State
Departments of State respectively, as of a date reasonably near the
Effective Time.
(r) Certificates of Incumbency. Citizens and Sub shall have
furnished to Ogden Certificates of the Secretaries of Citizens and Sub,
certified as of the Effective Time, as to the incumbency and signatures
of the officers of Citizens and Sub executing this Agreement and any
document contemplated or delivered under this Agreement.
(s) Additional Documents. Citizens shall have furnished to Ogden
such additional documents, certificates or instruments as shall be
reasonably requested by Ogden or its counsel.
(t) Employment Agreements. Citizens shall have furnished to each
of the four employees who are parties to the Employment Agreements set
forth on Schedule 6.1(m) written confirmation that his or her respective
Employment Agreement will remain in full force and effect pursuant to
its terms (with the exception of an amendment to each Employment
Agreement to reflect mutually agreeable revised job titles for each such
employee), nothwithstanding the Merger and the resignation from the
offices held by such employees as contemplated by Section 4.1(q) hereof.
4.3 Mutual Conditions to Obligations of Ogden, Citizens and Sub.
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(a) HSR Waiting Period. All applicable waiting periods under the
HSR Act shall have expired with no outstanding request for additional
information or clarification to be supplied by Citizens, Sub or Ogden,
or any other person filing in connection with this Agreement (provided
that the parties agree to use their commercially reasonable efforts to
respond timely to all such requests), and there shall be no outstanding
notice from either the Federal Trade Commission or the Department of
Justice indicating that further action will be taken by either of them
with respect to the Merger.
ARTICLE V
THE CLOSING
5.1 Closing Date, Time and Place. Subject to the terms and conditions of
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this Agreement, the closing of the transactions contemplated hereby (the
"Closing") shall be held at 9:00 A.M. local time at the offices of Harter,
Secrest & Emery, 700 Midtown Tower, Rochester, New York 14604-2070, on the last
business day of the month in which occurs the 10th business day after the date
Ogden and Citizens agree in writing that all required Regulatory Approvals and
approval of the Ogden Shareholders have been obtained, or at such other time and
place as the parties may agree. Such Closing shall be effective as of 11:59EP.M.
on the last calendar day of said month. The date on which the Closing occurs is
referred to herein as the "Closing Date." Upon satisfaction or waiver of the
conditions set forth in Article IV, the parties shall be deemed to have
authorized the filing of the Certificate of Merger with the New York Secretary
of State.
5.2 Delivery of Documents by Ogden. Ogden agrees to execute and deliver,
-------------------------------
or cause to be executed and delivered, to Citizens at the Closing, all of the
instruments and documents required to be delivered pursuant to Section 4.1.
5.3 Delivery of Documents by Citizens. Citizens agrees to execute and
----------------------------------
deliver, or cause to be executed and delivered, to Ogden at the Closing, all of
the instruments and documents required to be delivered pursuant to Section 4.2.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties of Ogden. As of the Execution Date,
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Ogden represents and warrants to Citizens and Sub as follows:
(a) Corporate Organization. Each of Ogden and the Ogden
Subsidiaries (as hereinafter defined) is a corporation duly organized,
validly existing and in good standing under the laws of New York and is
duly qualified to conduct business in New York; each has full power and
authority to own its properties and to carry on the Business as it is
now being conducted in New York; each holds valid licenses, permits or
other operating authority adequate for the conduct of the Business and
no such license, permit or other operating authority is presently the
subject of any dispute.
(b) Authorization and Effect of Agreement. Ogden has the
requisite corporate power and authority under its Certificate of
Incorporation and By-Laws to execute and deliver this Agreement and,
subject to Ogden Shareholders' approval, to fulfill its respective
obligations under this Agreement. The execution and delivery by Ogden of
this Agreement and the fulfillment of its obligations under this
Agreement have been duly authorized by all necessary corporate action on
the part of Ogden. Subject to Ogden Shareholders' approval, no further
corporate action on the part of Ogden is necessary to authorize this
Agreement and the performance of the transactions contemplated hereby.
Upon the redemption or conversion of all outstanding shares of the Ogden
Convertible Preferred Stock and the Ogden Preferred Stock as required by
Section 3.1(h), the affirmative votes or actions by written consent of
two-thirds of the votes that holders of outstanding shares of Ogden
Common Stock are entitled to cast are the only votes of the holders of
any class or series of capital stock of Ogden necessary to approve the
Merger under applicable Law and Ogden's Certificate of Incorporation and
By-Laws. This Agreement has been duly executed and delivered by Ogden
and, assuming approval by Ogden's shareholders and the due execution and
delivery of this Agreement by Citizens and by Sub, constitutes a valid
and binding obligation of Ogden, enforceable in accordance with its
terms, except as the enforceability hereof may be limited by
(i)bankruptcy, insolvency or other laws relating to or affecting
generally creditors' rights and (ii)general principles of equity
(regardless of whether such enforceability is considered in a proceeding
in equity or at law).
(c) Ogden Subsidiaries. Ogden is the direct or indirect record
owner of the number of shares of capital stock of each corporation
(collectively the "Ogden Subsidiaries") as set forth in Schedule 6.1(c).
Except as set forth on Schedule 6.1(c), Ogden does not own, directly or
indirectly, any capital stock or other securities of any corporation or
have any direct or indirect equity or ownership interest in any other
Person, other than the Ogden Subsidiaries. Schedule 6.1(c) lists the
jurisdiction of incorporation of each Ogden Subsidiary, and the
authorized and outstanding capital stock of each Ogden Subsidiary. Each
Ogden Subsidiary is a corporation duly organized, validly existing, and
in good standing under the laws of the jurisdiction of its
incorporation. Each Ogden Subsidiary has all requisite corporate
authority to own, lease, and operate its properties and to carry on its
business as now being conducted. No actions or proceedings to dissolve
any Ogden Subsidiary are pending. Except as set forth on Schedule
6.1(c), there are outstanding (i) no shares of capital stock or other
voting securities of any Ogden Subsidiary, (ii) no securities of Ogden
or any Ogden Subsidiary convertible into or exchangeable for shares of
capital stock or other voting securities of any Ogden Subsidiary, (iii)
no options or other rights to acquire from Ogden or any Ogden
Subsidiary, and no obligation of Ogden or any Ogden Subsidiary to issue
or sell, any shares of capital stock or other voting securities of any
Ogden Subsidiary or any securities convertible into or exchangeable for
such capital stock or voting securities, and (iv) no equity equivalents,
interests in the ownership or earnings, or other similar rights of or
with respect to any Ogden Subsidiary. There are no outstanding
obligations of Ogden or any Ogden Subsidiary to repurchase, redeem, or
otherwise acquire any of the shares, securities, options, equity
equivalents, interests, or rights of any Ogden Subsidiary. All of the
outstanding securities of each Ogden Subsidiary are validly issued,
fully paid and nonassessable, and are owned of record and beneficially
by Ogden, free and clear of any Liens with respect thereto, except for
restrictions on transfer imposed by federal and state securities laws or
transfers requiring Regulatory Approval.
(d) Capitalization of Ogden. The authorized capital stock of
Ogden consists of (i) 134,900 shares of common stock, no par value per
share of which 108,810.5 shares are issued and outstanding as of the
Execution Date, (ii) 57,500 shares of Class A Common Stock, no par value
per share, of which no shares are issued and outstanding as of the
Execution Date, (iii) 5,500 shares of Ogden Preferred Stock, of which
5,500 shares are issued and outstanding as of the Execution Date, (iv)
9,500 shares of Ogden Convertible Preferred Stock, of which 5,841 shares
are issued and outstanding as of the Execution Date, (v) 5,000 shares of
5% preferred stock, par value $100 per share, of which no shares are
issued and outstanding as of the Execution Date, (vi) 2,500 shares of 6%
preferred stock, par value, $100 per share, of which no shares are
issued and outstanding as of the Execution Date, and (vii) 5,500 shares
of 6 1/2% Preferred Stock, par value $100 per share, of which no shares
are issued and outstanding as of the Execution Date. The outstanding
shares of Ogden Common Stock, Ogden Preferred Stock and Ogden
Convertible Preferred Stock have been validly issued and outstanding,
are fully paid and nonassessable, and have not been issued in violation
of, and are not subject to, any preemptive rights, and, except as set
forth in Schedule 6.1(d), there are no outstanding convertible or
exchangeable securities, puts, warrants, rights, subscriptions, calls or
options relating to the Ogden Common Stock, Ogden Preferred Stock and
Ogden Convertible Preferred Stock. To the best knowledge of Ogden, other
than the Voting Agreement, there are no voting trusts or other
agreements of understandings with respect to the voting of any shares of
the stock of Ogden or any Ogden Subsidiary and there are no agreements
or understandings restricting the transfer of any shares of the stock of
Ogden.
(e) No Restrictions Against Merger. Except as listed or described
on Schedule 6.1(e), the execution and delivery of this Agreement by
Ogden does not, and the fulfillment by Ogden of its obligations under
this Agreement will not, conflict with or violate any provision of the
Certificate of Incorporation or By-Laws of Ogden or any Ogden Subsidiary
or, subject to obtaining the approvals and consents referred to in
Schedule 6.1(e), conflict with, violate or result in the breach of any
provision of any material Contract, to which Ogden or any Ogden
Subsidiary is a party 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 material Contract or other
material instrument or obligation to which Ogden or any Ogden Subsidiary
is a party or by which Ogden or any Ogden Subsidiary may be bound, or
result in the creation of any Liens upon any of the assets or property
of Ogden or any Ogden Subsidiary except as otherwise provided in
Schedule 6.1(e). For purposes of this Section a "material" Contract
shall be any Contract which requires aggregate payments by Ogden, or
pursuant to which Ogden expects to receive aggregate revenue, in excess
of $25,000.
(f) Consents and Approvals of Governmental Authorities. No
consent, approval, order or authorization of, or registration,
declaration or filing with, any court or governmental agency, authority
or instrumentality (collectively, "Governmental Authorities") is
required to be obtained or made by or with respect to Ogden or any Ogden
Subsidiary in connection with the execution and delivery of this
Agreement by Ogden or the consummation of the transactions contemplated
hereby by Ogden except (i) the filings and approvals described in
Sections 3.1(m), 3.3(b) and 3.3(d), or (ii) the filing of a Certificate
of Merger with the Secretary of State of the State of New York as
contemplated by Section 1.1 hereof.
(g) No Violation of Law. The execution and delivery of this
Agreement and the fulfillment by Ogden of its obligations under this
Agreement will not violate any applicable law, statute, ordinance, rule,
code, regulation, polices, guidelines, interpretation, directives,
decrees or orders of any Governmental Authority (collectively, "Laws").
(h) Brokers. Ogden has not paid or become obligated to pay any
fee or commission to any broker, finder, investment banker or other
intermediary in connection with the transactions contemplated by this
Agreement in such a manner as to give rise to a valid claim against
Citizens or Sub for any broker's or finder's fees or similar fees or
expenses.
(i) Title to Property. Ogden and the Ogden Subsidiaries have good
and marketable title to the real property listed on Schedule 6.1(i), and
except as set forth on Schedule 6.1(i), to all other real properties
held by them, subject to no lien, charge or encumbrance (collectively
"Liens") other than (i)Liens for current taxes not yet due and payable
or being contested in good faith, (ii)Liens imposed by law and incurred
in the ordinary course of business for obligations not yet due to
carriers, warehousemen, laborers and materialmen, (iii)Liens that would
not interfere in any material respect with the present use of such real
property, and (iv)exceptions of record and standard exceptions
contained in ALTA title insurance policies or commitments for issuance
thereof.
(j) Tangible Assets. Each of Ogden's and the Ogden Subsidiaries'
plant, materials, fixtures, equipment, machinery and supplies, taken as
a whole, are in substantially good operating condition and repair,
normal wear and tear excepted, and taken as a whole, are sufficient to
carry on their respective businesses as presently conducted.
(k) Financial Statements. Ogden has heretofore furnished to
Citizens a copy of its balance sheet dated as of December 31, 1995 and
the related statements of operations and cash flows for the year then
ended (the "Financial Statements"). The Financial Statements were
prepared based upon the books and records of Ogden and the Ogden
Subsidiaries, and fairly present in all material respects the financial
condition of Ogden and the Ogden Subsidiaries as of December 31, 1995
and its results of operations and cash flows for the year then ended, in
each case in conformity with GAAP. To the extent required by applicable
Law, the books and records of Ogden and the Ogden Subsidiaries are
maintained in all material respects in conformity with the regulations
of the FCC, the NYPSC and the REA. Ogden has heretofore furnished to
Citizens a copy of its internal, unaudited, consolidated financial
statements for the nine months ended September 30, 1996. The internal
unaudited consolidated financial statements of Ogden for nine months
ended September 30, 1996, consisting of the unaudited consolidated
income statement and balance sheet for the period ending on such date,
have been prepared in accordance with the books and records of Ogden and
the Ogden Subsidiaries and, to the extent required by applicable Law, in
conformity in all material respects with the regulations of the FCC, the
NYPSC and the REA, and fairly present the financial condition of Ogden
and the Ogden Subsidiaries as of September 30, 1996 and the results of
the operations of Ogden and the Ogden Subsidiaries for the period then
ended, in each case with accordance with GAAP except as set forth in the
notes thereto and subject to normal year-end adjustments consistent with
past practice. The internal, unaudited monthly financial statements to
be delivered to Citizens pursuant to Section 3.1(b)(xii) hereof, (x)
will be prepared in accordance with the books and records of Ogden and
the Ogden Subsidiaries which, to the extent required by applicable Law,
will be maintained in all material respects in conformity with the
regulations of the FCC, the NYPSC and the REA; and (y) will fairly
present the financial condition of Ogden and the Ogden Subsidiaries and
the results of operations of Ogden and the Ogden Subsidiaries for the
periods indicated in accordance with GAAP, except as set forth in the
notes thereto and subject to normal year-end adjustments consistent with
past practice.
(l) No Adverse Change. Since December 31, 1995, there has not
been (i) any material adverse change in the Business, results of
operations or financial condition of Ogden or the Ogden Subsidiaries;
(ii)any damage, destruction or loss to real or tangible property of
Ogden or the Ogden Subsidiaries that would have a material adverse
effect on the Business; (iii)any increase in compensation payable or to
become payable by Ogden or any Ogden Subsidiary to any of its employees
or agents, other than normal merit or promotional increases; (iv)any
amendment or termination by Ogden or any Ogden Subsidiary of any
material Contract, except for amendments or terminations occurring in
the ordinary course of business, and except as provided in Article VIII
of this Agreement; (v) except in the ordinary course of business, any
sale, lease, mortgage, pledge or Encumbrance of any material properties
or assets of Ogden or any Ogden Subsidiary; (vi) any loss of any
supplier, distributor or customer which materially and adversely affects
the financial condition or results of operations of Ogden or any Ogden
Subsidiary; (vii) any declaration or payment of any dividend or
distribution to the Ogden Shareholders, other than in the ordinary
course of business, or redemption, purchase or other acquisition of any
capital stock of the Ogden Shareholders; (viii) any increase in
indebtedness for borrowed money, except current borrowings from banks in
the ordinary course of business; (ix) any change in any method of
accounting or accounting practice other than the accounting conversion
previously described to Citizens; or (x) any agreement, whether or not
in writing, to do any of the foregoing.
(m) Contracts and Commitments. Except as set forth in
Schedule 6.1(m), neither Ogden nor any Ogden Subsidiary is a party to or
subject to: (i) any employment contract with any employee; (ii) any
plan, Contract or arrangement providing for bonuses, pensions, options,
deferred compensation, retirement payments, profit sharing, or the like;
(iii) any agreement with any labor union; (iv) any lease of real
property or personal property, except leases of personal property
involving payment of annual rentals in excess of $25,000; (v) any
agreement for the purchase or disposition of any material, equipment,
supplies, inventory or service, except individual purchase orders and
Contracts in amounts less than $25,000; (vi) any contract or arrangement
concerning directory publishing matters or billing and collection
matters; (vii) any Contract or arrangement that limits the ability of
Ogden or any Ogden Subsidiary to compete in any line of business or to
compete with any other Person; (viii) any Contract relating to any
obligation for borrowed money or any guarantee or indemnification of an
obligation for borrowed money or any other obligation or liability; (ix)
any Contract relating to management service, consulting or any other
similar type contract; (x) any Contract relating to licenses to or from
Ogden or any Ogden Subsidiary with respect to software or hardware used
in the Business; or (xi) any other agreement, obligation or commitment
requiring payments by Ogden or any Ogden Subsidiary in excess of $25,000
on or after the Closing Date. Ogden has delivered to Citizens true and
correct copies of all Contracts and instruments listed in
Schedule 6.1(m). Neither Ogden nor any Ogden Subsidiary is in default in
the performance of any term or condition contained in any Contracts or
instruments listed in Schedule 6.1(m). Except as set forth in Schedule
6.1(m), each of the Contracts and instruments listed in Schedule 6.1(m),
is legally binding and in full force and effect in accordance with its
terms, and there is no outstanding notice of cancellation or termination
in connection therewith. Except as set forth on Schedule 6.1(m) there is
no basis of any claim of material breach, material default or
termination by Ogden or any Ogden Subsidiary, or to Ogden's knowledge,
any other party, under any of the agreements or instruments. Except as
set forth in Schedule 6.1(m), to Ogden's actual knowledge Ogden or the
Ogden Subsidiary party thereto has the right to quiet enjoyment of all
leased real property for the full term of each such lease or similar
agreement relating thereto, and to Ogden's actual knowledge the
leasehold or other interest of Ogden or the Ogden Subsidiary party
thereto is not subject or subordinate to any Lien.
(n) No Material Claims. Except as disclosed in Schedule 6.1(n) or
with respect to taxes, there are no claims, actions, lawsuits,
regulatory or legal proceedings pending, or, to the knowledge of Ogden,
threatened against or affecting Ogden, the Ogden Subsidiaries or their
properties.
(o) Tax Matters. Ogden and the Ogden Subsidiaries have timely
filed all tax returns, local and foreign tax reports, and information
returns and have duly paid all taxes shown to be due and payable on such
tax returns and all estimated or advance payments required by Law. All
such tax returns are true, correct and complete in all material
respects. Ogden has delivered to Citizens true and complete copies of
all tax returns filed by Ogden with respect to its 1992, 1993, 1994 and
1995 fiscal years. All taxes for periods ending on or prior to or
including the Closing Date have been fully paid or reserved against on
the Financial Statements in accordance with GAAP. All taxes which are
required to be withheld or collected by Ogden and the Ogden Subsidiaries
have been duly withheld or collected and, to the extent required, have
been paid to the proper federal, state, local or foreign authorities or
properly segregated or deposited as required by applicable Law. There
are no Liens for taxes upon any property or assets of Ogden or the Ogden
Subsidiaries except for Liens for taxes not yet due and payable or for
taxes being contested in a manner permitted by Law. Neither Ogden nor
any Ogden Subsidiary has received any notice of deficiency, proposed
deficiency or assessment from any governmental taxing authority with
respect to taxes of Ogden or any Ogden Subsidiary. Neither Ogden nor any
Ogden Subsidiary has waived any statute of limitations with respect to
taxes and neither Ogden nor any Ogden Subsidiary has received any
requests for any such waiver or extension. There is no agreement for the
extension of any assessment of any tax with respect to the Business, and
there are no pending or, to Ogden's knowledge, proposed audits of any
tax return of Ogden or any Ogden Subsidiary currently in progress.
Neither Ogden nor any Ogden Subsidiary (i) is a party to any tax
allocation or sharing agreement or (ii) has ever been (or has any
liability for unpaid tax because they were) a member of an affiliated
group during any part of any consolidated return year within any part of
which consolidated return year any corporation other than Ogden or any
Ogden Subsidiary also was a member of the affiliated group. Ogden and
the Ogden Subsidiaries have not, with regard to any assets or property
held, acquired or to be acquired by any of them, filed a consent to the
application of Section 341(f) of the Code or any comparable state, local
or foreign tax provisions.
(p) Employee Matters.
(i) Schedule 6.1(p) lists (and identifies the sponsor of)
each "employee pension benefit plan," as that term is defined in
Section 3(2) of ERISA, each "employee welfare benefit plan," as
that term is defined in Section 3(1) of ERISA (such plans being
hereinafter referred to collectively as the "ERISA Plans"), and
each other deferred compensation, insurance, incentive
compensation, bonus, stock option, stock purchase, phantom stock,
stock appreciation rights, employee stock ownership, severance
pay, unemployment benefit, vacation pay, profit sharing, fringe
benefit, (including, but not limited to, paid holidays, personal
leave, employee discount, employee loan and education benefit
programs) cafeteria plan, or other employee benefit plan,
program, agreement, or arrangement maintained by Ogden or the
Ogden Subsidiaries, excluding any such plan, program, agreement,
or arrangement maintained or contributed to solely in respect of
or for the benefit of employees or former employees employed or
formerly employed by Ogden or the Ogden Subsidiaries outside of
the United States, as of the Execution Date (each a "Plan" and
collectively, together with the ERISA Plans, referred to
hereinafter as the "Plans"). Neither Ogden nor any of the Ogden
Subsidiaries has any intent or commitment to create any
additional Plan or amend any Plan so as to increase benefits
thereunder except as required by applicable law. Schedule 6.1(p)
also includes a list of each written employment, severance,
termination or similar-type agreement between Ogden or the Ogden
Subsidiaries and any employee. Except as otherwise disclosed on
Schedule 6.1(p), the execution and delivery of this Agreement by
Ogden and the Ogden Subsidiaries and the performance of this
Agreement by Ogden and the Ogden Subsidiaries will not directly
result now or at any time in the future in (i) the payment to any
employee of any severance, termination, or similar-type payments
or benefits or (ii)any "parachute payment" (as such term is
defined in Section 280G of the Code) being made to any employee.
(ii) Except as set forth on Schedule 6.1(p):
(a) Each ERISA Plan is in substantial compliance
with all reporting, disclosure and other requirements of
ERISA applicable to such ERISA Plan and a current,
accurate and complete copy of each such Plan has been made
available to Citizens; a current, accurate and complete
description of all other Plans has been made available to
Citizens.
(b) There has been and is no event or condition
existing which could be deemed a "reportable event"
(within the meaning of Section 4043 of ERISA) with respect
to which the thirty-day notice requirement has not been
waived; no condition exists which could subject Citizens
or Ogden or any Ogden Subsidiary to a penalty under
Section 4071 of ERISA.
(c) With respect to each welfare benefit plan to
which Ogden or any Ogden Subsidiary is a party which
constitutes a group health plan subject to Section 4980B
of the Code, each such Plan complies, and in each case has
materially complied, with all applicable requirements of
Section 4980B of the Code.
(d) None of Ogden, the Ogden Subsidiaries or any of
their Affiliates, nor, to Ogden's knowledge (or as to a
matter of which Ogden should have knowledge) any of the
ERISA Plans, any trust created thereunder, or any trustee
or administrator thereof, has engaged in any transaction
as a result of which Ogden could be subject to any
material liability pursuant to Section 409 of ERISA or to
either a civil penalty assessed pursuant to Section 502(i)
of ERISA or a tax imposed pursuant to Section 4975 of the
Code;
(e) No material liability under Title IV of ERISA
has been incurred or is reasonably expected to be incurred
by Ogden (other than liability for premiums due to the
PBGC), unless such liability is reserved for or otherwise
reflected on the Financial Statements or unless such
liability has been, or prior to the Closing Date will be,
satisfied in full; and
(f) Each Plan has been administered in accordance
with its terms.
(iii) Except as set forth on Schedule 6.1(p), with respect
to the ERISA Plans:
(a) Neither the PBGC, Ogden or any Ogden Subsidiary
has instituted proceedings to terminate any Plan that is
subject to Title IV of ERISA;
(b) none of the ERISA Plans has incurred an
"accumulated funding deficiency" (as defined in Section
302 of ERISA and Section 412 of the Code), whether or not
waived, as of the last day of the most recent fiscal year
of each of the ERISA Plans ended prior to the Execution
Date;
(c) each of the ERISA Plans that is intended to be
"qualified" within the meaning of Section 401(a) of the
Code and, to the extent applicable, Section 401(k) of the
Code, has been determined by the IRS to be so qualified,
and nothing has occurred since the date of the most recent
such determination (other than the effective date of
certain amendments to the Code, the remedial amendment
period for which has not yet expired) that, to Ogden's
knowledge, would adversely affect the qualified status of
any of such ERISA Plans; and
(d) there are no material written actions, lawsuits
or claims by or on behalf of any of the ERISA Plans, by
any employee or beneficiary covered under any such ERISA
Plan, or otherwise involving any such ERISA Plan (other
than routine claims for benefits and routine expenses)
pending or threatened against Ogden or any Ogden
Subsidiary.
(iv) None of the ERISA Plans is a "multiemployer plan," as
that term is defined in Section 3(37) of ERISA, and neither Ogden
nor any Ogden Subsidiary has made or incurred a "complete
withdrawal" or a "partial withdrawal," as such terms are
respectively defined in Sections 4203 and 4205 of ERISA that
would result in a material liability by Ogden that is not
reserved for or otherwise reflected on the Financial Statements.
(v) Except as set forth in Schedule 6.1(p):
(a) there is no outstanding liability (except for
funding liabilities as reflected on the Financial
Statements or for premiums due) under Title IV of ERISA
with respect to any Plan and the value on an ongoing basis
of accrued benefits under each of the Plans which is
subject to Title IV of ERISA does not exceed the current
value of the assets of such Plan;
(b) full payment has been made of all amounts which
Ogden and the Ogden Subsidiaries are required to have paid
in premiums or benefits due, or as a contribution to the
Plans as of the last day of the most recent fiscal year of
each of the Plans ended prior to the Execution Date;
(c) each of the Plans is, and its administration is
and has been during the six-year period preceding the
Execution Date in substantial compliance with, and neither
Ogden nor any Ogden Subsidiary has received any claim or
notice that any such Plan is not in substantial compliance
with, all applicable laws and orders and prohibited
transaction exemptions, including without limitation, to
the extent applicable, the requirements of ERISA;
(d) Ogden and the Ogden Subsidiaries are not in
default in performing any of their contractual obligations
under any of the Plans or any related trust agreement or
insurance contract; and
(e) there are no material outstanding liabilities
of any Plan other than (i) liabilities for benefits to be
paid to participants in such Plan and their beneficiaries
in accordance with the terms of such Plan and (ii) funding
liabilities under any Plan as disclosed in the Financial
Statements.
(vi) Except as set forth on Schedule 6.1(p), neither the
execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby constitutes a change in
control that would accelerate benefits under any Plan.
(vii) Citizens has been provided with a true and correct
copy of (i) actuarial reports for the last three years with
respect to all defined benefit plans maintained or contributed to
by Ogden or any Ogden Subsidiary, (ii) Form 5500 and any attached
schedules with respect to the last three years for each ERISA
Plan for which a Form 5500 is required to be filed, and (iii) the
most recent determination letter issued by the IRS for each ERISA
Plan which is intended to be qualified.
(viii) Except as set forth on Schedule 6.1(p), (i) none of
Ogden's employees are represented by a labor union or labor
organization and (ii) neither Ogden, any Ogden Subsidiary nor any
of their respective Affiliates is a party to, or is subject to,
any collective bargaining agreement covering any employee. There
are currently no strikes, slowdowns, work stoppages or lockouts
by or with respect to any employee covered by collective
bargaining agreements. Except as set forth on Schedule 6.1(p), to
the knowledge of Ogden, during the 12 months preceding the
Execution Date there have not been any union organizational
campaigns by or directed at employees.
(ix) Except as set forth on Schedule 6.1(p), neither Ogden
nor any Ogden Subsidiary maintains, contributes to, or has any
liability or obligation with respect to any plan, program or
arrangement providing post retirement or post employment
benefits.
(q) Bank Accounts. Schedule 6.1(q) sets forth a list of the bank
accounts maintained by Ogden and the Ogden Subsidiaries and the
authorized signatories for each such account.
(r) Dealings with Affiliates. Schedule 6.1(r) sets forth a
complete and accurate list of all oral and written Contracts between
Ogden and any one or more of its Affiliates. Except as set forth in
Schedule 6.1(r), since December 31, 1995, Ogden has not made any
payments, loaned any funds or property or made any credit arrangement
with any Affiliate or employee except for the payment of employee
salaries in the ordinary course of business.
(s) Absence of Undisclosed Liabilities. To the best of Ogden's
knowledge, neither Ogden nor any Ogden Subsidiary has any liability of
any nature whatsoever (whether known or unknown, due or to become due,
accrued, absolute, contingent or otherwise), including, without
limitation, any unfunded obligation under employee benefit plans or
arrangements as described in Section 6.1(p) or liabilities for taxes (as
described in Section 6.1(o)), except for (a) liabilities stated or
reserved against in the Financial Statements or Ogden's internal,
unaudited, consolidated financial statements for the nine months ended
September 30, 1996 (except as set forth in the notes thereto and subject
to normal year-end adjustments consistent with past practices), (b)
current liabilities incurred in the ordinary course of business and
consistent with past practice after the date of the Financial Statements
or Ogden's internal, unaudited, consolidated financial statements for
the nine months ended September 30, 1996, none of which are material,
and (c) liabilities disclosed on Schedule 6.1(s).
(t) Compliance with Applicable Laws, Regulations and Orders.
Ogden and each Ogden Subsidiary has been and is presently in material
compliance with all Laws applicable to the conduct of its Business,
including, without limitation, all Laws relating to health, sanitation,
fire, zoning, building and occupational safety.
(u) Insurance. Schedule 6.1(u) contains a complete list of all
policies of insurance now in force with respect to Ogden and the Ogden
Subsidiaries, including the names of the insurer and the insured, the
amount of premiums, the types and amounts of coverage and a description
of any self-insurance levels, underlying limits and deductibles. All of
such policies are in full force and effect, all premiums with respect
thereto have been paid or accrued for, and no notice of cancellation,
termination, non-renewal or material increase in premiums has been
received with respect to any such policy. Neither Ogden nor any Ogden
Subsidiary has breached or otherwise failed to perform its obligations
under any such policies, nor has Ogden or any Ogden Subsidiary received
any adverse notice from any insurers party to such policies with respect
to any alleged breach or failure in connection with any such policies.
Such policies will not terminate or lapse by reason of the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby. Except as set forth in Schedule 6.1(u), there are
no pending or, to Ogden's knowledge, threatened claims under any policy
relating to Ogden or any Ogden Subsidiary.
(v) Intellectual Property. Schedule 6.1(v) sets forth a complete
and accurate list of the Intellectual Property owned or used by Ogden
and each Ogden Subsidiary. Ogden has no written documents relating to
Ogden's or any Ogden Subsidiary's ownership or use of the Intellectual
Property other than that listed in Schedule 6.1(v). To Ogden's
knowledge, no other Person has any rights to such Intellectual Property,
except pursuant to agreements or licenses specified in Schedule 6.1(v).
To Ogden's knowledge, no other Person is infringing, violating or
misappropriating any such Intellectual Property. If necessary, Ogden and
each Ogden Subsidiary owns or holds valid licenses to use all
Intellectual Property used in the operation of its Business as presently
conducted.
(w) Permits and Reports. Schedule 6.1(w) sets forth a list of all
permits, licenses, registrations, certificates, orders, approvals or
other authorizations from any Governmental Authority or other Person
including, without limitation, the FCC ("Permits") issued to or held by
Ogden or any Ogden Subsidiary in connection with its operations. Such
Permits are the only Permits that are required for Ogden or the Ogden
Subsidiaries to conduct their Business as presently conducted and
proposed to be conducted, each such Permit is in full force and effect,
and neither Ogden nor any Subsidiary has received notice that any
suspension, cancellation or modification of the terms of any such Permit
is threatened. Ogden and the Ogden Subsidiaries are in full compliance
with the terms of each such Permit, and Ogden is not aware of any reason
not set forth in said Permits why any such Permit would not be renewed,
upon substantially the same terms as currently exist, upon expiration of
such Permit. Except as set forth in Schedule 6.1(w), (a) each Permit
issued to or held by Ogden or any Ogden Subsidiary will continue in full
force and effect following the Closing Date, (b) all returns, reports,
applications, statements and other documents required to be filed by
Ogden with the FCC, and other Governmental Authorities with respect to
the Business on or before the Execution Date have been duly filed or
properly extended as permitted by Law and are true and complete in all
material respects, and (c) all reporting requirements of the FCC and
other Governmental Authorities having jurisdiction thereof have been
complied with in all material respects.
(x) Environmental Matters. To the best of Ogden's knowledge,
except as disclosed on Schedule 6.1(x), (a)there has been no Release of
any Hazardous Substance at or from any of the real property or
facilities now or previously owned or leased by Ogden or the Ogden
Subsidiaries, (b)there has been no Disposal of any Hazardous Substance
at or on any of the real property or facilities now or previously owned
or leased by Ogden or the Ogden Subsidiaries, except in compliance with
Laws (c)there are no Hazardous Substances located in or on any of the
real property or facilities now or previously owned or leased by Ogden
or the Ogden Subsidiaries, (d)neither Ogden nor any Ogden Subsidiary
has generated, treated or stored any Hazardous Substances at or on any
real property or facilities which it owns or leases except in compliance
with Laws, (e)there has been no Disposal or arrangement for Disposal of
Hazardous Substances by Ogden or the Ogden Subsidiaries on any property
not now owned by Ogden or the Ogden Subsidiaries, and (f)there are no
underground storage tanks located at the real property or facilities now
or previously owned or leased by Ogden or the Ogden Subsidiaries. With
respect to real property or facilities previously owned or leased by
Ogden or the Ogden Subsidiaries, no representation or warranty is made
concerning the condition of such real property or facilities or actions
taken thereon or thereat at any time when such real property or
facilities were not owned or leased by Ogden or the Ogden Subsidiaries,
provided, however, that Ogden does represent and warrant to Citizens
that it is not aware of any condition existing at any time such real
property or facilities were not owned or leased by Ogden or the Ogden
Subsidiaries which would give rise to a breach of any of the
representations and warranties contained in this Section 6.1(x). As used
herein:
(i) "Disposal" means disposal as defined by the
Resource Conservation and Recovery Act("RCRA"), 42 U.S.C.
ss.690 et seq., and the regulations thereunder;
(ii) "Hazardous Substances" means hazardous substances as
defined by the Comprehensive Environmental Response Compensation
and Liability Act, 42 U.S.C. ss.9601 et seq., and the regulations
thereunder and also includes petroleum, gasoline, oil, fuel oil,
diesel fuel and petroleum solvents; asbestos, and polychlorinated
biphenyls; and
(iii) "Release" means any spilling, pumping, pouring,
emitting, emptying, placing, discharging, injecting, escaping,
leaking, dumping, or disposing into the environment, whether
intentional or unintentional, known or unknown.
(y) Charter and Bylaws. Ogden has made available to Citizens
accurate and complete copies of the Certificates of Incorporation and
Bylaws of Ogden and each Ogden Subsidiary as currently in effect and the
stock records of Ogden and each Ogden Subsidiary. Such records
accurately reflect the stock ownership of Ogden. Neither Ogden nor any
Ogden Subsidiary is in violation of any provisions of their respective
Certificates of Incorporation or Bylaws.
(z) Access Lines. Schedule 6.1(z) is a true and complete list of
the access lines of Ogden and Ogden Subsidiaries, by category, in
services as of June 30, 1996.
(aa) Price Caps. Neither Ogden nor any Ogden Subsidiary
has elected to file interexchange tariffs under the FCC's price cap
order.
(bb) Rate Base. Neither Ogden nor any Ogden Subsidiary has any
inventory, plant or equipment that has been disallowed from rate base or
excluded from the revenue calculations for any pool (unless due to the
deregulation of the service for which such assets are used) in any rate
order issued by the NYSPC or the FCC or any determination by an
administrator of an interstate or intrastate pool, or received
notification that the NYPSC or the FCC or any pool administrator
proposes to exclude any assets from rate base or revenue calculations
for the pools.
(cc) Tariffs. The state regulatory tariffs applicable to Ogden
and each Ogden Subsidiary are in full force and effect on the Execution
Date in accordance with all terms of such state tariffs, and there is no
outstanding notice of suspension, cancellation, termination or, to
Ogden's knowledge, any threatened suspension, cancellation or
termination in connection therewith, nor is Ogden or any Ogden
Subsidiary subject to any conditions or restrictions applicable to state
regulatory tariffs that limit or would limit the operation of the
Business (other than restrictions or conditions generally applicable to
tariffs of that type). Except as described on Schedule 6.1(cc), each
such state tariff has been duly and validly approved by the appropriate
state regulatory agency. Except as otherwise disclosed on Schedule
6.1(cc), neither Ogden nor any Ogden Subsidiary is in violation under
the terms and conditions of any such state tariff and there is no basis
of any claim of violation by Ogden or any Ogden Subsidiary in any
respect under any such state tariff. Except as described on Schedule
6.1(cc), there are no applications by Ogden or any Ogden Subsidiary or
complaints or petitions by others or proceedings pending or threatened
before the state regulatory authority relating to Ogden or any Ogden
Subsidiary. To the knowledge of Ogden, there are no material violations
by subscribers of others under any such state tariff that would be
material to Ogden, any Ogden Subsidiary or the Business. A true and
correct copy of each state tariff applicable to Ogden, any Ogden
Subsidiary or the Business has been delivered to Citizens.
(dd) FCC Licenses. Listed on Schedule 6.1(dd) are FCC Licenses
held by Ogden and each Ogden Subsidiary. Each such FCC License is in
full force and effect in accordance with its terms, and there is no
outstanding notice of suspension, cancellation or termination or, to
Ogden's knowledge, any threatened suspension, cancellation or
termination in connection therewith nor are any of such FCC Licenses
subject to any restrictions or conditions that limit the operation of
the Business (other than restrictions or conditions generally applicable
to licenses of that type). The FCC Licenses are free from all security
interests, liens, claims, or encumbrances of any nature whatsoever,
other than statutory liens and restrictions arising under the
Telecommunications Act of 1996 or the rules and regulations promulgated
thereunder. Except as set forth on Schedule 6.1(dd), (i) there are no
applications by Ogden or any Ogden Subsidiary or, to Ogden's knowledge,
material complaints or material petitions by others or (ii) proceedings
pending or, to Ogden's knowledge, threatened before the FCC relating to
Ogden, any Ogden Subsidiary or the FCC Licenses.
(ee) Non-FCC Authorizations. Listed on Schedule 6.1(ee) are all
Non-FCC authorizations materially necessary for the conduct of the
Business. Each such Non-FCC authorization is in full force and effect in
accordance with its terms. To Ogden's knowledge, no event has occurred
with respect to any materially necessary Non-FCC authorization which
permits, or after notice or lapse of time or both would permit,
revocation or termination thereof, or would result in any other material
impairment of the rights of the holder of such materially necessary
Non-FCC authorization.
(ff) Capital Improvements Required by NYPSC. There are no
changes, modifications, upgrades or enhancements required by the NYPSC
to be made to the Business or the assets of Ogden or any Ogden
Subsidiary.
(gg) Condition of Tangible Assets. Neither Ogden nor any Ogden
Subsidiary has received any written notice within the past twelve (12)
months of a violation of any ordinances, regulation or building, zoning
and other similar laws with respect to its assets that would have a
material adverse effect on Ogden, any Ogden Subsidiary, the Business as
a whole or any significant part of the assets used in the Business. The
use of each parcel of real property owned by Ogden or any Ogden
Subsidiary and, to the knowledge of Ogden, each parcel of real estate
leased by Ogden or an Ogden Subsidiary and materially necessary to the
Business as presently conducted complies with all applicable Laws in all
material respects. Other than Ogden or an Ogden Subsidiary, no Person
has actual possession or has a right to possession of all or any
material portion of any parcel of such real property.
(hh) Materials and Supplies. The value (as reflected on Ogden's
books) of materials and supplies of Ogden and any Ogden Subsidiary
relating to the Business which are obsolete or in excess of the
requirements of the Business, will not materially exceed the reserve for
obsolete or excess materials and supplies as reflected on the books of
Ogden or such Ogden Subsidiary.
(ii) Schedules of the Telephone Plant. Schedule 6.1(ii) sets
forth copies of schedules (at the level of detail agreed to by the
parties but in any case including details regarding net book value and
continuing property records lists associated therewith) of the "Plant in
Service" of Ogden and each Ogden Subsidiary as of December 31, 1995. The
account balances reflected on the schedule of Telephone Plant
correspond, in all material respects, to the associated account balances
reflected on the books of Ogden and each Ogden Subsidiary.
(jj) Correct Records. The financial records, ledgers, account
books and other accounting records of Ogden and each Ogden Subsidiary
are current, correct and complete in all material respects and, to the
knowledge of Ogden, conform in all material respects with the rules and
regulations of the FCC and NYPSC.
(kk) Approval of Transactions. Ogden is not aware of any fact,
event or circumstance relating to Ogden or any Ogden Subsidiary that is
reasonably likely to cause a regulatory agency to deny or withhold its
approval to the transactions contemplated hereby.
(ll) Accounts Receivable. The accounts receivable for Ogden and
the Ogden Subsidiaries as stated in the Financial Statements are actual
and bona fide receivables representing obligations for the total dollar
amount of such receivables, as shown on the books of Ogden and the Ogden
Subsidiaries, that resulted from the regular course of business of Ogden
and the Ogden Subsidiaries. To Ogden's knowledge, such receivables are
fully collectible in accordance with their terms and are subject to no
offset or reduction of any nature, except for a reserve for
uncollectible amounts consistent with the reserve established by Ogden
and the Ogden Subsidiaries in the Financial Statements. The value (as
reflected on Ogden's books) of any Accounts Receivable of Ogden and any
Ogden Subsidiary relating to the Business which are over 90 days are
either recoverable in full from Interexchange Carriers under billing and
collection contracts or will not materially exceed the billing reserve
established by Ogden in the Financial Statements.
(mm) Disclosure. No representations or warranty made by Ogden in
this Agreement and no statement made in any document, schedule or
exhibit referred to herein and furnished by Ogden contains or will
contain any untrue statement of a material fact, or omits or will omit
to state a material fact necessary to make the statements contained
therein, in light of the circumstances in which they were made, not
misleading.
(nn) Information Supplied. Information responding to Items
4(a)(6), 7, 17 and 18 of Form S-4 and Schedule 14A included in the Proxy
Statement prepared by Ogden and Registration Statement prepared by
Citizens and the Prospectus will, at the time the Registration Statement
on Form S-4 becomes effective under the Act, not contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances in which made, not misleading. Such portions
of the Proxy Statement and Registration Statement will comply as to form
in all material respects with the provisions of the Act and the Exchange
Act and the rules and regulations thereunder, specifically for use in
the preparation thereof.
6.2 Representations and Warranties of Citizens. As of the Execution
----------------------------------------------
Date, Citizens represents and warrants to Ogden as follows:
(a) Organization, Standing and Power. Citizens and Sub are each
corporations duly organized, validly existing and in good standing under
the laws of their respective jurisdictions of incorporation. Each of
Citizens and Sub has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now
being conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification
necessary.
(b) Authority and Effect of Agreement. Each of Citizens and Sub
has all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Citizens and Sub. This
Agreement has been duly executed and delivered by Citizens and Sub and
constitutes a valid and binding obligation of Citizens and Sub
enforceable in accordance with its terms, except as the enforceability
hereof may be limited by (i)bankruptcy, insolvency or other laws
relating to or affecting generally creditors' rights and (ii)general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). The execution and
delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby and the fulfillment of the obligations
and undertakings hereunder will not result in any violation pursuant to
any provision of the Certificate of Incorporation or By-laws of Citizens
or Sub or result in any violation of any Contract, Permit or Law
applicable to Citizens or Sub or to which Citizens or Sub is a party. No
consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Authority is required by or
with respect to Citizens or Sub in connection with the execution and
delivery of this Agreement by Citizens and Sub or the consummation by
Citizens and Sub of the transactions contemplated hereby, except for (i)
the filings and approvals described in Sections 3.1(m), 3.2(b), 3.2(c),
3.3(b) and 3.3(d) or (ii) the filing of a Certificate of Merger with the
Secretary of State of the State of New York as contemplated by
Section 1.1 hereof.
(c) SEC Documents. Citizens has made available to Ogden a true
and complete copy of its annual report on Form 10-K for the year ended
December 31, 1995, its quarterly reports on Form 10-Q for the quarters
ended March 31, 1996, June 30, 1996 and September 30, 1996 and
definitive proxy statement for the 1996 Annual Meeting of the
Stockholders of Citizens held on May 23, 1996 filed by Citizens with the
SEC (as such documents have since the time of their filing been amended,
the "Citizens SEC Documents"). As of their respective dates, the
Citizens SEC Documents complied in all material respects with the
requirements of the Act and the Exchange Act and the rules and
regulations of the SEC thereunder applicable to such Citizens SEC
Documents, and none of the Citizens SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Citizens included in the
Citizens SEC Documents comply as to form in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by Form 10-Q of the SEC)
and fairly present (subject, in the case of the unaudited statements, to
normal, recurring audit adjustments) the consolidated financial position
of Citizens and its consolidated Subsidiaries as at the dates thereof
and the consolidated results of their operations and cash flows for the
periods then ended.
(d) Capitalization of Sub. The authorized capital stock of Sub
consists of one thousand (1,000) shares of common stock, no par value.
As of the Execution Date, one hundred (100) shares of common stock are
issued and outstanding, all of which are held by Citizens. Such shares
have been validly issued and outstanding, are fully paid and
nonassessable, and have not been issued in violation of, and are not
subject to any preemptive rights. There are no outstanding convertible
or exchangeable securities, puts, warrants, rights, subscriptions, calls
or options, related to any such shares.
(e) Information Supplied. Information responding to Items 1, 2,
3, 4(a)(1), 4(a)(2), 4(a)(3), 4(a)(5), 4(b), 4(c), 5, 8, 9, 10, 11,
18(a)(7), 20, 21 and 22 of Form S-4 included in the Registration
Statement prepared by Citizens and the prospectus will, at the time such
Registration Statement becomes effective under the Act, not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which made, not misleading.
Such portions of the Registration Statement will comply as to form in
all material respects with the provisions of the Act and the Exchange
Act and the rules and regulations thereunder, specifically for use in
the preparation thereof.
(f) Brokers. Neither Citizens nor Sub has paid or become
obligated to pay any fee or commission to any broker, finder, investment
banker or other intermediary in connection with the transaction
contemplated by this Agreement in such a manner as to give rise to a
valid claim against Ogden for any broker's or finder's fees or similar
fees or expenses.
(g) Citizens A Stock. The shares of Citizens A Stock to be issued
in connection with the Merger have been duly authorized and, when issued
and delivered against payment therefor pursuant to this Agreement, will
be duly authorized, validly issued, fully paid and non-assessable, free
of preemptive rights of any security holder of Citizens and free of all
Liens other than restrictions arising under the Securities Act. Neither
the filing of the Registration Statement nor the offering or sale of any
of the shares of Citizens A Stock as contemplated by this Agreement
gives rise to any rights, other than those which have been waived or
satisfied, for or relating to the registration of any securities of
Citizens.
(h) Ogden Capital Stock. Neither Citizens, Sub, nor any
Subsidiary of either Citizens or Sub, beneficially owns any capital
stock of any class of Ogden, either directly or indirectly.
(i) Stock Dividend Sale Plan. The Citizens A Stock to be issued
pursuant to this Agreement is convertible on a share-for-share basis
into Series B Common Stock of Citizens at no cost to Ogden Shareholders
if converted through the Exchange Agent. Citizens has no plan or
intention to terminate such conversion rights. Citizens has no present
plan or intention of terminating, suspending, amending or otherwise
modifying the Citizens Utilities Series B Stock Dividend Sale Plan
attached hereto as Exhibit D (the "Stock Dividend Sale Plan"), including
without limitation any amendments or modifications which relate to
eligibility or procedures for participation. The Stock Dividend Sale
Plan complies in all respects with all Laws, including without
limitation the Act and the Exchange Act. Following the Effective Time,
each Ogden Shareholder who has properly converted his or her shares of
Citizens A Stock into shares of Series B Common Stock of Citizens and
who is either a "Record Owner" or an "Eligible Customer" (as such terms
are defined in the Stock Dividend Sale Plan) will be eligible to enroll
in the Stock Dividend Sale Plan in accordance with and subject to the
terms and conditions of the Stock Dividend Sale Plan as modified from
time to time by Citizens so long as the Stock Dividend Sale Plan has not
been suspended or terminated by Citizens.
(j) Approval of Transactions. Citizens is not aware of any fact,
event or circumstance relating to Citizens or Sub that is reasonably
likely to cause a regulatory agency to deny or withhold its approval to
the transactions contemplated hereby.
(k) Disclosure. No representations or warranty made by Citizens
or Sub in this Agreement and no statement made in any document, schedule
or exhibit referred to herein and furnished by Citizens or Sub contains
or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary make the statements
contained therein, in light of the circumstances in which they were
made, not misleading.
ARTICLE VII
ADDITIONAL COVENANTS
7.1 Sales and Similar Taxes.
------------------------
(i) Citizens and Sub shall be solely responsible for, and
shall make timely payment of, any state or local taxes resulting
from the consummation of the Merger (other than any state or
local income tax liabilities of any shareholders of Ogden),
including, but not limited to any New York State sales and use
taxes imposed, as a result of the Merger, on the transfer of any
and all assets owned by Ogden. Ogden shall cooperate in providing
any documents or affidavits necessary for any filings.
(ii) Citizens shall indemnify, defend and hold harmless
Ogden and its directors, officers, employees and shareholders
from and against any and all liability, cost, loss or expense to
them or any of them arising out of the imposition of any state or
local taxes resulting from the consummation of the Merger (other
than any state or local income tax liabilities of any
shareholders of Ogden), including but not limited to, New York
State sales and use taxes.
7.2 Press Releases. The parties shall consult with each other in
----------------
preparing any press release, public announcement, news media response or other
form of release of information concerning this Agreement or the transactions
contemplated hereby that is intended to provide such information to the news
media or the public (a "Press Release"). Neither party shall issue or cause the
publication of any such Press Release without the prior written consent of the
other party; provided, however, that nothing herein will prohibit either party
from issuing or causing publication of any such Press Release to the extent that
such action is required by applicable Law or the rules of any national stock
exchange applicable to such party or its Affiliates, in which case the party
wishing to make such disclosure will, if practicable under the circumstances,
notify the other party of the proposed time of issuance of such Press Release
and consult with and allow the other party reasonable time to comment on such
Press Release in advance of its issuance.
7.3 Expenses. Except as otherwise expressly provided herein, each party
--------
will pay any expenses (including, without limitation, attorneys' fees) incurred
by it in connection with to this Agreement and in consummating the transactions
provided for herein.
7.4 Filing of Financial and Other Information. Citizens covenants and
------------------------------------------
agrees to file with the SEC, in the next appropriate SEC Report 10-Q or 10-K to
be filed by Citizens after the Effective Time, all necessary interim financial
statements to facilitate the secondary resale of Citizens A Stock received by
Ogden shareholders who sign Affiliate Agreements.
ARTICLE VIII
EMPLOYEE MATTERS
8.1 Ogden Transferred Employees.
----------------------------
(a) As of the Closing Date, Citizens shall cause Ogden to
continue to employ the employees of Ogden who are actively employed by
Ogden immediately prior to Closing and who are listed on Scheduled
8.1(a) ("Transferred Employees"). For purposes of the preceding
sentence, the term "active" shall include employees on maternity leave,
on short-term disability, on military leave, and on other approved
leaves of absence of twelve months or less, but shall not include any
other employee of Ogden as of the Closing. Prior to the Closing Date,
Ogden shall take any and all actions necessary to terminate the
employment of any employee who is not a "Transferred Employee" as
defined above.
(b) Following the Closing, Citizens covenants and agrees to (i)
use its commercially reasonable efforts not to relocate any Transferred
Employees and to place Transferred Employees in positions with Citizens
or subsidiaries of Citizens in at least the same position and base
compensation level as such employees have as of the Effective Time, and
(ii) honor all existing employment and consulting agreements between
Ogden and its employees or consultants listed on Schedule 6.1(m),
notwithstanding the resignation of certain employees from the offices
held by such employees (but not from employment) pursuant to Section
4.1(q) hereof. The parties agree and acknowledge that the resignation of
such officers shall not have the effect of terminating their employment
with Ogden or of terminating or causing a breach pursuant to such
officers' respective Employment Agreements, as amended and as set forth
in Schedule 6.1(m), all of which Citizens covenants and agrees to assume
and be responsible for. Citizens covenants and agrees to amend such
Employment Agreements as of the Effective Time to reflect mutually
agreeable revised job titles of such officers.
(c) Notwithstanding anything to the contrary contained in her
Consulting Agreement, Citizens covenants and agrees that Maxine Davison
shall continue to have use of her office until the later of December 31,
1997 or the Closing Date.
8.2 Employee Benefit Plans.
-----------------------
(a) At least fifteen days prior to the Effective Time, Ogden
shall take any and all actions necessary to cease benefit accruals and
fully vest all participants in their accrued benefits under the Ogden
Telephone Company Pension Plan (the "Ogden Pension Plan") as of the date
their benefit accruals cease, including providing the notice required
under Section 204(h) of ERISA.
(b) Ogden shall make, or cause to be made, to the Ogden Pension
Plan as of the Effective Time, a prorated portion of the minimum
required contribution under Section 412 of the Code for the 1997 Plan
Year (and the 1998 Plan Year, if applicable) determined, using the
actuarial assumptions specified in Ogden's January 1, 1996 actuarial
valuation report for the Ogden Pension Plan for funding purposes, by
multiplying such required minimum contribution by a fraction, the
numerator of which is the number of days in 1997 (and 1998, if
applicable) preceding the Closing and the denominator of which is 365.
(c) Effective as of the Effective Time or as soon thereafter as
administratively feasible, Citizens and Ogden shall cause the Ogden
Pension Plan to be merged into the Citizens Pension Plan. As required by
Section 414(l) of the Code and regulations thereunder, in no event shall
the accrued benefits of Transferred Employees under the Citizens Pension
Plan (or of any other participant in the Ogden Pension Plan) be less
than their accrued benefits under the Ogden Pension Plan immediately
before the plan merger. Not later than 30 days prior to said plan
merger, Citizens and Ogden shall respectively ensure that the Internal
Revenue Form 5310A is filed with the IRS.
(d) Ogden covenants and agrees that, except as required by Law or
as required by Section 8.2(i), it shall not vary the plan terms or
conditions of the Ogden Pension Plan or of the post-retirement medical
plan from those that provided the basis for determining the unfunded
accrued benefit obligation and accrued post-retirement benefit
obligation, respectively, as reported in the Consolidated Balance Sheets
of Ogden Telephone Company and its Subsidiaries as of December 31, 1995.
For purposes of determining the Ogden Net Liabilities under Section
2.1(d)(i), the unfunded accrued benefit obligation of the Ogden Pension
Plan as of the Closing Date shall be calculated using the actuarial
assumptions used in determining net periodic pension cost and
accumulated benefit obligations which are specified in the Annual
Disclosure Report for the Ogden Pension Plan SFAS 87 and 88 for the year
ending December 31, 1995.
(e) Effective as of the Effective Time, Citizens shall cause the
Citizens Pension Plan to be amended to include Transferred Employees,
and shall recognize the service that the Transferred Employee had with
Ogden and its subsidiaries, determined immediately prior to the Closing
Date under the terms of the Ogden Pension Plan, for purposes of
determining such employee's eligibility to participate and vesting under
the Citizens Pension Plan, but not for purposes of determining such
Employee's accrual of benefits under the Citizens Pension Plan. Under
the Citizens Pension Plan, the accrued benefit of each Transferred
Employee shall equal the sum of each Transferred Employee's Ogden
Pension Plan benefit, plus the Transferred Employee's accrued benefit
under the Citizens Pension Plan calculated using service rendered with
Citizens and its direct and indirect subsidiaries after the Effective
Time. For purposes of this Section, the Ogden Pension Plan benefit shall
be calculated by applying the benefit formula contained in the Ogden
Pension Plan (as in effect on the Closing Date) to the Transferred
Employee's service for benefit accrual purposes credited under the Ogden
Pension Plan as of the Closing Date, and the Transferred Employee's
Average Annual Compensation (as defined in the Ogden Pension Plan as of
the Closing Date).
(f) As soon as practicable following the Execution Date, Citizens
covenants and agrees to negotiate in good faith with those individuals
who are parties to deferred compensation agreements with Ogden, for
mutually agreeable arrangements with respect to deferred compensation.
(g) Prior to the Closing Date, Ogden shall take any and all
actions necessary to (i) fully vest Ogden employees in their account
balances under the Ogden Telephone Company Tax Deferred Savings
Retirement Plan and Trust (the "Ogden 401(k) Plan"), (ii) to terminate
said Plan, and (iii) to file with the IRS a request for a determination
that the termination of said Plan does not adversely affect its
qualified status.
(h) As of the Effective Time, Citizens shall enroll Ogden
Employees in the CUC 401(k) Employee Benefit Plan ("Citizens 401(k)
Plan"). The service of each Transferred Employee with Ogden and the
Ogden Subsidiaries shall be recognized under the Citizens' 401(k) Plan
for purposes of determining such employee's eligibility to participate
and vesting in Citizens' 401(k) Plan. As soon as administratively
feasible following the Closing and upon receipt of a favorable
determination letter upon termination of the Ogden 401(k) Plan, Ogden
shall cause the trustee of the Ogden 401(k) Plan to distribute vested
account balances under the Ogden 401(k) Plan and Citizens shall cause
the Citizens 401(k) Plan to accept direct rollovers of vested account
balances (including loan balances) from the terminated Ogden 401(k)
Plan. It is Ogden's intent to disclose to the IRS, during the
termination process, the facts of the Merger and if, upon such
disclosure, it is determined that distributions from the Ogden Plan
would not comply with Treasury Regulation ss.1.401(k)-1(d)(3), then
Citizens shall, at its election, either (i)effect trust-to-trust
transfers of the vested account balances of Transferred Employees under
the Ogden 401(k) Plan, or (ii) maintain the Ogden 401(k) Plan as a
wasting trust.
(i) Prior to the Effective Time and except as hereinbefore
provided or otherwise required by Law, Ogden shall take any and all
action necessary to terminate all other Plans, including but not limited
to those set forth on Schedule 6.1(p) so that Citizens shall have no
liability, and not become a successor, with respect to any of such Plans
as of the Closing Date with respect to any existing or former employees
of Ogden; provided, however, that this provisions shall not apply to
deferred compensation agreements listed on Schedule 6.1(p), and shall
not apply to non-contributory post-retirement medical coverage for
retirees and for Ogden employees who have satisfied the age and service
requirements for such coverage on or before September 1, 1997.
(j) As of the Effective Time, Citizens shall designate one or
more plans to provide pre-retirement medical, dental, and prescription
drug benefits ("Citizens' Medical Plan") to Transferred Employees and
their eligible dependents. As of the Effective Time, Citizens shall
enroll all Transferred Employees and their eligible dependents in such
Plan subject to all of the terms and conditions of such Plan; provided,
however, that Citizens shall cause its medical, dental and prescription
drug benefits plans to waive any waiting period and any restrictions and
limitations for pre-existing conditions. Citizens and the Citizens'
Medical Plan shall be responsible only for medical, dental, and
prescription drug expenses incurred by Transferred Employees and their
eligible dependents after the Effective Time.
(k) As of the Effective Time, Citizens shall allow Transferred
Employees to enroll in plans providing long-term and short-term
disability benefits, life insurance, accidental death and dismemberment,
travel accident coverage and health and dependent care flexible spending
account plans. In the case of Citizens long-term disability benefits and
life insurance plans, such enrollment shall be without waiting period or
pre-existing condition limits or exclusions, subject to the consent of
the insurance company providing such benefits to waive such waiting
period or pre-existing condition limits or exclusions. If such consent
cannot be obtained before the Effective Time, the parties will delay the
termination of the corresponding Ogden Plan with respect to any
Transferred Employee not able to enroll in such Citizens plans due to
such waiting period and with respect to any Transferred Employee who is
able to enroll but would be subject to a pre-existing condition limit or
exclusion. Citizens and its plans shall assume all responsibility for
accidents and sickness, worker's compensation, and short-term and
long-term disability claims incurred by any Ogden employee after the
Effective Time.
(l) At least 10 days but no more than 30 days prior to the
Closing Date, Ogden shall deliver to Citizens a revised Schedule 6.1(p)
setting forth true and complete information as of a date no earlier than
the end of the month immediately preceding the month in which Closing
occurs.
(m) Ogden will make available to Citizens, prior to the Closing
Date, a list of those employees that Ogden believes (1) to have
participated in the health or dependent care reimbursement accounts of
Ogden or the Ogden Subsidiaries, together with the elections made prior
to the Closing Date with respect to such accounts through the Closing
Date, and (2) will leave Ogden within six months following the Closing
Date, together with each such employee's salary and benefits
information.
ARTICLE IX
SURVIVAL AND TERMINATION OF REPRESENTATION AND WARRANTIES
9.1 Representations and Warranties of Citizens. In the event the Merger
-------------------------------------------
is consummated, Citizens and Sub shall be liable with respect to any breach of
any warranty or representation contained in Section 6.2 hereof only to the
extent, if any, that Citizens would be liable pursuant to the Act or the
Exchange Act, irrespective of terms and conditions of this Agreement. The
representations and warranties of Citizens contained in this Agreement shall
survive the Closing, provided that no claims may be made against Citizens for
any breach of Citizens' representations and warranties, and Citizens shall have
no liability of any nature, from and after the second anniversary of the Closing
Date.
9.2 Termination of Ogden's Representations and Warranties. The
-------------------------------------------------------------
representations and warranties of Ogden contained in Section 6.1 shall expire,
lapse and be of no further force or effect from and after the Effective Time,
and after such time Ogden shall have no liability of any nature (including
liability to indemnify Citizens) on account of the breach of any such
representation or warranty.
ARTICLE X
TERMINATION
10.1 Termination Rights. This Agreement may be terminated at any time
--------------------
prior to the Closing Date:
(a) by mutual written consent of the parties;
(b) by Ogden, if there has been a material misrepresentation,
breach of covenant or breach of warranty on the part of Citizens or Sub
in their respective representations, warranties or covenants set forth
in this Agreement;
(c) by Citizens, if (i) there has been a material
misrepresentation, breach of covenant or breach of warranty on the part
of Ogden in its representations, warranties or covenants set forth in
this Agreement, (ii) Ogden's Board of Directors shall not recommend to
the Ogden Shareholders the approval of the transactions contemplated by
this Agreement or shall withdraw or modify in any manner adverse to
Citizens' its approval or recommendation of the transactions
contemplated hereby; or (iii) Ogden's Board of Directors shall take any
other action to facilitate any other transaction or series of
transactions that, if consummated, would impair Citizens' ability to
consummate the transaction contemplated hereby;
(d) by Citizens if any of the conditions provided in Section 4.1
of this Agreement have not been met at the Closing and have not been
waived by Citizens; or
(e) by Ogden if any of the conditions provided in Section 4.2 of
this Agreement have not been met at the Closing and have not been waived
by Ogden; provided, however, that a party shall not be entitled to
exercise any right of termination pursuant to subsection (b), (c), (d)
or (e) above if such party shall not have performed diligently and in
good faith the obligations required to be performed by such party
hereunder prior to the date of termination.
(f) by Ogden or Citizens, if the Closing has not occurred on or
before March 31, 1998, unless such failure to close shall be due to a
breach of this Agreement by the party seeking to terminate this
Agreement.
(g) by Ogden or Citizens, if the Ogden Shareholders fail to
approve the Agreement and the transactions contemplated hereby at the
meeting of Ogden Shareholders held pursuant to Section 3.1(d).
10.2 Effect of Termination.
----------------------
(a) If this Agreement is terminated pursuant to Sections 10.1(a)
or 10.1(f), this Agreement shall be of no further force and effect and
there shall be no further liability hereunder on the part of either
party or its Affiliates, directors, officers, shareholders, agents or
other representatives.
(b) If this Agreement is terminated by Citizens pursuant to
Sections 10.1(c) or 10.1(d), this Agreement shall be of no further force
and effect and if such termination under Section 10.1(d) is as a result
of a failure of Section 4.1(a) hereof or if such termination is under
Section 10.1(c), then in either case Ogden shall immediately pay to
Citizens a termination fee of $300,000 as liquidated damages and,
following such payment, there shall be no further liability hereunder on
the part of either party or its Affiliates, directors, officers,
shareholders, agents or other representatives.
(c) If this Agreement is terminated by Ogden pursuant to Sections
10.1(b), 10.1(e) or 10.1(g), this Agreement shall be of no further force
and effect and, if such termination is under Section 10.1(e) is as a
result of a failure of Section 4.2(a) hereof, Citizens shall immediately
pay to Ogden a termination fee of $300,000 as liquidated damages and,
following such payment, there shall be no further liability hereunder on
the part of either party or its Affiliates, directors, officers,
shareholders, agents or other representatives. If this Agreement is
terminated by Ogden or by Citizens under Section 10.1(g) and provided
that the Ogden Board of Directors has recommended to its shareholders
approval of the transactions contemplated by this Agreement, Ogden shall
immediately pay to Citizens a termination fee equal to Citizens' actual,
documented out-of-pocket costs incurred in connection with the
transactions contemplated by this Agreement, not to exceed $200,000, as
liquidated damages and, following such payment, there shall be no
further liability hereunder on the part of any party or its Affiliates,
directors, officers, shareholders, agents or other representatives.
(d) Notwithstanding anything to the contrary contained herein,
the provisions of this Section 10.2 and of Sections 3.1(a), 3.3(a),
3.3(b), 7.2 and 7.3 shall survive any termination of this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 Definitions. For purposes of this Agreement and any amendment
hereto, the following terms are defined as set out below or in the Section
referenced below. Such terms shall be deemed to refer to the singular, plural,
masculine, feminine or neuter as the context requires.
"Act" shall mean the Securities Act of 1933, amended.
"Affiliate" has the meaning given that term in Rule 405 of the Act. The
Residuary Trust u/w/o D.F. Davison shall not be deemed to be an Affiliate of
Ogden for purposes of Sections 3.1(a), 3.1(b)(xiii) or 6.1(r)of this Agreement.
"Affiliates Agreement" is defined in Section 3.1(f).
"Agreement" is defined on page 1.
"BCL" is defined in Section 1.1.
"Business" shall mean the provision by Ogden of local exchange and exchange
access telecommunications services and related activities, services and
products.
"Cancelled Shares" is defined in Section 2.1(a).
"Capital Budget" is defined in Section 3.1(b)(ii).
"Citizens" is defined on page 1.
"Citizens A Stock" is defined in Section 2.1(b).
"Citizens' Medical Plan" is defined in Section 8.2(j).
"Citizens SEC Documents" is defined in Section 6.2(c).
"Closing" is defined in Section 5.1.
"Closing Date" is defined in Section 5.1.
"Code" is defined in the Recitals.
"Confidentiality Agreement" shall mean that certain Confidentiality Agreement
between Ogden and Citizens dated March 26, 1996.
"Constituent Corporations" is defined in Section 1.2(a).
"Contract" shall mean any written contract, agreement, instrument, lease or
license.
"Disposal" is defined in Section 6.1(x).
"Dissenting Holders" is defined in Section 2.1(c).
"Effective Time" is defined in Section 1.1.
"ERISA" shall mean the Employment Retirement Income Security Act of 1974, as
amended.
"ERISA Plans" is defined in Section 6.1(p).
"Exchange Act" shall mean the Securities Exchange Act of 1934.
"Exchange Agent" is defined in Section 2.2(a).
"Exchange Fund" is defined in Section 2.2(a).
"Execution Date" is defined on page 1.
"FCC" shall mean the Federal Communications Commission.
"Final Adjustment Certificate" is defined in Section 2.1(d)(iv).
"Final Merger Consideration" is defined in Section 2.1(d)(vi).
"Financial Statements" is defined in Section 6.1(k).
"GAAP" shall mean generally accepted accounting principles, consistently
applied.
"Gross Shares Distributable" is defined in Section 2.1(d)(v).
"Governmental Authority" is defined in Section 6.1(f).
"Hazardous Substances" is defined in Section 6.1(x).
"Heldback Shares" is defined in Section 2.1(d)(v).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Information" is defined in the Confidentiality Agreement and referred to in
Section 3.1(a).
"Initial Adjustment Certificate" is defined in Section 2.1(d)(iii).
"Initial Merger Consideration" is defined in Section 2.1(d)(ii).
"Initial Merger Consideration Adjustment" is defined in Section 2.1(d)(ii).
"Intellectual Property" shall mean all inventions (whether patentable or not and
whether or not such inventions are described or claimed in any patent or patent
application),designs (useful or ornamental), and works subject to copyright,
that may be embodied in, without exclusion, invention disclosures,
specifications, manuals, drawings, functional or system block diagrams, flow
charts, circuit diagrams, design or user documentation, engineering notebooks,
schematics, test programs, documented procedures, documented processes,
documented flows, devices, software, or firmware, that relate to the function,
design, development,manufacture, testing, use,operation, maintenance or repair
of any product, apparatus, article of manufacture, process, method or service;
Intellectual Property shall also include patents,patent applications (including
continuations, continuations-in-part, divisions, reissues, reexamined patents
and patent applications, and extensions thereof),copyrights (whether common law
or statutory, registered or unregistered), or trade secrets, residing in the
subject matter above and further includes trademarks, servicemarks (whether
registered or common law rights) and applications therefor.
"IRS" shall mean the United States Internal Revenue Service.
"Law" is defined in Section 6.1(g).
"Lien" is defined in Section 6.1(i).
"Long Term Indebtedness" is defined in Section 3.1(m).
"Market Price" is defined in Section 2.1(b)
"Merger" is defined in the Recitals.
"Merger Consideration" is defined in Section 2.1(b).
"NYPSC" is defined in Section 3.3(d).
"NYSE" is defined in Section 2.1(b).
"Ogden" is defined on page 1.
"Ogden 401(k) Plan" is defined in Section 8.2(h)
"Ogden Adjusted Net Liabilities" is defined in Section 2.1(d)(i).
"Ogden 12/31/95 Net Liabilities" is defined in Section 2.1(d)(i).
"Ogden Certificates" is defined in Section 2.2(b).
"Ogden Common Stock" is defined in Section 2.1.
"Ogden Convertible Preferred Stock" is defined in Section 3.1(h).
"Ogden Net Liabilities" is defined in Section 2.1(d)(i).
<PAGE>
"Ogden Pension Plan" is defined in Section 8.2(a).
"Ogden Preferred Stock" is defined in Section 3.1(h).
"Ogden Shareholders" is defined in the Recitals.
"Ogden Shareholders Representative" shall mean Francis M. Smith or such other
individual designated by Ogden, with notice thereof given to Citizens in
accordance with Section 11.2 of this Agreement.
"Ogden Subsidiaries" is defined in Section 6.1(c).
"party" and "parties" are defined on page 1.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permits" is defined in Section 6.1(w).
"Person" shall mean any individual, sole proprietorship, partnership, limited
liability company, limited liability partnership, joint venture, trusts,
unincorporated association, corporation, or entity, included any Governmental
Authority.
"Plans" is defined in Section 6.1(p).
"Press Release" is defined in Section 7.2.
"Proxy Materials" is defined in Section 3.3(e).
"Qualified Auditor" is defined in Section 2.1(d)(iv).
"REA" is defined in Section 3.1(m).
"REA Consent" is defined in Section 3.1(m).
"Record Date" is defined in Section 2.2(b).
"Registration Statement" is defined in Section 3.3(e).
"Regulatory Approvals" shall mean the approval and consent to the transactions
contemplated hereby all Governmental Authorities from whom approval is
required, including without limitation, approval of the NYPSC, the FCC
(other than regulatory action with respect to Study Areas) and approval under
the HSR Act.
"Release" is defined in Section 6.1(x).
"SEC" shall mean the United States Securities and Exchange Commission.
"Stock Dividend Sale Plan" is defined in Section 6.2(i).
"Sub" is defined on page 1.
"Subsidiary" is defined in Section 2.1(a). The Residuary Trust u/w/o D. F.
Davison shall not be deemed to be a Subsidiary of Ogden for purposes of this
Agreement.
"Surviving Corporation" is defined in Section 1.2(a).
"Transferred Employees" is defined in Section 8.1(a).
"Trust Properties" shall mean the following parcels of real property: (i)
181-191 South Union Street, Village of Spencerport, Town of Ogden, Monroe
County, New York (Tax Account Nos. 87.13-1-10 and 87.13-1-11); (ii) 23 West
Avenue, Village of Spencerport, Town of Ogden, Monroe County, New York (Tax
Account No. 87.13-1-14); and (iii) 4333 Buffalo Road, Town of Chili, Monroe
County, New York (Tax Account No. 132.13-1-81), together with and including all
buildings and other improvements thereon and all rights of Seller in and to any
and all streets,roads, highways, alleys, driveways, easements and rights-of-way
appurtenant thereto.
"Voting Agreement" is defined in the Recitals.
11.2 Notices. All notices and other communications required or permitted
-------
hereunder shall be in writing and, unless otherwise provided in this Agreement,
will be deemed to have been given when delivered in person or when dispatched by
electronic facsimile transfer (with transmission confirmed) or one business day
after having been dispatched for next-day delivery by a nationally recognized
overnight courier service to the appropriate party at the address specified
below, or to such other address or addresses as any such party may from time to
time designate for itself by like notice.
(a) If to Ogden:
Prior to Closing:
Ogden Telephone Company
21 West Avenue
Spencerport, New York 14559
Attn: Philip T. Evans, President
with copies to:
Kraskin & Lessee
2120 L Street, N.W., Suite 520
Washington, D.C. 20037
Attn: David I. Reader, Esq.
and
Harter, Secrest & Emery
700 Midtown Tower
Rochester, New York 14614
Attn: John T. Pattison, Esq.
After Closing:
Francis M. Smith, as the Ogden Shareholders Representative
21 West Avenue
Spencerport, New York 14559
with copies to:
Kraskin & Lessee
2120 L Street, N.W., Suite 520
Washington, D.C. 20037
Attn: David I. Reader, Esq.
and
Harter, Secrest & Emery
700 Midtown Tower
Rochester, New York 14614
Attn: John T. Pattison, Esq.
(b) If to Citizens:
Citizens Utilities Company
High Ridge Park
Stamford, Connecticut 06905
Attn: Donald P. Weinstein
With a copy to:
Citizens Utilities Company
High Ridge Park
Stamford, Connecticut 06905
Attn: L. Russell Mitten, II, Esq.
Fleischman and Walsh, L.L.P.
1400 Sixteenth Street, N.W.
Washington, D.C. 20036
Attn: Jeffry L. Hardin, Esq.
11.3 Successors and Assigns. This Agreement will be binding upon and
------------------------
inure to the benefit of the parties and their respective successors and
permitted assigns, but is not assignable or delegable by any party without the
prior written consent of the other parties.
11.4 Amendments. This Agreement may be amended or modified only by a
-----------
subsequent writing signed by authorized representatives of the parties.
11.5 Captions. The captions set forth in this Agreement are for
---------
convenience only and shall not be considered as part of this Agreement, nor as
in any way limiting or amplifying the terms and provisions hereof.
11.6 Entire Agreement. The term "this Agreement" shall mean collectively
-----------------
this document, the Schedules and Exhibits annexed hereto, any agreements
expressly incorporated herein, and the Confidentiality Agreement, as the same
may be amended, modified and supplemented from time to time. This Agreement
supersedes and revokes any prior discussions and representations, other
agreements, commitments, arrangements or understandings of any sort whatsoever,
whether oral or written, that may have been made or entered into by the parties
relating to the matters contemplated hereby. This Agreement constitutes the
entire agreement by and among the parties, and there are no representations,
warranties, agreements, commitments, arrangements or understandings except as
expressly set forth herein.
11.7 Certain Interpretive Matters and Definitions. Unless the context
-----------------------------------------------
otherwise requires, (a) all references to Sections, Articles, Schedules or
Exhibits are to Sections, Articles, Schedules or Exhibits of or to this
Agreement, (b) each term defined in this Agreement has the meaning so assigned
to it, (c) each accounting term not otherwise defined in this Agreement has the
meaning assigned to it in accordance with GAAP, (d) all references to the
"knowledge" or "best knowledge" of a party will be deemed to refer to the actual
knowledge of such party after due inquiry, (e) all references to a party's
"commercially reasonable efforts" and references of like import will be deemed
to refer to the commercially reasonable efforts of such party in accordance with
reasonable commercial practice and without incurring unreasonable expense, and
(g) as used in this Agreement, "material adverse effect" and "material adverse
change" shall be interpreted as referring to a change or effect that has a
significant impact on a party's business as a whole.
11.8 No Construction Against Draftsman. No provision of this Agreement
-----------------------------------
will be interpreted in favor of, or against, any party by reason of the extent
to which any such party or its counsel participated in the drafting thereof or
by reason of the extent to which any such provision is inconsistent with any
prior draft of such provision or of this Agreement.
11.9 Waiver. Except as otherwise expressly provided in this Agreement,
-------
neither the failure nor any delay on the part of any party to exercise any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise or waiver of any such right, power or privilege
preclude any other or further exercise thereof, or the exercise of any other
right, power or privilege available to each party at law or in equity.
11.10 Third Parties. Except as expressly provided herein, nothing
---------------
contained in this Agreement is intended to confer upon any person, other than
the parties and their successors and permitted assigns, any rights or remedies
under or by reason of this Agreement.
11.11 Counterparts. This Agreement may be executed (a) in two or more
-------------
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument or (b) via counterpart facsimiles
upon (i) the transmission by facsimile by each party of a signed signature page
thereof to each other party, with return receipt by facsimile requested and
received and (ii) the parties' agreement that they will each concurrently mail,
by overnight courier, a fully executed original counterpart of the Agreement to
each other party.
11.12 Governing Law. This Agreement shall in all respects be governed by
--------------
and construed in accordance with the internal laws of the State of New York
(except that no effect shall be given to any conflicts of law principles of the
State of New York that would require the application of the laws of any other
jurisdiction).
11.13 Further Assurances. From time to time, as and when requested by
--------------------
one of the parties, the other party will execute and deliver, or cause to be
executed and delivered, all such documents and instruments as may be reasonably
necessary to consummate and make effective the transactions contemplated by this
Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties, acting through their duly authorized
agents, have caused this Agreement to be duly executed and delivered as of the
Execution Date.
CITIZENS UTILITIES COMPANY
By:/s/Ronald E. Spears
--------------------------
Name:Ronald E. Spears
Title:Vice President
CITIZENS-OGDEN TELECOMMUNICATIONS COMPANY
By:/s/Ronald E. Spears
--------------------------
Name:Ronald E. Spears
Title:Vice President
OGDEN TELEPHONE COMPANY
By:/s/Philip T. Evans
------------------
Name:Philip T. Evans
Title:President
<PAGE>
INDEX TO SCHEDULES
Schedule 2.1(d)(i) Calculation of 12/31/95 Ogden Net Liabilities
Schedule 2.1(d)(ii) Actions Taken at Request of Citizens
Schedule 2.1(d)(vii) Certain Pro-Forma Calculations
Schedule 3.1(n) Prohibited Actions (Pooling)
Schedule 4.1(i) Required Consents
Schedule 4.2(n) Citizens Tax Representations and Warranties
Schedule 6.1(c) Ogden Subsidiaries
Schedule 6.1(d) Convertible Securities
Schedule 6.1(e) Restrictions Against Merger
Schedule 6.1(i) Ogden Real Property
Schedule 6.1(m) Contracts and Commitments
Schedule 6.1(n) Legal Proceedings
Schedule 6.1(p) Employee Benefit Matters
Schedule 6.1(q) Bank Accounts
Schedule 6.1(r) Dealings with Affiliates
Schedule 6.1(s) Additional Liabilities
Schedule 6.1(u) Insurance Policies
Schedule 6.1(v) Intellectual Property
Schedule 6.1(w) Permits
Schedule 6.1(x) Environmental Matters
Schedule 6.1(z) Access Lines
Schedule 6.1(dd) FCC Licenses
Schedule 6.1(ee) Non-FCC Licenses
Schedule 6.1(ii) Plant in Service
<PAGE>
INDEX TO EXHIBITS
Exhibit A Voting Agreement
Exhibit B Certificate of Merger
Exhibit C Form of Affiliates Agreement
Exhibit D Citizens Utilities Series B Stock
Dividend Sales Plan
<PAGE>
FIRST AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION
FIRST AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION (the "Amendment"), dated
as of September 22, 1997, by and among Citizens Utilities Company, a Delaware
corporation ("Citizens"), Citizens-Ogden Telecommunications Company, a New York
Corporation ("Sub"), and Ogden Telephone Company, a New York corporation
("Ogden").
RECITALS
A. Citizens, Sub and Ogden are parties to the Agreement and
Plan of Reorganization, dated as of February 3, 1997 (together with the
Schedules and Exhibits thereto, the "Merger Agreement").
B. Citizens, Sub and Ogden desire to amend the Merger Agreement
in order to reflect that, as a result of the conversion of Citizens' Common
Stock Series A to Common Stock Series B, the Merger Consideration shall consist
of shares of Citizens' Common Stock Series B.
NOW, THEREFORE, the parties, intending to be legally bound,
agree as follows:
SECTION 1. Article II, Section 2.1(b) of the Merger Agreement hereby is amended
by deleting the language "Citizens Series A Common Stock (the "Citizens A
Stock") in the first sentence thereof and replacing such language with the
following language: "Citizens Series B Common Stock (the "Citizens B Stock")."
SECTION 2. The Merger Agreement hereby is amended by deleting the language
"Citizens A Stock" wherever located throughout the Agreement and replacing such
language with the following language: "Citizens B Stock".
SECTION 3. Article IV, subsections 4.1(d) and 4.2(f) of the Merger Agreement
hereby are amended so as to each read in their entirety as follows:
"Market Price. The Market Price of Citizens B stock shall not
be less than $2 below the average closing sales price of Citizens' Common Stock
Series A during the 15 trading day period ending 5 trading days before the
Execution Date nor greater than $2 above the average closing sales price of
Citizens' Common Stock Series A during the 15 trading day period ending 5 days
before the Execution Date."
SECTION 4. Article VI, subsection 6.2(i) of the Merger Agreement hereby is
amended so as to read in its entirety as follows:
"Stock Dividend Sale Plan. Citizens has no present
plan or intention of terminating, suspending, amending or
otherwise modifying the Citizens Utilities Series B Stock Dividend
Sale Plan attached hereto as Exhibit D (the "Stock Dividend Sale
Plan"), including without limitation any amendments or
modifications which relate to eligibility or procedures for
participation. The Stock Dividend Sale Plan complies in all
respects with all Laws, including without limitation the Act and
the Exchange Act. Following the Effective Time, each Ogden
Shareholder who is either a "Record Owner" or an "Eligible
Customer" (as such terms are defined in the Stock Dividend Sale
Plan) will be eligible to enroll in the Stock Dividend Sale Plan
in accordance with and subject to the terms and conditions of the
Stock Dividend Sale Plan as modified from time to time by Citizens
so long as the Stock Dividend Sale Plan has not been suspended or
terminated by Citizens."
SECTION 5. This Amendment is hereby made supplemental to and a part of the
Merger Agreement and, except as expressly amended by this Amendment, the Merger
Agreement is in all respects ratified and confirmed and all terms, conditions
and provisions thereof shall remain in full force and effect.
SECTION 6. Capitalized terms contained herein and not otherwise defined herein
shall have the respective meanings assigned to them in the Merger Agreement.
SECTION 7. This Amendment shall be governed by, and construed in accordance
with, the laws of the State of New York (without giving effect to its choice of
law principles).
SECTION 8. This Amendment may be executed in one or more counterparts, and by
the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement. The signature page of any counterpart may
be removed therefrom and attached to any other counterpart to evidence execution
thereof by all of the parties hereto without affecting the validity thereof.
IN WITNESS WHEREOF, Citizens, Sub and Ogden have caused this Amendment
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
CITIZENS UTILITIES COMPANY
By: /s/ Ronald Spears
--------------------
Name: Ronald Spears
Title: V. P. Communications
CITIZENS-OGDEN
TELECOMMUNICATIONS COMPANY
By: /s/ Mark Shine
-----------------
Name: Mark Shine
Title: V. P. Financial Operations
OGDEN TELEPHONE COMPANY
By: /s/ Philip T. Evans
---------------------
Name: Philip T. Evans
Title: President
ANNEX B
NEW YORK Business Corporation Law
Section 623 PROCEDURE TO ENFORCE SHAREHOLDER'S RIGHT TO RECEIVE PAYMENT
FOR SHARES.
(a) A shareholder intending to enforce his right under a section of
this chapter to receive payment for his shares if the proposed corporate action
referred to therein is taken shall file with the corporation, before the meeting
of shareholders at which the action is submitted to a vote, or at such meeting
but before the vote, written objection to the action. The objection shall
include a notice of his election to dissent, his name and residence address, the
number and classes of shares as to which he dissents and a demand for payment of
the fair value of his shares if the action is taken. Such objection is not
required from any shareholder to whom the corporation did not give notice of
such meeting in accordance with this chapter or where the proposed action is
authorized by written consent of shareholders without a meeting.
(b) Within ten days after the shareholders' authorization date, which term
as used in this section means the date on which the shareholders' vote
authorizing such action was taken, or the date on which such consent without a
meeting was obtained from the requisite shareholders, the corporation shall give
written notice of such authorization or consent by registered mail to each
shareholder who filed written objection or from whom written objection was not
required, excepting any shareholder who voted for or consented in writing to the
proposed action and who thereby is deemed to have elected not to enforce his
right to receive payment for his shares.
(c) Within twenty days after the giving of notice to him, any shareholder
from whom written objection was not required and who elects to dissent shall
file with the corporation a written notice of such election, stating his name
and residence address, the number and classes of shares as to which he dissents
and a demand for payment of the fair value of his shares. Any shareholder who
elects to dissent from a merger under section 905 (Merger of subsidiary
corporation) or paragraph (c) of section 907 (Merger or consolidation of
domestic and foreign corporations) or from a share exchange under paragraph (g)
of section 913 (Share exchanges) shall file a written notice of such election to
dissent within twenty days after the giving to him of a copy of the plan of
merger or exchange or an outline of the material features thereof under section
905 or 913.
(d) A shareholder may not dissent as to less than all of the shares, as to
which he has a right to dissent, held by him of record, that he owns
beneficially. A nominee or fiduciary may not dissent on behalf of any
beneficial owner as to less than all of the shares of such owner, as to which
such nominee or fiduciary has a right to dissent, held of record by such nominee
or fiduciary.
(e) Upon consummation of the corporate action, the shareholder shall cease
to have any of the rights of a shareholder except the right to be paid the fair
value of his shares and any other rights under this section. A notice of
election may be withdrawn by the shareholder at any time prior to his acceptance
in writing of an offer made by the corporation, as provided in paragraph (g),
but in no case later than sixty days from the date of consummation of the
corporate action except that if the corporation fails to make a timely offer, as
provided in paragraph (g), the time for withdrawing a notice of election shall
be extended until sixty days from the date an offer is made. Upon expiration of
such time, withdrawal of a notice of election shall require the written consent
of the corporation. In order to be effective, withdrawal of a notice of election
must be accompanied by the return to the corporation of any advance payment made
to the shareholder as provided in paragraph (g). If a notice of election is
withdrawn, or the corporate action is rescinded, or a court shall determine that
the shareholder is not entitled to receive payment for his shares, or the
shareholder shall otherwise lose his dissenter's rights, he shall not have the
right to receive payment for his shares and he shall be reinstated to all his
rights as a shareholder as of the consummation of the corporate action,
including any intervening preemptive rights and the right to payment of any
intervening dividend or other distribution or if any such rights have expired
or any dividend or distribution other than in cash has been completed, in
lieu thereof, at the election of the corporation, the fair value thereof in cash
as determined by the board as of the time of such expiration or completion, but
without prejudice otherwise to any corporate proceedings that may have been
taken in the interim.
(f) At the time of filing the notice of election to dissent or within one
month thereafter the shareholder of shares represented by certificates shall
submit the certificates representing his shares to the corporation, or to its
transfer agent, which shall forthwith note conspicuously thereon that a notice
of election has been filed and shall return the certificates to the shareholder
or other person who submitted them on his behalf. Any shareholder of shares
represented by certificates who fails to submit his certificates for such
notation as herein specified shall, at the option of the corporation exercised
by written notice to him within forty-five days from the date of filing of such
notice of election to dissent, lose his dissenter's rights unless a court, for
good cause shown, shall otherwise direct. Upon transfer of a certificate bearing
such notation, each new certificate issued therefor shall bear a similar
notation together with the name of the original dissenting holder of the shares
and a transferee shall acquire no rights in the corporation except those which
the original dissenting shareholder had at the time of the transfer.
(g) Within fifteen days after the expiration of the period within which
shareholders may file their notices of election to dissent, or within fifteen
days after the proposed corporate action is consummated, whichever is later (but
in no case later than ninety days from the shareholder's authorization date),
the corporation or, in the case of a merger or consolidation, the surviving or
new corporation, shall make a written offer by registered mail to each
shareholder who has filed such notice of election to pay for his shares at a
specified price which the corporation considers to be their fair value. Such
offer shall be accompanied by a statement setting forth the aggregate number of
shares with respect to which notices of election to dissent have been received
and the aggregate number of holders of such shares. If the corporate action has
not been consummated,such offer shall also be accompanied by (1) advance payment
to each such shareholder who has submitted the certificates representing his
shares to the corporation, as provided in paragraph (f), of an amount equal to
eighty percent of the amount of such offer,or (2) as to each shareholder who has
not yet submitted his certificates a statement that advance payment to him of an
amount equal to eighty percent of the amount of such offer will be made by the
corporation promptly upon submission of his certificates. If the corporate
action has not been consummated at the time of the making of the offer, such
advance payment or statement as to advance payment shall be sent to each
shareholder entitled thereto forthwith upon consummation of the corporate
action. Every advance payment or statement as to advance payment shall include
advice to the shareholder to the effect that acceptance of such payment does not
constitute a waiver of any dissenter's rights. If the corporate action has not
been consummated upon the expiration of the ninety day period after the
shareholders' authorization date, the offer may be conditioned upon the
consummation of such action. Such offer shall be made at the same price per
share to all dissenting shareholders of the same class, or if divided into
series, of the same series and shall be accompanied by a balance sheet of the
corporation whose shares the dissenting shareholder holds as of the latest
available date, which shall not be earlier than twelve months before the making
of such offer, and a profit and loss statement or statements for not less than
a twelve months period ended on the date of such balance sheet or, if the
corporation was not in existence throughout such twelve month period, for the
corporation thereof during which it was in existence. Notwithstanding the
foregoing, the corporation shall not be required to furnish a balance sheet or
profit and loss statement or statements to any shareholder to whom such
balance sheet or profit and loss statement or statements were previously
furnished, nor if in connection with obtaining the shareholders' authorization
for or consent to the proposed corporate action the shareholders were
furnished with a proxy or information statement, which included financial
statements, pursuant to Regulation 14A or Regulation 14C of the United States
Securities and Exchange Commission. If within thirty days after the making
of such offer, the corporation making the offer and any shareholder agree upon
the price to be paid for his shares, payment therefor shall be made within
sixty days after the making of such offer or the consummation of the proposed
corporate action, whichever is later, upon the surrender of the certificates
for any such shares represented by certificates.
(h) the following procedure shall apply if the corporation fails to make
such offer within such period of fifteen days, or if it makes the offer and any
dissenting shareholder or shareholders fail to agree with it within the period
of thirty days thereafter upon the price to be paid for their shares:
(1) The corporation shall, within twenty days after the expiration of
whichever is applicable of the two periods last mentioned, institute a special
proceeding in the supreme court in the judicial district in which the office of
the corporation is located to determine the rights of dissenting shareholders
and to fix the fair value of their shares. If, in the case of merger or
consolidation, the surviving or new corporation is a foreign corporation without
an office in this state, such proceeding shall be brought in the county where
the office of the domestic corporation, whose shares are to be valued, was
located.
(2) If the corporation fails to institute such proceeding within such period
of twenty days, any dissenting shareholder may institute such proceeding for the
same purpose not later than thirty days after the expiration of such twenty day
period. If such proceeding is not instituted within such thirty day period, all
dissenter's rights shall be lost unless the supreme court, for good cause shown,
shall otherwise direct.
(3) all dissenting shareholders, excepting those who, as provided in
paragraph (g), have agreed with the corporation upon the price to be paid for
their shares, shall be made parties to such proceeding, which shall have the
effect of an action quasi in rem against their shares. The corporation shall
serve a copy of the petition in such proceeding upon each dissenting shareholder
who is a resident of this state in the manner provided by law for the service of
a summons, and upon each nonresident dissenting shareholder either by registered
mail and publication, or in such other manner as is permitted by law. The
jurisdiction of the court shall be plenary and exclusive.
(4) The court shall determine whether each dissenting shareholder, as to
whom the corporation requests the court to make such determination, is entitled
to receive payment for his shares. If the corporation does not request any such
determination or if the court finds that any dissenting shareholder is so
entitled, it shall proceed to fix the value of the shares, which, for the
purposes of this section, shall be the fair value as of the close of business on
the day prior to the shareholders' authorization date. In fixing the fair value
of the shares, the court shall consider the nature of the transaction giving
rise to the shareholder's right to receive payment for shares and its
effects on the corporation and its shareholders, the concepts and methods then
customary in the relevant securities and financial markets for determining fair
value of shares of a corporation engaging in a similar transaction under
comparable circumstances and all other relevant factors. The court shall
determine the fair value of the shares without a jury and without referral to an
appraiser or referee. Upon application by the corporation or by any shareholder
who is a party to the proceeding, the court may, in its discretion, permit
pretrial disclosure, including, but not limited to, disclosure of any expert's
reports relating to the fair value of the shares whether or not intended for use
at the trial in the proceeding and notwithstanding subdivision (d) of section
3101 of the civil practice law and rules.
(5) The final order in the proceeding shall be entered against the
corporation in favor of each dissenting shareholder who is a party to the
proceeding and is entitled thereto for the value of his shares so determine.
(6) The final order shall include an allowance for interest at such rate as
the court finds to be equitable, from the date the corporate action was
consummated to the date of payment. In determining the rate of interest, the
court shall consider all relevant factors, including the rate of interest which
the corporation would have had to pay to borrow money during the pendency of the
proceeding. If the court finds that the refusal of any shareholder to accept the
corporate offer of payment for his shares was arbitrary, vexatious or otherwise
not in good faith, no interest shall be allowed to him.
(7) Each party to such proceeding shall bear its own costs and expenses,
including the fees and expenses of its counsel and of any experts employed by
it. Notwithstanding the foregoing, the court may, in its discretion, apportion
and assess all or any part of the costs, expenses and fees incurred by the
corporation against any or all of the dissenting shareholders who are parties to
the proceeding, including any who have withdrawn their notices of election as
provided in paragraph (e), if the court finds that their refusal to accept the
corporate offer was arbitrary, vexatious or otherwise not in good faith. The
court may, in its discretion, apportion and assess all or any part of the costs,
expenses and fees incurred by any or all of the dissenting shareholders who are
parties to the proceeding against the corporation if the court finds any of the
following: (A) that the fair value of the shares as determined materially
exceeds the amount which the corporation offered to pay; (B) that no offer or
required advance payment was made by the corporation; (C) that the corporation
failed to institute the special proceeding within the period specified therefor;
or (D) that the action of the corporation in complying with its obligations as
provided in this section was arbitrary, vexatious or otherwise not in good
faith. In making any determination as provided in clause (A), the court may
consider the dollar amount or the percentage, or both, by which the fair value
of the shares as determined exceeds the corporate offer.
8) Within sixty days after final determination of the proceeding, the
corporation shall pay to each dissenting shareholder the amount found to be due
him, upon surrender of the certificate for any such shares represented by
certificates.
(i) Shares acquired by the corporation upon the payment of the agreed value
therefor or of the amount due under the final order, as provided in this
section, shall become treasury shares or be cancelled as provided in section 515
(Reacquired shares), except that, in the case of a merger or consolidation, they
may be held and disposed of as the plan of merger or consolidation may otherwise
provide.
(j) No payment shall be made to a dissenting shareholder under this section
at a time when the corporation is insolvent or when such payment would make it
insolvent. In such event, the dissenting shareholder shall, at his option:
(1) Withdraw his notice of election, which shall in such event be deemed
withdrawn with the written consent of the corporation; or
(2) Retain his status as a claimant against the corporation and, if it is
liquidated, be subordinated to the rights of creditors of the corporation, but
have rights superior to the non-dissenting shareholders, and if it is not
liquidated, retain his right to be paid for his shares, which right the
corporation shall be obliged to satisfy when the restrictions of this paragraph
do not apply.
(3) The dissenting shareholder shall exercise such option under subparagraph
(1) or (2) by written notice filed with the corporation within thirty days after
the corporation has given him written notice that payment for his shares cannot
be made because of the restrictions of this paragraph. If the dissenting
shareholder fails to exercise such option as provided, the corporation shall
exercise the option by written notice given to him within twenty days after the
expiration of such period of thirty days.
(k) The enforcement by a shareholder of his right to receive payment for his
shares in the manner provided herein shall exclude the enforcement by such
shareholder of any other right to which he might otherwise be entitled by virtue
of share ownership, except as provided in paragraph (e), and except that this
section shall not exclude the right of such shareholder to bring or maintain an
appropriate action to obtain relief on the ground that such corporate action
will be or is unlawful or fraudulent as to him.
(l) Except as otherwise expressly provided in this section, any notice to be
given by a corporation to a shareholder under this section shall be given in the
manner provided in section 605 (Notice of meetings of shareholders).
(m) This section shall not apply to foreign corporations except as
provided in subparagraph (e)(2) of section 907 (Merger or consolidation of
domestic and foreign corporations). (Last amended by Ch. 117, L. '86,
eff. 9-1-86.)
EXHIBIT C
AFFILIATES AGREEMENT
This Affiliates Agreement ("Agreement") dated as of __________________,
1997, is made by and between ___________________ (the "New Shareowner") and
Citizens Utilities Company ("Citizens").
1. Background.
In connection with the Agreement and Plan of Reorganization (the
"Merger Agreement") entered into as of the 3rd day of February, 1997, by and
among Citizens, Citizens-Ogden Telecommunications Company, a wholly owned
subsidiary of Citizens ("Sub"), and Ogden Telephone Company ("Ogden"), whereby
Sub will merge with and into Ogden, with Ogden being the surviving corporation
(the "Merger"), the New Shareowner will receive shares of Series A Common Stock
of Citizens ("Citizens Stock") in exchange for the shares of the Common Stock of
Ogden which the New Shareowner beneficially owns directly or indirectly at the
effective time of the Merger. The New Shareowner hereby acknowledges that he or
she is an "affiliate" of Ogden, as that term is defined by Rule 144(a)(1) under
the Securities Act of 1933 (the "Securities Act").
The purpose of this Agreement is to address the rights and obligations
between the parties hereto with respect to the securities laws issues arising in
relation to the Merger as set forth herein.
2. Covenants, Representations and Warranties of the New Shareowner.
The New Shareowner hereby makes the following covenants,
representations and warranties to Citizens:
(a) The New Shareowner, as an affiliate of Ogden, will hold
indefinitely the Citizens Stock which the New Shareowner will receive unless a
subsequent transfer, sale or other disposition thereof is either registered
under the Securities Act (Citizens being under no obligation to so register) or
is accomplished by the undersigned in accordance with Rule 145(d) under the
Securities Act.
(b) The New Shareowner has no present plan or intention to
transfer, sell, or otherwise dispose of any of the Citizens Stock which the New
Shareowner will receive in the Merger. In no event will the New Shareowner
transfer, sell or otherwise dispose of any such shares of Citizens Stock in any
transaction, private or public, or in any other way reduce the New Shareowner's
risk relative to any of such shares until such time as the financial results of
at least thirty (30) days of post-Merger combined operations of Citizens and
Ogden have been published.
(c) The New Shareowner is acquiring the Citizens Stock for his
or her own account, and no other person or entity has, or will have, subject to
the right of the New Shareholder to transfer such stock in accordance with this
Agreement, any beneficial interest in the Citizens Stock.
(d) The New Shareowner acknowledges his or her review of and
familiarity with the Securities Act and the Securities Exchange Act of 1934
("Exchange Act") and the rules and regulations promulgated thereunder by the
Securities and Exchange Commission ("SEC") and covenants that he or she will not
take any action with regard to his or her sale of the Citizens Stock that
violates the Securities Act and Exchange Act and the rules and regulations
thereunder, specifically including but not limited to, any deceptive practices,
market manipulation or stabilization activities.
(e) The New Shareowner shall prepare or cause to be prepared
and appropriately filed one or more Forms 144, or successor form, with respect
to any sale of the Citizens Stock.
3. Covenants, Representations and Warranties of Citizens.
Citizens hereby makes the following covenants, representations and
warranties to the New Shareowner:
(a) The Citizens Stock to be received by the New Shareowner
shall be freely transferable, subject only to the pooling requirements set forth
in paragraph 2(b) herein and the requirements set forth in Rules 145(c) and (d)
under the Securities Act.
(b) Citizens shall file with the SEC, in the next appropriate
SEC Report 10-Q or 10-K to be filed by Citizens after the Effective Time, the
financial statements required to be included in such SEC Report 10Q or 10K.
(c) Citizens acknowledges and consents that all of the
certificates representing the Citizens Stock issued in connection with the
Merger shall be issued without any restrictive legend of any type whatsoever nor
with any stop order placed against the account of the New Shareowner.
(d) Citizens acknowledges the New Shareowner's right to
transfer his or her Citizens Stock by gift, provided that such Citizens Stock
remains subject to the terms of this Agreement. Citizens will allow the New
Shareowner to make such transfers provided any such donee shall personally
execute a copy of this Agreement and agree to be bound thereby, subject to, and
benefit from, its provisions. Notwithstanding the foregoing, it is agreed that
during the time period referred to in paragraph 2(b) herein, Citizens shall not
be required to allow any transfer, by gift or otherwise, of the Citizens Stock.
(e) Citizens will file with the SEC the reports referred to in
Rule 144(c)(1) under the Securities Act with so that the requirements of Rule
144(c) under the Securities Act will be satisfied for any affiliate of Ogden
making sales of Citizens Stock pursuant to Rules 144 and 145 under the
Securities Act.
5. Available Exemptions.
The parties hereto agree, notwithstanding anything herein to the
contrary, that in the event any of the foregoing restrictions shall not be
required with respect to any proposed sale by the New Shareowner by virtue of
the existence of any other exemption pursuant to the Securities Act and the
rules and regulations promulgated thereunder, the New Shareowner shall not be
restricted thereby, provided that the New Shareowner, at its own expense,
provides counsel for Citizens with a statement of the exemption to be relied
upon and reasonable evidence including, if requested, a written opinion of
counsel reasonable acceptable to Citizens' counsel, of its applicability to the
proposed sale.
6. Binding Effect.
The provisions of this Agreement shall be binding upon and inure to the
benefit of the heirs, executors, administrators, personal representatives,
successors and the assigns of the parties hereto (including a successor to
Citizens by means of merger, sale of assets or otherwise), provided that in the
event of the death of the New Shareowner, any restriction on the New Shareowner
under this Agreement that is not otherwise required by the Securities Act shall
no longer be binding upon any individual receiving the Citizens Stock thereby.
7. Expenses.
All expenses incident to the sale by the New Shareowner of Citizens
Stock (such as brokerage fees) shall be borne by the New Shareowner.
<PAGE>
IN WITNESS WHEREOF, the New Shareowner and Citizens have executed this
Agreement as of the date first written above.
NEW SHAREOWNER CITIZENS UTILITIES COMPANY
_____________________ ______________________
Name: Name:
Its:
[Signature Page to Securities Agreement among Citizens Utilities Company and
the New Shareowner named above.]
ANNEX D
FORM OF VOTING AGREEMENT
This Voting Agreement ("Agreement"), dated as of ____________________,
1997, is made by and among Citizens Utilities Company, a Delaware corporation
("Citizens") and each of the undersigned shareholders (each, a "Shareholder") of
Ogden Telephone Company, a New York corporation ("Ogden").
PRELIMINARY STATEMENTS
----------------------
Concurrently with the execution of this Agreement, Citizens, Ogden and
Citizens-Ogden Telecommunications Company, a New York corporation and
wholly-owned subsidiary of Citizens ("Sub"), have entered into an Agreement and
Plan of Reorganization (as the same may be amended from time to time, the
"Merger Agreement"), providing for the merger of Sub with and into Ogden, with
Ogden being the surviving corporation (the "Merger"), which Merger is subject to
Ogden shareholder approval as provided in the Merger Agreement, New York
Business Corporation Law (the "New York BCL") and Ogden's Certificate of
Incorporation.
The Shareholders own the shares of Ogden Common Stock set forth
opposite their respective names on Exhibit A hereto (such shares set forth on
Exhibit A being referred to as the "Shares"). Also set forth on Exhibit A for
each Shareholder is a description of all present options, warrants and other
rights with respect to Ogden Common Stock as well as all shares of Ogden
Preferred Stock and Ogden Convertible Preferred Stock owned by each Shareholder.
To induce Citizens to enter into the Merger Agreement, the Shareholders
have agreed, upon the terms and subject to the conditions set forth herein, in
their capacity as stockholders of Ogden, to vote the Shares in favor of the
Merger Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency, and adequacy of which are hereby acknowledged, the parties to this
Agreement agree as follows:
1. Shareholders' Representations and Warranties. Each Shareholder, as
--------------------------------------------
to itself only, represents and warrants to Citizens that:
(a) The Shareholder owns, or is otherwise able to direct the
voting of, the Shares set forth on Exhibit A hereto, free and clear of
any restrictions on voting, and has the right to vote the same free of
any such encumbrance (other than any general fiduciary obligation
imposed by law).
(b) The execution, delivery and performance of this Agreement
by the Shareholder does not (i) conflict with or violate any trust or
other agreement or instrument to which or by which the Shareholder is a
party or is bound, (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to the Shareholder or
by which the Shares are bound or affected, or (iii) result in any
breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of,
or result in the creation of a lien or encumbrance on any of the Shares
pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to
which the Shareholder is a party or by which the Shareholder or the
Shares is or are bound or affected.
(c) The execution, delivery and performance of this Agreement
by the Shareholder does not and will not require any consent, approval,
authorization or permit of any foreign, federal, state, or local
regulatory body.
(d) Each Shareholder has completed and delivered to Citizens,
in form satisfactory to Citizens, either an Accredited Investor
Purchaser Questionnaire or a Non-Accredited Purchaser Questionnaire.
Except as set forth in either the Accredited Investor Purchaser
Questionnaire or the Non-Accredited Purchaser Questionnaire, the
Shareholder makes no representations regarding his or her status as an
"accredited investor" (as defined in Rule 501(a) under the Securities
Act of 1933, as amended) or regarding his or her sophistication,
knowledge and experience in financial and business matters.
(e) The Shareholder has received (i) Citizens' 1995 Annual
Report, (ii) Citizens' Annual Report on Form 10-K for the year ended
December 31, 1995, (iii) Citizens' Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996, (iv) Citizens' Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996, (v) Citizens' Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996, and (vi)
Citizens' Notice of Annual Meeting of Stockholders dated March 29,
1996. The Shareholder has received all other information that it
considers necessary or appropriate for deciding whether to enter into
this Agreement. The Shareholder has had a reasonable opportunity to ask
questions of and receive answers from Citizens and Ogden concerning
their respective businesses and the Merger, and all such questions have
been answered to the Shareholder's satisfaction.
2. Agreements with Respect to the Shares.
--------------------------------------
(a) Voting. Each Shareholder agrees during the term of this
Agreement to vote those Shares owned by him then eligible to vote and
any other shares of Ogden Common Stock to which the Shareholder at the
time of such vote is able to direct the voting thereof (and any other
voting securities of Ogden issued or exchanged with respect to all such
shares upon any reclassification, recapitalization, reorganization,
stock split, stock dividend or any other change in Ogden's capital
structure) (i) in favor of adoption and approval of the Merger
Agreement and the Merger, at every meeting of the shareholders of Ogden
at which such matters are considered and at every adjournment thereof,
and (ii) against any merger, consolidation, business combination, sale
of a significant amount of assets outside of the ordinary course of
business, sale of shares of capital stock outside the ordinary course
of business, tender or exchange offer, or other similar transaction
involving Ogden or any of its divisions or subsidiaries but excluding
any of the foregoing involving Citizens, any of its affiliates, or
their respective businesses (a "Competing Transaction"), unless
Citizens consents in writing to a vote in favor of any such transaction
not involving Citizens. Except with the prior written consent of
Citizens, each Shareholder agrees that he will not, and shall not
permit any employee, attorney, accountant, investment banker or other
agent of such Shareholder to, initiate, solicit, negotiate, encourage,
or provide confidential information in order to facilitate any
Competing Transaction.
(b) No Solicitation. Each Shareholder agrees not to solicit,
encourage or recommend to other stockholders of Ogden that they (i)
vote their shares of Ogden Common Stock or any such other securities in
any contrary manner, (ii) not vote their shares at all, (iii) sell,
transfer, tender or otherwise dispose of their shares or (iv) attempt
to execute any statutory appraisal or other similar rights they may
have.
3. No Voting Trusts. Each Shareholder hereby revokes any and all
-------------------
proxies and voting instructions with respect to the Shares previously given by
the Shareholder, and the Shareholder agrees that the Shareholder will not, nor
will the Shareholder permit any entity under the Shareholder's control to,
deposit any of the Shares in a voting trust or subject any of the Shares to any
arrangement with respect to the voting of the Shares inconsistent with this
Agreement.
4. Proxies. Each Shareholder with respect to Shares owned by him agrees
-------
to grant Citizens or its designee irrevocable proxies and powers of attorney
(which may be in such form consistent with the terms hereof as Citizens may
specify) to vote the Shares, to the extent such Shares are entitled to vote, and
hereby specifically agrees not to revoke such proxies granted under any
circumstances:
(a) at any and all meetings of stockholders of the Company,
notice of which meetings are given prior to the due and proper
termination of this Agreement, with respect to matters presented to the
Company's stockholders for vote which, directly or indirectly, in any
way relate to or affect (i) the Merger or the Merger Agreement or the
approval of either thereof, or (ii) any Competing Transaction; or
(b) with respect to actions to be taken by written consent of
the stockholders of the Company which, directly or indirectly, in any
way relates to or affects any of the foregoing, and which consent is
solicited prior to the due and proper termination of this Agreement.
5. Limitation on Sales. During the term of this Agreement, except
--------------------
pursuant to the Merger, each Shareholder agrees not to sell, assign, transfer,
lend, tender, pledge, hypothecate, exchange, encumber or otherwise dispose of or
impair such Shareholder's Shares unless, in connection therewith, the
Shareholder retains voting rights with respect to the Shares.
6. Specific Performance. Each Shareholder acknowledges that it will be
--------------------
impossible to measure in money the damage to Citizens if the Shareholder fails
to comply with the obligations imposed by this Agreement, and that, in the event
of any such failure, Citizens will not have an adequate remedy at law or in
damages. Accordingly, each Shareholder agrees that injunctive relief or any
other equitable remedy, in addition to any remedies at law or damages, is the
appropriate remedy for any such failure and will not oppose the granting of any
such remedy on the basis that Citizens has an adequate remedy at law. Each
Shareholder agrees not to seek, and agrees to waive any requirement for, the
securing or posting of a bond in connection with Citizens' seeking or obtaining
such equitable relief.
7. Term of Agreement; Termination.
-------------------------------
(a) The term of this Agreement shall commence on the date
hereof and shall terminate upon the earlier of (i) the Effective Time
(as defined in the Merger Agreement), (ii) the date of the Ogden
shareholders' meeting in which the Ogden shareholders consider and vote
upon the Merger and the Merger Agreement, but fail to approve the
Merger and the Merger Agreement by at least a two-thirds (2/3) vote, or
(iii) upon termination of the Merger Agreement in accordance with its
terms. Upon such termination, no party shall have any further
obligations or liabilities hereunder; provided, however, that, such
termination shall not relieve any party from liability for any uncured
breach of this Agreement occurring prior to such termination.
(b) The obligations of the Shareholders set forth in this
Agreement shall not be effective or binding upon any Shareholder until
after such time as the Merger Agreement is executed and delivered by
Ogden and Citizens.
8. Miscellaneous.
-------------
(a) Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter of this
Agreement and supersedes all prior written and oral and all
contemporaneous oral agreements and understandings with respect to the
subject matter of this Agreement.
(b) Notices. Any notice, request, instruction or other
document to be given hereunder by any party to the others shall be in
writing and shall be deemed to have been duly given on the next
business day after the same is sent, if delivered personally or sent by
telecopy or overnight delivery, or five calendar days after the same is
sent, if sent by registered or certified mail, return receipt
requested, postage prepaid, as set forth below, or to such other
persons or addresses as may be designated in writing in accordance with
the terms hereof by the party to receive such notice.
If to Citizens, to:
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/329-4651
Attn: Donald P. Weinstein, Esq.
with a required copy to:
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/329-4651
Attn: L. Russell Mitten, II, Esq.
and
Fleischman and Walsh, L.L.P.
1400 Sixteenth Street, N.W.
Washington, D.C. 20036
Facsimile No.: 202/745-0916
Attn: Jeffry L. Hardin, Esq.
If to a Shareholder, to:
Such Shareholder at the address or facsimile number
set forth for such Shareholder on Exhibit A attached
hereto.
(c) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without
giving effect to the principles of conflict of laws thereof.
(d) Rules of Construction. The descriptive headings in this
Agreement are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of
this Agreement. Words used in this Agreement, regardless of the gender
and number specifically used, shall be deemed and construed to include
any other gender, masculine or feminine, or neuter, and any other
number, singular or plural, as the context requires. As used in this
Agreement, the word "including" is not limiting, and the word "or" is
not exclusive.
(e) Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of the parties to this Agreement and
their legal successors-in-interest, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
(f) Counterparts. This Agreement may be executed in one or
more counterparts, and each of such counterparts shall for all purposes
be deemed to be an original, but all such counterparts together shall
constitute but one instrument.
(g) Assignment. No party hereto shall assign its rights and
obligations under this Agreement or any part thereof, nor shall any
party assign or delegate any of its rights or duties hereunder without
the prior written consent of the other party, and any assignment made
without such consent shall be void; provided, that the rights and
obligations of Citizens hereunder may be assigned to and assumed by a
subsidiary of Citizens. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
(h) Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of all the parties.
(i) Extension; Waiver. Any party to this Agreement may (a)
extend the time for the performance of any of the obligations or other
acts of any of the other parties to this Agreement, (b) waive any
inaccuracies in the representations and warranties of any other party
contained herein or in any document, certificate, or writing delivered
pursuant to this Agreement by any other party, or (c) waive compliance
by any other party with any of the agreements or conditions contained
herein or any breach thereof. Any agreement on the part of any party to
any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
(j) Legal Fees; Costs. If any party to this Agreement
institutes any action or proceeding, whether before a court or
arbitrator, to enforce any provision of this Agreement, the prevailing
party therein shall be entitled to receive from the losing party
reasonable attorneys' fees and costs incurred in such action or
proceeding, whether or not such action or proceeding is prosecuted to
judgment.
(k) Severability. The provisions of this Agreement are
severable and, if any provision of this Agreement is determined to be
invalid or unenforceable by any court of competent jurisdiction, such
provision (in any other jurisdiction) and the other provisions hereof
(in any jurisdiction) shall not be rendered otherwise invalid or
unenforceable and such provision shall be deemed to be modified to the
extent necessary to render it legal, valid and enforceable, and if no
such modification shall render it legal, valid and enforceable, then
this Agreement shall be construed as if not containing the provision
held to be invalid, and the rights and obligations of the parties shall
be construed and enforced accordingly.
(l) Fiduciary Duty as Director. Citizens and each Shareholder
hereby acknowledge and agree that none of the provisions herein set
forth shall be deemed to restrict or limit any fiduciary duty the
undersigned may have as a member of the Ogden board of directors or as
an executive officer of Ogden; provided that, no such duty shall excuse
the undersigned from his obligation as a stockholder of Ogden to vote
the Shares, to the extent that they may be so voted, or otherwise
perform any obligation as herein provided and to otherwise comply with
the terms and conditions of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
CITIZENS UTILITIES COMPANY
By:_____________________
Name:___________________
Title:__________________
SHAREHOLDERS
_________________________________
Name: Maxine B. Davison
_________________________________
Name: Maxine B. Davison, Trustee of The
Residuary Trust u/w/o Donald F. Davison
_________________________________
Name: Maxine B. Davison, Trustee
_________________________________
Name: Francis A. Smith
__________________________________
Name: Francis A. Smith, Trustee of The
Residuary Trust u/w/o Donald F. Davison
[Signature page to Voting Agreement among Citizens Utilities Company and
the Ogden Shareholders named above.]
__________________________________
Name: Francis A. Smith, Trustee
__________________________________
Name: Francis A. Smith, Trustee
__________________________________
Name: Philip T. Evans
__________________________________
Name: William C. Crothers
__________________________________
Name: Andrew B. Davison
[Signature page to Voting Agreement among Citizens Utilities Company and
the Ogden Shareholders named above.]
<PAGE>
EXHIBIT A
---------
Holdings of Ogden Telephone Company Securities as of January 31, 1997
Name of Shareholder: Maxine B. Davison
Address: 15 Evergreen Street
Spencerport, New York 14559
Telephone No: (716) 352-5111
Facsimile No.:
Number of Ogden Common Shares: 43,568
Number of Ogden Common Shares over which
Shareholder has voting power:
Maxine B. Davison, Trustee of
The Residuary Trust u/w/o
Donald F. Davison: 27,313
Maxine B. Davison, Trustee 3,736
Number of Ogden Preferred Shares: 813
Number of Ogden Preferred Shares over
which Shareholder has voting power:
Maxine B. Davison, Trustee of
The Residuary Trust u/w/o
Donald F. Davison: 410
Number of Ogden Convertible
Preferred Shares: 11
<PAGE>
EXHIBIT A
---------
Holdings of Ogden Telephone Company Securities as of January 31, 1997
Name of Shareholder: Francis A. Smith
Address: 8 Shagbark Circle
Rochester, New York 14624
Telephone No: (716) 889-3183
Facsimile No.:
Number of Ogden Common Shares: 1,194
Number of Ogden Common Shares over
which Shareholder has voting power:
Francis A. Smith, Trustee of
The Residuary Trust u/w/o
Donald F. Davison: 27,313
Francis A. Smith, Trustee 960
Francis A. Smith, Trustee 3,736
Number of Ogden Preferred Shares: 35
Number of Ogden Preferred Shares over
which Shareholder has voting power:
Francis A. Smith, Trustee of
The Residuary Trust u/w/o
Donald F. Davison: 410
Number of Ogden Convertible
Preferred Shares: 0
<PAGE>
EXHIBIT A
---------
Holdings of Ogden Telephone Company Securities as of January 31, 1997
Name of Shareholder: Philip T. Evans
Address: 33 Short Hills Drive
Hilton, New York 14468
Telephone No: (716) 392-3333
Facsimile No.:
Number of Ogden Common Shares: 82
Number of Ogden Preferred Shares: 0
Number of Ogden Convertible
Preferred Shares: 0
<PAGE>
EXHIBIT A
---------
Holdings of Ogden Telephone Company Securities as of January 31, 1997
Name of Shareholder: William C. Crothers
Address: c/o Roberts Wesleyan College
2301 Westside Drive
Rochester, New York 14624
Telephone No: (716) 594-6000
Facsimile No.: (716) 594-6371
Number of Ogden Common Shares: 0
Number of Ogden Common Shares over
which Shareholder has voting power:
Roberts Wesleyan College: 3142
Number of Ogden Preferred Shares: 0
Number of Ogden Preferred Shares
over which Shareholder has
voting power:
Roberts Wesleyan College: 285
Number of Ogden Convertible
Preferred Shares: 0
<PAGE>
EXHIBIT A
---------
Holdings of Ogden Telephone Company Securities as of January 31, 1997
Name of Shareholder: Andrew B. Davison
Address: 3303 Wood Court
Ellenton, Florida 34222
Telephone No: (941) 722-3647
Facsimile No.:
Number of Ogden Common Shares: 343
Number of Ogden Common Shares over
which Shareholder has voting power:
Andrew B. Davison and
Ann W. Davison: 2500
Number of Ogden Preferred Shares: 1
Number of Ogden Convertible
Preferred Shares: 0
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Citizens, being incorporated under the Delaware General Corporation
Law, is empowered by Section 145 of such law to indemnify officers and directors
against certain expenses, liabilities and payments, including liabilities
arising under the Securities Act of 1933, as amended (the "Act"), as therein
provided. In addition, By-Laws 24 and 24A of Citizens and a resolution adopted
by the Board of Directors in connection with the issuance of certain Securities
of Citizens provide for indemnification of specified persons, including officers
and directors of Citizens, for liabilities arising under said Act, as provided
in said By-Laws and resolution.
Citizens also maintains insurance providing coverage for Citizens and
its subsidiaries against obligations incurred as a result of indemnification of
officers and directors. The coverage also insures the officers and directors for
a liability against which they may not be indemnified by Citizens or its
subsidiaries but excludes specified dishonest acts.
Item 21. Exhibits and Financial Statement Schedules.
An Exhibit index, containing a list of all exhibits and financial
statement schedules to this registration statement, commences on page II-7.
Item 22. Undertakings.
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 the 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 the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Act,
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;
(4) That, for purposes of determining any liability under the Act, each
filing of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
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;
(5) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this Form,
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 the
registration statement through the date of responding to the request;
(6) 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;
(7) 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; and
(8) That every prospectus; (i) that is filed pursuant to paragraph (7)
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, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Act, 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.
(9) Insofar as indemnification for liabilities arising under the Act
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 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this Amendment No. 1 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Stamford and State of Connecticut on the 25th day of November, 1997.
CITIZENS UTILITIES COMPANY
By:/s/ Robert J. DeSantis
---------------------------
Robert J. DeSantis
Vice President and Treasurer
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
*Leonard Tow
- -----------------------------------
<S> <C> <C>
(Leonard Tow) Chairman of the Board, November 25, 1997
Chief Executive Officer,
Chief Financial Officer
and Director
/s/Robert J. DeSantis
- -----------------------------------
(Robert J. DeSantis) Vice President and November 25, 1997
Treasurer
*Norman I. Botwinik
- ---------------------------------- Director November 25, 1997
(Norman I. Botwinik)
*James C. Goodale
- ---------------------------------- Director November 25, 1997
(James C. Goodale)
*Stanley Harfenist
- ---------------------------------- Director November 25, 1997
(Stanley Harfenist)
*Andrew N. Heine
- -----------------------------------
(Andrew N. Heine) Director November 25, 1997
*Aaron I. Fleischman
- -----------------------------------
(Aaron I. Fleischman) Director November 25, 1997
*John L. Schroeder
- ---------------------------------- Director November 25, 1997
(John L. Schroeder)
*Robert D. Siff
- ---------------------------------- Director November 25, 1997
(Robert D. Siff)
*Robert A. Stanger
- -----------------------------------
(Robert A. Stanger) Director November 25, 1997
*Charles H. Symington, Jr.
- -----------------------------------
(Charles H. Symington, Jr.) Director November 25, 1997
*Edwin Tornberg
- ---------------------------------- Director November 25, 1997
(Edwin Tornberg)
*Claire Tow
- -----------------------------------
(Claire Tow) Director November 25, 1997
By:/s/Robert J. DeSantis
- -----------------------------------
Attorney-in-fact
</TABLE>
<PAGE>
Exhibit Index
Exhibit
No. Description
- ------- -----------
2.1* Agreement and Plan of Reorganization by and Among Citizens
Utilities Company, Citizens-Ogden Telecommunications Company
and Ogden Telephone Company, as amended
3.200.1** Restated Certificate of Incorporation of Citizens Utilities
Company, with all amendments to date.
3.200.2** By-laws of Citizens Utilities Company, with all amendments to
date.
5 Opinion of Winthrop, Stimson, Putnam & Robert
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Winthrop, Stimson, Putnam & Roberts (contained in
Exhibit No. 5).
23.3 Consent of Coopers & Lybrand
23.4 Tax Opinion of Harter Secrest & Emery
24*** Powers of Attorney
99.1 Notice of Special Meeting of Shareholders of Ogden
99.2 Letter to Shareholders of Ogden
99.3 Proxy Card
- ---------------------
* Filed as Annex A to the Prospectus.
** Exhibit No. 3.200.1 is incorporated by reference to such document
bearing the same exhibit designation filed with Citizens' Registration
Statement on Form S-3, No. 333-1047, on June 27, 1996. Exhibit No.
3.200.2 is incorporated by reference to such document bearing the same
exhibit designation filed with Citizens' Current Report on Form 8-K on
December 23, 1996.
*** Previously filed.
<PAGE>
EXHIBIT 5
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004-1490
Telephone: (212) 858-1000
November 25, 1997
Citizens Utilities Company
High Ridge Park
Stamford, Connecticut 06905
Gentlemen:
As special counsel to Citizens Utilities Company, a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933 (the "Act"), of up to 1,850,584 shares of the Company's
Common Stock, par value $.25 per share (the "Common Stock"), to be issued in
connection with the merger (the "Merger") of Ogden Telephone Company ("Ogden")
with Citizens-Ogden Telecommunications Company ("C-O Tel"), a wholly owned
subsidiary of the Company, we have examined the registration statement on Form
S-4 (the "Registration Statement") filed under the Act, including the prospectus
which is a part thereof, and such other documents as we have considered
necessary for the purposes of this opinion. Such shares are issuable pursuant to
the Agreement and Plan of Reorganization dated as of February 3, 1997 among the
Company, C-O Tel and Ogden (the "Merger Agreement"). Based upon such
examination, we hereby advise you that:
We are of the opinion that shares of Common Stock (the
"Offered Common Stock") to be issued in accordance with the
Registration Statement, as amended and supplemented from time to time,
upon completion of the steps enumerated in the next succeeding
paragraph hereof shall have been taken, will be validly issued, fully
paid and non-assessable.
The steps which are referred to in the foregoing opinion are:
(a) It shall be determined that the public service
commissions, or other regulatory agencies or bodies, or other political entities
relating to public utilities matters of the pertinent states shall be without
jurisdiction, or shall have declined to exercise jurisdiction over the issuance
of the Offered Common Stock pursuant to the Merger, or shall have issued
appropriate orders approving and authorizing the issuance of the Offered Common
Stock pursuant to the Merger and such order shall be in full force and effect;
(b) An appropriate order of the Federal Energy Regulatory
Commission with respect to the issuance of the Offered Common Stock pursuant to
the Merger shall be in full force and effect;
(c) The Offered Common Stock shall have been issued, delivered
and consideration therefore received in accordance with the provisions of the
aforesaid Merger Agreement.
We are members of the bar of the State of New York. In
rendering the foregoing opinion, we express no opinion as to laws other than the
laws of the State of New York, the Delaware General Corporation Law and the
Federal laws of the United States.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference made to our firm under "Legal
Opinions" in the prospectus constituting part of the Registration Statement. In
giving such consent, we do not hereby admit that we are within the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Securities and Exchange Commission.
Very truly yours,
/s/Winthrop, Stimson, Putnam & Roberts
EXHIBIT 23.1
The Board of Directors:
Citizens Utilities Company
We consent to the use of our report included herein and to the reference of our
firm under the heading "Experts" in the registration statement on Form S-4.
KPMG Peat Marwick LLP
New York, New York
November 25, 1997
EXHIBIT 23.3
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Amendment No. 1 to this registration
statement on Form S-4 of Citizens Utilities Company of our report dated
February 25, 1997, except for Note 8, as to which the date is October 23,
1997, on our audits of the consolidated financial statements of Ogden
Telephone Company and Subsidiary. We also consent to the reference to our firm
under the caption "Experts."
Coopers & Lybrand LLP
Rochester, New York
November 24, 1997
Exhibit 23.4
[Harter, Secrest & Emery Letterhead]
November 25, 1997
Citizens Utilities Company
High Ridge Park, Building No. 3
Stamford, Connecticut 06905
Gentlemen:
We have acted as counsel to Ogden Telephone Company, a New York
corporation ("Ogden"), in connection with the merger (the "Merger") of Ogden
with Citizens-Ogden Telecommunications Company, a New York corporation and a
wholly owned subsidiary ("C-O Tel") of Citizens Utilities Company, a Delaware
corporation ("Citizens"), pursuant to the Agreement of Merger and Plan of
Reorganization dated as of February 3, 1997, among Ogden, Citizens and C-O Tel
(the "Merger Agreement"). The Merger Agreement provides, inter alia, that Ogden
shareholders' shares of Ogden common stock ("Ogden Common Stock") will
automatically represent only the right to receive shares of the common stock of
Citizens ("Citizens Common Stock") and cash according to certain formulae set
forth in the Merger Agreement.
In connection with this opinion, we have made the following factual
assumptions:
(1) The Merger will be consummated in accordance with the terms
of the Merger Agreement;
(2) The aggregate value on the date of the Merger of Citizens
Common Stock issued to Ogden shareholders pursuant to the Merger will
equal or exceed 80 percent of the total consideration (Citizens Common
Stock, valued on the date of the Merger, and cash) received by the Ogden
shareholders, including dissenters, as a result of the Merger; and
(3) That all factual material set forth in the registration
statement on Form S-4 Registration No. 333-40069 (the "Registration
Statement") is true, complete, and correct.
In addition, we have relied upon certain written representations and
covenants of Citizens, Ogden and certain shareholders of Ogden. The opinions
expressed herein are expressly conditioned on such factual assumptions and
representations, and, except as otherwise set forth herein, we have relied
solely on these assumptions and representations and made no independent
investigation of any factual matter. We have reviewed and examined the Merger
Agreement, the Registration Statement, and such other documents, records and
matter of law as we have deemed necessary to render the opinion hereinafter set
forth. Based upon and subject to the foregoing, we are of the opinion that, for
United States federal income tax purposes:
(i) The Merger will, under current law, constitute a
reorganization under Sections 368(a)(1)(A) and 368(a)(2)(E) of the
Internal Revenue Code of 1986, as amended (the "Code"). Citizens, Ogden
and C-O Tel will each be "a party to the reorganization" within the
meaning of Section 368(b) of the Code.
(ii) No gain or loss will be recognized by Ogden shareholders as
a result of the exchange of Ogden Common Stock for Citizens Common Stock
pursuant to the Merger, except that gain or loss will be recognized on
the receipt of cash, if any, received in lieu of fractional shares. Any
cash received by a shareholder of Ogden in lieu of a fractional share of
Citizens Common Stock will generally be treated as received in exchange
for such fractional share and not as a dividend, and any gain or loss
recognized to such shareholder as the result of the receipt of such cash
will be capital gain equal to the difference between the amount of cash
received and the basis of the shareholder allocable to such fractional
share.
(iii) The tax basis of the shares of Citizens Common Stock
received by each shareholder of Ogden in the Merger will equal the tax
basis of such shareholder's shares of Ogden Common Stock exchanged in
the Merger, less the amount allocated to any fractional shares for which
cash is received.
(iv) The holding period of the shares of Citizens Common Stock
received by a shareholder of Ogden in the Merger will include the
holding period of such shareholder for the shares of Ogden Common Stock
that were exchanged in the Merger.
(v) Neither Citizens, Ogden nor C-O Tel will recognize any gain
or loss as a result of the Merger.
The foregoing opinion does not address the consequences to a holder of
shares of Ogden Common Stock who (i) does not hold such shares as capital assets
at the time of the Merger or (ii) received such shares pursuant to the exercise
of an employee stock option or otherwise as compensation.
Our opinion is based on the Code, the existing and proposed regulations
thereunder, published administrative announcements and rulings of the Internal
Revenue Service and judicial decisions, all as of the date hereof and all of
which are subject to modification. Any change in the applicable law may affect
the validity of this opinion. We express no opinion as to the state, local or
foreign tax ramifications of the Merger and, except as set forth above, we
express no opinion as to the tax consequences, whether federal, state, local or
foreign, to any other party of the Merger or of any transactions related to the
Merger. Except as set forth below, this opinion is being furnished to you only
in connection with the Merger and solely for your benefit in connection
therewith and may not be used or relied upon for any other purpose and may not
be circulated, quoted or otherwise referred to for any other purpose without our
express written consent.
We hereby consent to be named in the Registration Statement and to the
use of our name under the caption "Certain Federal Income Tax Consequences" set
forth in the related Proxy Statement/Prospectus which constitutes a part of the
Registration Statement, as attorneys who are opining upon the federal income tax
consequences to the shareholders of Ogden in connection with the Merger, and we
hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/Harter, Secrest & Emery
EXHIBIT 99.1
OGDEN TELEPHONE COMPANY
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be Held on December 30, 1997
To the Shareholders of Ogden Telephone Company:
A Special Meeting of the Shareholders ("Special Meeting") of Ogden
Telephone Company ("Ogden") will be held on Tuesday, December 30, 1997 at
10:00am local time at the offices of Harter, Secrest & Emery, 700 Midtown Tower,
Rochester, New York, for the following purposes:
1. To consider and vote upon a proposal to approve and to adopt
an Agreement and Plan of Reorganization By and Among Citizens Utilities Company,
Citizens-Ogden Telecommunications Company and Ogden Telephone Company, dated
February 3, 1997 ("Merger Agreement"), as more fully described in the
accompanying Proxy Statement/Prospectus; and
2. To transact any other business which may properly come be-
fore the Special Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on December 1,
1997 as the record date for the determination of the holders of Ogden common
stock entitled to notice of, and to vote at, the Special Meeting. Your attention
is directed to the accompanying Proxy Statement/Prospectus.
All Shareholders are cordially invited to attend the Special Meeting. To
ensure your representation at the meeting, however, you are urged to complete,
date, sign, and return the enclosed Proxy as soon as possible. Any Shareholder
attending the Special Meeting may vote in person even if that Shareholder has
returned a Proxy.
By Order of the Board of Directors,
Maureen L. Howard,
Secretary
December 1, 1997
EXHIBIT 99.2
OGDEN TELEPHONE COMPANY
December 1, 1997
Dear Shareholder:
I am pleased to invite you, on behalf of the Board of Directors of Ogden
Telephone Company ("Ogden"), to a Special Meeting of the Shareholders of Ogden
which is to be held at 10:00am on Tuesday, December 30, 1997 at the offices of
Harter, Secrest & Emery, 700 Midtown Tower, Rochester, New York.
Only common shareholders of record on December 1, 1997 will be entitled
to vote at the Special Meeting.
As proud as we are of our accomplishments as a local exchange company,
we recognize that, given the current state of deregulation within our industry,
it is becoming increasingly difficult for small telephone companies to keep up
with advancing technological demands while still providing dividends and value
to shareholders. It is the Board's opinion that future growth will be
significantly more difficult to achieve without access to new resources and
capital markets. Faced with the prospect of focusing Ogden's resources on
accessing new technology and markets at the expense of our shareholders'
investment interest, we believed it was an appropriate time to review our
overall position and to investigate options for remaining competitive while
increasing shareholder value.
The opportunity to merge with Citizens Utilities Company ("Citizens")
and become part of the Citizens family emerged as a very favorable alternative
for our shareholders. The Board believes Citizens has a similar business
philosophy to that of Ogden and that the merger will provide Ogden with the
knowledge, experience, and resources of Citizens' nationwide organization. In
addition, the Citizens merger provides a tax deferral to participating
shareholders. The Board of Directors has unanimously voted in favor of the
merger transaction with Citizens. As indicated in the Proxy Statement/Prospectus
which accompanies this letter, Ogden's Board of Directors believes the proposed
merger will be beneficial to the shareholders and employees of Ogden, as well as
the community as a whole.
A Notice of Meeting, a Proxy Statement/Prospectus and a Proxy Form
accompany this letter to common shareholders. I urge all common shareholders to
read the enclosed material carefully and to complete, date, sign, and mail the
proxy form promptly even if you intend to attend the Special Meeting.
Very truly yours,
Philip T. Evans
President
EXHIBIT 99.3
PROXY
OGDEN TELEPHONE COMPANY
The undersigned hereby appoints MAXINE B. DAVISON and PHILIP T. EVANS,
and each of them, proxies for the undersigned with full power of substitution,
to vote all shares of the Common Stock of OGDEN TELEPHONE COMPANY ("Ogden")
owned by the undersigned at the Special Meeting of Shareholders to be held at
the offices of Harter, Secrest & Emery, 700 Midtown Tower, Rochester, New York,
on December 30, 1997 at 10:00am, local time, and at any adjournment or
adjournments thereof:
1. Proposal to approve and adopt the Agreement and Plan of Reorganization
By and Among Citizens Utilities Company ("Citizens"), Citizens-Ogden
Telecommunications Company ("C-O Tel"), and Ogden Telephone Company,
dated February 3, 1997, providing for the merger of C-O Tel, a
wholly-owned subsidiary of Citizens, with and into Ogden, with Ogden
continuing in existence as the surviving corporation.
_ FOR _ AGAINST _ ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting.
This Proxy is solicited on behalf of the Board of Directors of Ogden.
This Proxy will be voted as specified by the undersigned. This proxy revokes any
prior proxy given by the undersigned. Unless otherwise specified, a signed Proxy
will be voted FOR the proposal listed herein and described in the accompanying
Proxy Statement/Prospectus. The undersigned acknowledges receipt with this Proxy
of a copy of the Notice of Special Meeting and Proxy Statement/Prospectus dated
November 25, 1997, describing more fully the proposal set forth herein.
Dated: _______________________, 1997
-----------------------------------
-----------------------------------
Signature(s) of shareholder(s)
Please date and sign name exactly as it appears hereon. Executors,
administrators, trustees, etc. should so indicate when signing. If the
shareholder is a corporation, the full corporate name should be inserted and the
proxy signed by an officer of the corporation, indicating his title.
