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(LOGO OF C-TEC APPEARS HERE)
105 CARNEGIE CENTER, PRINCETON, NEW JERSEY 08545 . (609) 734-3700
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 3, 1995
The Annual Meeting of Shareholders of C-TEC Corporation (the "Company") will
be held at the Hyatt Regency Princeton, 102 Carnegie Center, Princeton, New
Jersey, on Wednesday, May 3, 1995 at 11:00 A.M., local time. The meeting will
be held for the following purposes:
1. To elect four (4) Directors to Class II to serve for a term of three
(3) years.
2. To ratify the selection of Coopers & Lybrand as independent auditors
for the fiscal year ending December 31, 1995.
3. To amend the Articles of Incorporation of the Company to increase the
authorized Common Stock and Class B Common Stock and to authorize a new
class of Preferred Stock.
4. To act upon such other matters as may properly come before the meeting
or any adjournment or postponement thereof.
Only shareholders of record at the close of business on March 15, 1995 will
be entitled to vote at the meeting either in person or by proxy. Each of these
shareholders is cordially invited to be present and vote at the meeting in
person.
In order to insure that your shares are represented and are voted in
accordance with your wishes, IT WILL BE APPRECIATED IF YOU WILL DATE AND SIGN
THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE. If you
attend the meeting, you may personally vote your shares regardless of whether
you have signed a proxy.
(ART)
Raymond B. Ostroski, Executive
Vice President, General Counsel
and Corporate Secretary
Dated: March , 1995
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C-TEC CORPORATION
PROXY STATEMENT
This Proxy Statement is being mailed to shareholders on or about April 5,
1995 in connection with the solicitation of proxies by the Board of Directors
of the Company for use at the Annual Meeting of Shareholders (the "Meeting") to
be held on Wednesday, May 3, 1995 at 11:00 A.M., local time, at the Hyatt
Regency Princeton, 102 Carnegie Center, Princeton, New Jersey, and at any
adjournment or postponement thereof. All shares represented by valid proxies
received in time for the Meeting, and not revoked, will be voted. Unless the
shareholder otherwise specifies therein, such shares will be voted by the
persons named as proxy holders in favor of Proposals 1, 2 and 3. As to any
other business which may properly come before the Meeting and be submitted to a
vote of shareholders, proxies will be voted in the best judgment of the
designated proxy holders. The form of proxy enclosed is for use by a
shareholder if the shareholder is unable to attend or does not desire to vote
in person. Any shareholder giving a proxy has the right to revoke it at any
time before the proxy is exercised, by executing another proxy and delivering
it to the Secretary of the Company or by voting in person at the Meeting.
The close of business on March 15, 1995 has been fixed as the record date for
the determination of shareholders entitled to notice of and to vote at the
Meeting and at any adjournment or postponement thereof. On March 15, 1995,
there were outstanding shares of Common Stock and shares of Class B
Common Stock of the Company. The presence at the meeting, in person or by
proxy, of shareholders entitled to cast at least a majority of the votes which
all shareholders are entitled to cast will constitute a quorum for the meeting.
Shareholders will be entitled to one vote per share for Common Stock and
fifteen votes per share for Class B Common Stock on all matters to be submitted
at the Meeting and are entitled to cumulative voting rights with respect to the
election of Directors. Under cumulative voting, a shareholder's total vote (the
number of shares held multiplied by the number of Directors to be elected) may
be cast entirely for one candidate or distributed among two or more candidates.
The persons named in the accompanying proxy may, at their discretion, cumulate
the votes which they are authorized to cast. Holders of Common Stock and
holders of Class B Common Stock will vote as separate classes with respect to
Proposal 3 to amend the Amended and Restated Articles of Incorporation of the
Company (the "Articles of Incorporation"). If a shareholder is a participant in
the C-TEC Corporation Common-Wealth Builder Plan, the proxy card will indicate
the number of shares held beneficially by the participant in the plan and the
proxy card will serve as a voting instruction for the trustee of the plan.
In accordance with Pennsylvania law, a shareholder entitled to vote for the
election of directors can withhold authority to vote for all nominees for
directors or can withhold authority to vote for certain nominees for directors.
Directors will be elected by a plurality of the votes cast. Abstentions and
broker non-votes are not treated as votes cast, and this are not the equivalent
of votes against. With respect to ratification of the independent auditors,
ratification will require the affirmative vote of a majority of the votes cast
by the holders of Common Stock and Class B Stock voting together as a single
class. Abstentions and broker non-votes, because they are not treated as votes
cast, are not the equivalent of votes against ratification. With respect to
approval of the amendment to the Articles of Incorporation of the Company,
abstentions and broker non-votes, because they are not treated as votes cast,
are not the equivalent of votes against with respect to the required
affirmative vote of a majority of the votes cast by holders of Common Stock and
Class B Stock, voting together as a single class. However, with respect to the
required affirmative vote of a majority of the votes entitled to be cast by all
the holders of the Common Stock voting as a single class, and a majority of the
votes entitled to be cast by all the holders of the Class B Stock voting as a
single class, abstentions and broker non-votes are considered in determining
the number of votes required to pass the Company's proposal to amend the
Articles of Incorporation, because as noted above an affirmative vote of a
majority of all outstanding shares entitled to vote is required for each class
for passage of this
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proposal. Thus, abstentions and broker non-votes will have the same legal
effect as votes against the proposal with respect to the class votes. With
respect to the proposal to amend the Company's Articles of Incorporation, the
Company believes that brokers who have received no voting instructions from
their customers will not have discretion to vote on such proposal. Abstentions
from the proposals to approve the ratification of the selection of auditors or
from the proposal to amend the Articles of Incorporation are treated as votes
against the particular proposal. Broker non-votes on the Proposals are treated
as shares as to which voting power has been withheld by the beneficial holders
of those shares and, therefore, as shares not entitled to vote on the proposal.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes and is
currently comprised of 11 members. One class is elected each year for a three-
year term. Class II Directors whose term will expire at the Meeting include the
following nominees, all of whom are presently Directors of the Company: Thomas
C. Stortz, Robert E. Julian, Frank M. Henry and Eugene Roth. These four (4)
nominees, if elected at the 1995 Annual Meeting, will serve for a term of three
(3) years expiring at the Annual Meeting of Shareholders to be held in 1998.
It is not anticipated that any of these nominees will become unavailable for
any reason, but, if that should occur before the Meeting, the persons named on
the enclosed Proxy reserve the right to substitute another of their choice as
nominee in his place or to vote for such lesser number of Directors as may be
prescribed by the Board of Directors.
The Board of Directors recommends that the shareholders vote FOR the election
of four Directors to Class II for a term of three years.
PROPOSAL 2
RATIFICATION OF INDEPENDENT AUDITORS
The Company is asking the shareholders to ratify the selection of Coopers &
Lybrand as the Company's independent auditors for the year ending December 31,
1995.
If the shareholders do not ratify this appointment, other independent
auditors will be considered by the Board of Directors. Notwithstanding the
shareholders ratification of the selection of the independent auditors, the
Board of Directors reserves the right to select other independent auditors at
its discretion.
Representatives of Coopers & Lybrand are expected to be present at the
Meeting, will have the opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions.
The Board of Directors recommends that the shareholders vote FOR the
ratification of the selection of Coopers & Lybrand to serve as the Company's
independent auditors for the year ending December 31, 1995.
PROPOSAL 3
AMENDMENT TO ARTICLES OF INCORPORATION
The Board of Directors of the Company has adopted a resolution unanimously
approving and recommending to the Company's stockholders for their approval of
an amendment (the "Stock Amendment") to the Articles of Incorporation of the
Company to provide therein for (1) an increase
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in the authorized number of shares of Common Stock, par value $1.00 per share
(the "Common Stock"), from 35,000,000 to 85,000,000, (2) an increase in the
authorized number of shares of Class B Common Stock, par value $1.00 per share
(the "Class B Stock"), from 8,753,203 to 15,000,000 and (3) a new class of
25,000,000 shares of Preferred Stock, without par value (the "Preferred
Stock"). The text of the Stock Amendment is attached hereto as Annex A and is
incorporated herein by reference.
As of March 15, 1995, there were [ ] shares of Common Stock and [ ]
shares of Class B Stock outstanding. In addition 8,748,561 shares of Common
Stock were reserved for issuance upon possible conversion of the outstanding
shares of Class B Stock, 1,350,000 shares of Common Stock were reserved for
issuance in connection with stock options granted under the Company's 1994
Stock Option Plan, and 1,457,142 shares of Common Stock were reserved for
issuance upon the exchange of exchangeable preferred stock of C-TEC Cable
Systems, Inc., a subsidiary of the Company. The Company has no authorized or
outstanding preferred stock.
The Board of Directors believes the authorization of the increase in the
number of shares of Common Stock and Class B Stock and the creation of the
Preferred Stock is in the best interests of the Company and its shareholders
and believes it advisable to authorize such shares to have them available for,
among other things, possible issuance in connection with such activities as
public or private offerings of shares for cash, dividends payable in stock of
the Company, acquisitions of other companies or properties and implementation
of employee benefit plans. The Company is in the process of negotiating and
consummating certain acquisitions. In connection with such acquisitions, the
Company or its subsidiaries as part of the purchase price to be paid by it in
such acquisitions may issue securities which are convertible or exchangeable
into other securities of the Company. The exact number of Company securities
issuable in such acquisitions is presently undeterminable, because, among other
things, such transactions have not been finalized, and because the number of
shares issuable in such transactions may be subject to adjustment. Unless
otherwise required by applicable law, further authorization from the Company's
shareholders will not be solicited prior to the issuance of such securities.
The voting and equity ownership rights of the Company's shareholders may be
diluted by such issuances.
Another possible transaction in which additional shares of Common Stock and
Class B Stock might be issued is a reorganization transaction involving RCN
Holdings, Inc. ("Holdings"), a wholly owned subsidiary of RCN Corporation
("RCN"). RCN purchased the shares of Holdings in October, 1993 as part of an
acquisition by RCN of a controlling interest in the Company. RCN owns, directly
or indirectly, 8,226,262 shares of Common Stock and 5,094,223 shares of Class B
Stock representing, respectively, 43.5% of the outstanding Common Stock and
59.6% of the outstanding Class B Stock. The majority of RCN's interest in the
Company is owned through Holdings which is the record owner of 128,198 shares
of Common Stock and 3,582,406 shares of Class B Stock (collectively, the
"Subsidiary Shares"). Holdings owns no assets other than the Subsidiary Shares.
The Company and RCN have had preliminary discussions regarding a possible
reorganization in which RCN would transfer to the Company 100% of the capital
stock of Holdings in exchange for newly issued shares of Common Stock and Class
B Stock equal, respectively, to the number of shares of Common Stock and Class
B Stock comprising the Subsidiary Shares. Holdings would become a wholly owned
subsidiary of the Company, and the shares of Common Stock and Class B Stock
owned by Holdings would be treated as treasury shares that would not be
entitled to voting, dividend or liquidation privileges so long as they were so
held. Such a reorganization would not result in any increase in RCN's
beneficial ownership or voting power in the Company. The purpose behind such a
reorganization would be to allow RCN to hold all of its interest in the Company
directly rather than through the Subsidiary Shares of Holdings.
The Company does not have any plans, agreements or commitments to RCN
regarding such a reorganization. It is therefore not possible to predict
whether a reorganization transaction will take
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place or to describe the timing or terms on which such a reorganization might
be effected. If a reorganization were to be consummated, however, the Company
anticipates that it would receive adequate consideration to effect the
reorganization and that RCN or one of its affiliates would indemnify the
Company against any liabilities of Holdings and from any expenses and other
liabilities resulting from the reorganization.
Prior to any steps being taken to effect any reorganization, the Company's
Board of Directors would establish a special committee composed of independent
directors to review the transaction. The special committee's approval of the
terms and conditions of a reorganization would be required before the
transaction would be undertaken. Except as required by law or by the applicable
rules of the National Association of Securities Dealers, Inc. (the "NASD"), no
further shareholder approval would be required for such a reorganization.
The additional shares of Common Stock and Class B Stock, and the newly
created Preferred Stock, that would be available for issuance if the proposed
amendment is approved could be issued for any proper corporate purpose by the
Board of Directors at any time without further shareholder approval, subject to
applicable law and to the rules of the NASD that apply to the Company as a
result of the quotation of the Common Stock and Class B Stock on The NASDAQ
Stock Markets' National Market so long as the Common Stock and Class B Stock is
so quoted. Stockholders will not have preemptive rights to subscribe for shares
of Common Stock, Class B Stock or Preferred Stock unless the Company grants
such rights at the time of issue. The Company currently has no plans or
proposals to issue any of the additional shares of Common Stock or Class B
Stock or any of the shares of Preferred Stock other than the matters described
above.
The Preferred Stock being authorized as part of the Stock Amendment is stock
for which the designations, voting rights, preferences, limitations and special
rights, if any, and other terms (collectively, the "Rights and Preferences")
will be determined from time to time in the future by the Board of Directors of
the Company. If the proposal is approved by the shareholders, the Board of
Directors of the Company would have the authority to create and authorize
issuance of up to 25,000,000 shares of Preferred Stock in one or more classes
or series with such Rights and Preferences as may be determined in the Board's
sole discretion to be in the best interests of the Company and its
shareholders, with no further authorization by holders of Common Stock or Class
B Stock.
It is not possible to state the actual effect of the Preferred Stock on the
rights of holders of Common Stock and Class B Stock until the Board of
Directors determines the Rights and Preferences of one or more series of the
Preferred Stock. However, such effects could include (i) restrictions on
dividends; (ii) dilution of the voting power to the extent that one or more
classes or series of Preferred Stock were given voting rights; (iii) dilution
of the equity interest of the Common Stock and Class B Stock; and (iv)
restrictions upon distributions of assets to the holders of Common Stock or
Class B Stock upon liquidation or dissolution until the satisfaction of any
liquidation preference of one or more classes or series of the Preferred Stock.
The Board of Directors is required to make any determination to issue shares
of Common Stock, Class B Stock or Preferred Stock based on its judgment as to
the best interests of the shareholders and the Company. Although the Board of
Directors has no present intention of doing so, it could issue shares of Common
Stock, Class B Stock or Preferred Stock (within the limits imposed by
applicable laws and the rules of the NASD as described above) that could,
depending on the circumstances and, in the case of the Preferred Stock, the
Rights and Preferences of the relevant class or series, make more difficult or
discourage an attempt to obtain control of the Company by means of a merger,
tender offer, proxy contest or other means. When in the judgment of the Board
of Directors such action would be in the best interest of the Company, such
shares could be used to create voting or other impediments or to discourage
persons seeking to gain control of the Company.
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Such shares could be privately placed with purchasers favorable to the Board of
Directors in opposing such action. In addition, the Board of Directors could
authorize holders of a class or series of Preferred Stock to vote either
separately as a class or with the holders of the Common Stock and/or Class B
Stock, on any merger, sale or exchange of assets by the Company or any other
extraordinary corporate transaction. The existence of the Preferred Stock could
have the effect of discouraging unsolicited takeover attempts. The issuance of
new shares of Common Stock, Class B Stock or Preferred Stock also could be used
to dilute the stock ownership of a person or entity seeking to obtain control
of the Company should the Board of Directors consider the action of such entity
or person not to be in the best interest of the Company. Any such issuance
could also have the effect of diluting the earnings per share, book value per
share and/or voting power of the Common Stock and Class B Stock.
Under Pennsylvania law, shareholders are not entitled to dissenters' rights
of appraisal with respect to the proposed amendment to the Articles of
Incorporation of the Company to increase the authorized Common Stock and Class
B Stock and to authorize the new class of Preferred Stock.
The approval of the amendment to the Articles of Incorporation of the Company
to increase the authorized Common Stock and Class B Stock and to authorize a
new class of Preferred Stock requires the approval of (a) a majority of the
votes entitled to be cast by all of the holders of the Common Stock voting
separately as a class and (b) a majority of the votes entitled to be cast by
all of the holders of the Class B Stock voting separately as a class.
The Board of Directors Recommends a vote FOR the proposal to amend the
Articles of Incorporation to increase the number of authorized shares of Common
and Class B Stock and to create a new class of Preferred Stock.
DIRECTOR INFORMATION
Information as of February 1, 1995 concerning the principal occupation and
beneficial ownership of Common Stock and Class B Common Stock of the Company
for the nominees for election as Class II Directors and for the other current
directors is set forth below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF DIRECTOR AGE SINCE
---------------- --- --------
<C> <C> <S> <C>
James Q. Crowe............ 45 Chairman of the Board, Chief Ex-
ecutive Officer and Director,
MFS Communications Company, Inc.
("MFSCC"); and Director, Peter
Kiewit Sons', Inc. ("PKS") and
California Energy Company, Inc.
("CECI"). Mr. Crowe does not own
any Company securities.......... 1993
Stuart E. Graham.......... 49 Chairman, President and Chief Ex-
ecutive Officer, Skanska Engi-
neering and Construction, Inc.
Mr. Graham owns 3,200 shares of
Class B Stock of the Company.... 1990
Frank M. Henry............ 61 President, Frank Martz Coach Com-
pany; President, Gold Line,
Inc.; Director, First Fidelity
Bancorporation and First Fidel-
ity Bank, N.A. Mr. Henry owns
41,040 shares of Common Stock
and 23,097 shares of Class B
Stock of the Company............ 1980
</TABLE>
5
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<TABLE>
<CAPTION>
DIRECTOR
NAME OF DIRECTOR AGE SINCE
---------------- --- --------
<C> <C> <S> <C>
Richard R. Jaros.......... 43 Executive Vice President and Di-
rector, PKS; Director, MFSCC and
CECI. Mr. Jaros does not own any
Company securities.............. 1993
Robert E. Julian.......... 55 Executive Vice President, Chief
Financial Officer and Director,
PKS; and Director, MFSCC. Mr.
Julian does not own any Company
securities...................... 1993
Daniel E. Knowles(1)...... 65 Personnel Consultant; retired
Vice President of Personnel and
Administration, Grumman Corpora-
tion. Mr. Knowles owns 500
shares of Common Stock of the
Company......................... 1995
David C. McCourt.......... 38 Chairman, Chief Executive Officer
and Director of the Company
since October, 1993; President,
Chief Executive Officer and Di-
rector, RCN; Chairman and Chief
Executive Officer, Mercom Inc.;
President and Director, Metro-
politan Fiber Systems/McCourt,
Inc.; and Director, MFSCC and
MFS Telecom, Inc. Mr. McCourt
owns 1,759 shares of Common
Stock of the Company and dis-
claims beneficial ownership of
ten (10) shares of Common Stock
owned by his children for which
his spouse is custodian......... 1993
David C. Mitchell......... 53 Retired Corporate Executive Vice
President, President of the Tel-
ephone Group and Director, Roch-
ester Telephone Corporation; Re-
gional Director, Marine Midland
Bank. Mr. Mitchell owns 570
shares of Common Stock of the
Company......................... 1993
Eugene Roth............... 59 Partner, Rosenn, Jenkins and
Greenwald (Attorneys); and Di-
rector, Pennsylvania Regional
Board of First Fidelity Bank,
N.A. Mr. Roth has sole voting
and investment power with re-
spect to 357 shares of Common
Stock and 396 shares of Class B
Common stock and shares voting
and investment power with re-
spect to 3,600 shares of Class B
Stock........................... 1989
Walter Scott, Jr.......... 63 Chairman, President and Director,
PKS; and Director, MFSCC, CECI,
Berkshire Hathaway Inc., Bur-
lington Resources, Inc.,
ConAgra, Inc., FirsTier Finan-
cial, Inc., and Valmont Indus-
tries, Inc. Mr. Scott does not
own any Company securities...... 1993
Thomas C. Stortz.......... 43 Vice President and General Coun-
sel, Kiewit Construction Group,
Inc.; Mr. Stortz does not own
any Company securities.......... 1993
</TABLE>
--------
(1) Mr. Knowles was appointed by the Board of Directors to replace Donald
Reinhard who resigned on December 31, 1994.
David C. McCourt, David C. Mitchell, Daniel E. Knowles and Walter Scott, Jr.
are members of Class I with terms expiring in 1997. James Q. Crowe, Stuart E.
Graham and Richard R. Jaros are members of Class III with terms expiring in
1996.
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SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
No named executive officer (as such term is defined herein), nominee or
Director beneficially owned, as of February 1, 1995, more than one percent (1%)
of either the outstanding Common Stock or Class B Stock of the Company. The
named executive officers who beneficially owned securities of the Company as of
such date are David C. McCourt (1,759 Shares of Common Stock of which he shares
voting and investment power with his spouse, and 10 Shares of Common Stock for
which his spouse is custodian for his minor children), Michael J. Mahoney
(5,000 Shares of Common Stock), Raymond B. Ostroski (1,000 Shares of Class B
Stock and 390 Shares of Common Stock), Paul W. Mazza (20,000 Shares of Common
Stock) and Bruce C. Godfrey (1,820 Shares of Common Stock). Nominees, Directors
and executive officers as a group (the "Group") beneficially owned 66,946
shares of Common Stock and 31,293 shares of Class B Stock, representing less
than one percent (1%) of each class of stock. The Group, after giving effect to
the conversion of Class B Stock into Common Stock, owned 98,239 shares of
Common Stock representing less than one percent of such class. The information
set forth above and in "Director Information" does not give effect to the
ownership of Company securities by RCN Corporation. Certain executive officers
and directors of the Company are directly or indirectly affiliated with RCN
Corporation. For information with respect to the beneficial ownership of
securities by RCN Corporation, see "Security Ownership of Certain Beneficial
Owners."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to the
beneficial ownership of shares of Common Stock and Class B Stock of the Company
by any person or group known to the Company to be a beneficial owner of more
than five percent of either class of shares. The "Total" columns are unlikely
to represent the sum of the related columns because most forms of ownership
require that the same shares be disclosed in two of the columns.
Because the shares of Class B Stock are convertible at the option of the
holder into shares of Common Stock on a one-for-one basis at any time and from
time to time, the "Assuming Conversion" columns in the Common Stock table
reflect the total shares of Common Stock which would be beneficially owned upon
conversion by each group, as well as the related percentage beneficially owned
by such group assuming no other conversions. The "Percent of Class" columns
represent ownership not voting interest. Shares of Common Stock have one vote
per share and shares of Class B Stock have 15 votes per share. In addition,
shares of both classes can be voted cumulatively with respect to the election
of directors.
COMMON STOCK:
<TABLE>
<CAPTION>
WITHOUT CONVERSION ASSUMING CONVERSION
--------------------------------------------------------- -------------------
SOLE SOLE SHARED SHARED PERCENT PERCENT
VOTING INVESTMENT VOTING INVESTMENT OF CLASS OF CLASS
POWER POWER POWER POWER TOTAL APPROX. TOTAL APPROX.
--------- ---------- ------ ---------- --------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RCN Corporation(1)...... 8,226,260 8,226,260 0 0 8,226,260 43.5% 13,320,483 55.52%
Mario J. Gabelli
Group(2)............... 3,527,501 3,828,281 0 0 3,828,281 20.3% 5,040,352 25.06%
Ruane, Cunniff & Co,
Inc.(3)................ 971,100 578,535 0 696,900 1,275,435 6.75% 1,275,435 6.75%
CLASS B STOCK:
RCN Corporation(1)...... 5,094,223 5,094,223 0 0 5,094,223 59.60%
Mario J. Gabelli
Group(2)............... 1,212,071 1,212,071 0 0 1,212,071 14.20%
</TABLE>
--------
(1) PKS is the sole stockholder of KDG, which holds 90% of the stock of RCN.
David C. McCourt owns the remaining 10% of the stock of RCN. The address
for RCN, KDG and PKS is 1000 Kiewit Plaza, Omaha, Nebraska 68131.
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<PAGE>
(2) Based on information obtained from Schedule 13Ds and amendments thereto for
the Common Stock and the Class B Stock filed through February 28, 1995 with
the Securities and Exchange Commission (the "SEC") by Mario J. Gabelli,
together with GAMCO Investors, Inc., Gabelli Funds, Inc., Gabelli
Performance Partnership, Gabelli International Limited, Gabelli
International II Limited and Gabelli & Co., all of whose address is One
Corporate Center, Rye, New York 10580-1434.
(3) Based on information obtained from Schedule 13G for the Common Stock filed
through December 31, 1994 with the SEC by Ruane, Cunniff & Co., Inc. whose
address is 767 Fifth Avenue, Suite 4701, New York, New York 10153-4798.
COMPENSATION COMMITTEE REPORT
The compensation programs for the Company's executive officers are
administered by the Compensation Committee (the "Committee") of the Company's
Board of Directors. The Committee makes recommendations with respect to
executive compensation matters, which are submitted to the Board of Directors
for approval. The Committee is comprised entirely of non-management directors.
No member of the Committee is a former or current officer or employee of the
Company. One member of the Committee is a consultant to the Company and another
member's law firm performs services from time-to-time for the Company. The
Committee has access to an independent compensation consultant.
The Committee submits the following report on compensation for the Company's
executive officers for 1994.
COMPENSATION PHILOSOPHY
In 1994, the Committee completed a review of the Company's compensation
strategies, policies and practices. The fundamental philosophy of the Company's
compensation program is to offer performance-based compensation to its
executives, while rewarding those executives whose efforts enable the Company
to achieve its business objectives and enhance shareholder value. The following
objectives for the company's executive compensation plan were established:
1. Establish and implement the concept of Total Direct Compensation
("TDC") with a base salary slightly below that of our peer group, a short
term bonus equivalent to that of our peer group, and provide a long term
bonus above that of our peer group.
2. Establish levels or bands which are market based for the executive
group and develop a TDC for each band. Position placement in the bands will
be based on level of responsibility, scope and impact on decision making.
3. The design of the plan will convey a philosophy of executive officer
ownership through stock options. This will align executive performance to
shareholder rewards.
Base salary structure guidelines were approved by the Board of Directors and
became effective February 1, 1994. The 1994 Executive short-term incentive plan
was approved by the Board of Directors in April 1994. The plan established
specific objectives and component weightings for each executive level band. On
April 21, 1994 the shareholders of C-TEC approved the Company's 1994 Stock
Option Plan which provides for the long term incentive component of the TDC.
These actions completed the implementation of the executive compensation
objectives enumerated above. As a result of these actions, as an executive's
level of responsibility increases, a greater portion of their potential total
compensation opportunity is based on performance incentives and less on base
salary and benefits.
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EXECUTIVE OFFICER COMPENSATION
In conjunction with the establishment of market based executive level
position bands referred to above, the Board of Directors, acting on the
recommendations of the Committee, increased executive salaries effective
February 1, 1994. These increases were based upon the consideration of
comparable employment data, an assessment of the Company's and the officers
performance during the prior year, adjustments to reflect relocation cost of
living considerations, elimination of annual automobile allowances, and in two
cases, promotional increases.
In February 1995 executive short-term incentive plan performance results for
1994 were compared to the established short-term incentive plan objectives. The
Committee awarded each executive officer short-term cash bonuses based on the
weighted results of corporate and business unit financial performance,
individual objectives and a discretionary component.
At February 14, 1995, 860,000 stock options are held by eight executive
officers, including Mr. McCourt and an additional 165,500 stock options were
held by nineteen (19) mid-level management employees of the Company. All grants
are governed by the terms and conditions of the 1994 Stock Option Plan. The
number of stock options granted to each executive officer and/or mid level
management employee was based on the individual's salary band and scope of
responsibility.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. McCourt's annual base salary of $375,000 in 1994 was at the same rate as
his compensation in 1993.
Mr. McCourt participates in the executive short-term incentive plan and was
awarded a cash bonus of $500,000 by action of the Board of Directors on
February 14, 1995 for performance results for the period of October 1993
through December 1994. Mr. McCourt's short-term incentive award reflects the
major accomplishments achieved during his first fourteen (14) months as Chief
Executive Officer. These accomplishments include strengthening of the balance
sheet (debt restructuring and Rights Offering), the divestiture of the
Company's cellular division, the purchase of Twin County Cable and the
attainment of corporate financial goals.
During 1994, the Committee awarded Mr. McCourt stock options in accordance
with the Company's 1994 Stock Option Plan. Mr. McCourt was granted 500,000
options; 250,000 options were granted as of August 19, 1994 at an exercise
price equal to the closing price of the common stock on August 19, 1994
($22.50); 250,000 options were granted on January 20, 1995 with an exercise
price equal to the closing price of the common stock on January 20, 1995
($21.125). The number of shares granted reflects the Committee's assessment of
competitive compensation practices and Mr. McCourt's contribution toward the
achievement of C-TEC's strategic objectives. Mr. McCourt's grant is governed by
the terms and conditions of the 1994 Stock Option Plan which was approved by
the shareholders on April 21, 1994.
COMPENSATION COMMITTEE
David C. Mitchell, Chairman
Robert E. Julian
Stuart E. Graham
Eugene Roth
9
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years ending December 31,
1992, 1993 and 1994, the cash compensation, as well as certain other
compensation, paid or accrued to the named executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------ ---------------------------------
AWARDS PAYOUTS
--------------------- -----------
(1) SECURITIES
OTHER RESTRICTED UNDERLYING (1) (2)
NAME AND SALARY BONUS ANNUAL STOCK OPTIONS LTP ALL OTHER
POSITION YEAR ($) ($) COMP. ($) AWARDS (#) PAYOUTS ($) COMPENSATION ($)
-------- ---- ------- ------- --------- ---------- ---------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David C. McCourt........ 1994 375,000 500,000 -- -- 250,000 -- 387
Chairman of the 1993 64,904 N/A N/A N/A N/A N/A 28
Board and C.E.O. 1992 N/A N/A N/A N/A N/A N/A N/A
Michael J. Mahoney...... 1994 190,719 125,000 -- -- 100,000 -- 5,585
President and Chief 1993 141,231 83,504 -- -- -- 293,902 5,135
Operating Officer 1992 136,846 50,000 -- -- -- 149,919 2,782
Bruce C. Godfrey........ 1994 128,154 53,500 -- -- 70,000 -- 165
E.V.P. and 1993 N/A N/A N/A N/A N/A N/A N/A
Chief Financial Officer 1992 N/A N/A N/A N/A N/A N/A N/A
Raymond B. Ostroski..... 1994 122,335 43,750 -- -- 35,000 -- 4,427
E.V.P., General Counsel 1993 91,615 53,503 -- -- -- 137,296 3,199
and Corporate Secretary 1992 88,961 23,000 -- -- -- 128,772 2,633
Paul W. Mazza........... 1994 162,443 54,000 -- -- 25,000 -- 5,615
E.V.P.--Telephone Group 1993 146,462 70,560 -- -- -- 248,214 5,678
1992 144,231 40,000 -- -- -- 299,427 5,555
</TABLE>
--------
(1) The only type other Annual Compensation for each of the named executive
officers was in the form of perquisites and was less than the level
required for reporting.
(2) Includes the following amounts for the last fiscal year: (i) David McCourt:
$367--Company paid life insurance; (ii) Bruce Godfrey: $165--Company paid
life insurance; (iii) Michael J. Mahoney; $503--Company paid life
insurance; $5,082--401(k) Company match; (iv) Raymond Ostroski; $390--
Company paid life insurance; $4,037--401(k) Company match; (v) Paul Mazza;
$1,433--Company paid life insurance; $5,082--401(k) Company match. Does not
include $686,685 paid to certain senior officers listed for relocation
expenses incurred in moving said senior officers and their families to the
Company's new executive offices in Princeton, New Jersey.
10
<PAGE>
AGGREGATE OPTION GRANTS IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following tables show information with respect to the executive officers
identified below concerning the grants of options under the Company's 1994
Stock Option Plan.
C-TEC OPTION GRANTS IN FISCAL YEAR 1994
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES OF
% OF TOTAL STOCK PRICE
# OF SECURITIES OPTIONS GRANTED APPRECIATION
UNDERLYING TO EMP. IN EXERCISE OR EXPIRATION ---------------------
NAME OPTIONS GRANTED (1) FISCAL YR. 1994 BASE PRICE DATE 5% ($) 10% ($)
---- ------------------- --------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
David C. McCourt........ 250,000 29.92% $22.50 08/19/04 $3,537,532 $8,964,801
Michael J. Mahoney...... 100,000 11.97% 25.50 04/21/04 1,603,681 4,064,043
Bruce C. Godfrey........ 70,000 8.38% 25.50 04/21/04 1,122,577 2,844,830
Raymond B. Ostroski..... 35,000 4.19% 25.50 04/21/04 561,288 1,422,415
Paul W. Mazza........... 25,000 2.99% 25.50 04/21/04 400,920 1,016,011
</TABLE>
--------
(1) Said options become exercisable (subject to acceleration upon a change in
control) in cumulative annual increments of 20% from the original date of
grant.
C-TEC OPTION EXERCISES IN FISCAL YEAR 1994 AND 12/31/94 OPTION VALUES
<TABLE>
<CAPTION>
# OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED VALUE OPTIONS AS OF 12/31/94 OPTIONS AS OF 12/31/94
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
David C. McCourt........ $0 $0 0/250,000 $0
Michael J. Mahoney...... 0 0 0/100,000 0
Bruce C. Godfrey........ 0 0 0/70,000 0
Raymond B. Ostroski..... 0 0 0/35,000 0
Paul W. Mazza........... 0 0 0/25,000 0
</TABLE>
11
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the performance of the Company's
Common Stock and Class B Stock to the NASDAQ market index and to a peer group
index (composed of Associated Communications, Lincoln Telecommunications,
Inc., and TCA Cable Television, Inc.) for the Company's last five fiscal
years. The non-Company related indices were supplied by Star. The graph
assumes that the value of the investment in the Company's Common Stock, Class
B Stock and each index was $100 at December 31, 1989 and that all dividends
were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG C-TEC CORPORATION, THE NASDAQ STOCK MARKET-US INDEX
AND THE C-TEC CORPORATION CLASS B INDEX
(MAC GRAPH)
Associated Communications, one of the companies included in the Company's
peer group effected a plan of merger and reorganization on December 16, 1994.
The 1994 period end stock price utilized for Associated Communications in
determining peer group performance was the closing price on December 15, 1994,
the last day on which Associated Communications' stock traded prior to the
merger.
12
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Eugene Roth served on the Company's Compensation Committee in 1994. He is a
partner in Rosenn, Jenkins and Greenwald, which serves as counsel to the
Company from time to time.
David C. Mitchell, Chairman of the Compensation Committee, serves as a
consultant. In 1994, the Company paid Mr. Mitchell $104,750 in fees for
consulting services rendered to the Company.
In 1994, the Company paid $304,401 to Frank M. Henry Associates pursuant to a
lease for office space in the Martz Tower, 46 Public Square, Wilkes-Barre, Pa.
The total paid by the Company was for rent, utilities, parking and maintenance
services for the period January 1, 1994 through December 31, 1994. See
"Transactions with Management and Certain Concerns."
PKS and/or its affiliates have a substantial stock ownership in MFSCC, CECI,
RCN and the Company. Many of the companies share mutual director representation
on their respective boards. Although members of the current Compensation
Committee do not serve on any Kiewit-related compensation committees, Robert E.
Julian is a Director at PKS and MFSCC. James Q. Crowe, a member of the
Company's Executive Committee and Chairman of the Board of MFSCC, is on the
Compensation Committee of CECI. Richard R. Jaros, also a member of the
Company's Executive Committee, is Chairman of the Board of CECI and serves on
the Compensation Committee of MFSCC.
PENSION BENEFITS
The following table shows the estimated annual benefits payable upon
retirement for the named executive officers in the compensation and years of
service classifications indicated under the Company's pension plan.
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE ------------------------------------------------------------------
COMPENSATION 15 20 25 30 35
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$125,000 $23,040 $30,720 $38,400 $46,080 $53,760
150,000 28,103 37,470 46,838 56,225 65,573
175,000 28,103 37,470 46,838 56,225 65,573
200,000 28,103 37,470 46,838 56,225 65,573
225,000 28,103 37,470 46,838 56,225 65,573
250,000 28,103 37,470 46,838 56,225 65,573
</TABLE>
Pensions are computed on a straight life annuity basis and are not reduced
for social security or other offset amounts. Participants receive a pension
based upon average compensation multiplied by the number of years of service.
Average compensation is computed on the basis of the average of the employees
highest five (5) consecutive annual base salaries in the ten (10) years
immediately preceding retirement. The compensation covered by this plan is
generally based upon the compensation disclosed as salary in the "Summary
Compensation Table."
TRANSACTIONS WITH MANAGEMENT AND CERTAIN CONCERNS
Frank M. Henry, a Director of the Company, is a principal in Martz Travel and
Frank Martz Coach Company which perform certain travel and related services for
the Company. In 1994, the Company paid $196,339 to Martz Travel and Frank Martz
Coach Company for such services.
Frank M. Henry, together with his spouse, owns a 50% partnership interest in
Frank M. Henry Associates, which leases office space to the Company under an
amended lease which expires May 31, 1996. A total of $304,401 was paid by the
Company to Frank M. Henry Associates for rent, utility, parking and maintenance
services for the year ending December 31, 1994.
13
<PAGE>
Eugene Roth, a Director of the Company, is a partner in Rosenn, Jenkins and
Greenwald which serves as counsel for the Company from time to time.
David C. Mitchell, a director of the Company, serves as a consultant to the
Company and was paid $104,750 by the Company in 1994.
During fiscal 1994, the Company made payments in the aggregate amount of
$332,103 to PKS and its affiliates (including but not limited to MFSCC) for
engineering, financial and other related support services.
INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
The Board of Directors of the Company held eight (8) meetings in 1994. The
Board of Directors has standing Executive, Audit, Compensation and Pension
Committees.
The Executive Committee of the Company held two (2) meetings in 1994. The
Committee reviewed and recommended investments and acquisitions and presented
names of prospective candidates to serve on the Board of Directors. The current
Executive Committee consists of David C. McCourt, Chairman, James Q. Crowe,
Richard R. Jaros and Walter Scott, Jr.
The Audit Committee of the Company held three (3) meetings in 1994. The
Committee (i) discussed matters concerning the audit of the annual financial
statements, (ii) considered the Company's internal audit program, (iii)
recommended the selection of the independent auditors to audit the accounts of
the Company, and (vi) discussed other matters of concern to the Audit
Committee, the auditors or management. The current Audit Committee consists of
Robert E. Julian, Chairman, David C. Mitchell and Frank M. Henry.
The Compensation Committee of the Company held four (4) meetings in 1994. The
Committee made recommendations to the Board of Directors concerning the
salaries and incentive compensation awards for the top levels of management of
the Company and its subsidiaries and established compensation policy. The
Compensation Committee also administered the Company's, Short-Term Incentive
Plan and the 1994 Stock Option Plan. The current Compensation Committee
consists of David C. Mitchell, Chairman, Robert E. Julian, Stuart E. Graham and
Eugene Roth.
The Pension Committee of the Company held four (4) meetings in 1994. The
Committee reviewed and evaluated the investment performance of the various
pension investment funds and monitored the performance of the administrators,
investment managers and trustees of such funds, as well as reviewed the
actuarial assumptions used in setting the Company's funding policies for such
funds. The current Pension Committee consists of Richard R. Jaros, Chairman,
David C. McCourt, Thomas C. Stortz and Michael J. Mahoney.
Non-employee Directors of the Company receive a retainer of $900 per month
and are paid $1,000 for each board meeting attended. The Committee Chairman and
other committee members are paid $500 and $300, respectively, for each
committee meeting attended. In fiscal 1994, Stuart E. Graham, Frank M. Henry,
David C. Mitchell, Donald G. Reinhard (resigned December 31, 1994) and Eugene
Roth were paid $20,300, $21,500, $22,150, $18,800 and $21,300 respectively, for
the foregoing services. Compensation for director services rendered by
Directors not employed as executive officers of the Company but employed as
executive officers at PKS and MFSCC totaled $88,100(/1/) and $17,200(/2/),
respectively in 1994.
--------
(1) Messrs. Jaros, Julian, Scott, and Stortz.
(2) Mr. Crowe.
14
<PAGE>
OTHER MATTERS
The Board of Directors does not know of any other matters that may come
before the meeting. However, if any other matters properly come before the
meeting, it is the intention of the persons named in the accompanying form of
proxy to vote the proxy in accordance with their judgment on such matters.
GENERAL INFORMATION
FINANCIAL INFORMATION
A copy of the Company's 1994 Annual Report to Shareholders containing the
Consolidated Financial Statements of the Company, including the report thereon
dated March , 1995 of Coopers & Lybrand, independent accountants, accompanies
this Proxy Statement.
UPON THE WRITTEN REQUEST OF ANY PERSON WHO ON MARCH 15, 1995 WAS A RECORD
OWNER OF THE COMPANY'S COMMON OR CLASS B STOCK, OR WHO REPRESENTS IN GOOD
FAITH THAT HE WAS ON SUCH DATE A BENEFICIAL OWNER OF SUCH STOCK ENTITLED TO
VOTE AT THE ANNUAL MEETING, THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS,
SCHEDULES, AND EXHIBITS, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
WRITTEN REQUESTS FOR THE REPORT SHOULD BE DIRECTED TO:
INVESTOR RELATIONS DEPARTMENT
C-TEC CORPORATION
105 CARNEGIE CENTER
PRINCETON, NEW JERSEY 08540
ATTN: VALERIE HAERTEL
DIRECTOR, INVESTOR RELATIONS
SOLICITATION OF PROXIES
The Company will bear the cost of solicitation of proxies. In addition to
the use of the mail, proxies may be solicited by officers, directors and
regular employees of the Company, personally or by telephone, telecopy or
telegraph, and the Company may reimburse persons holding stock in their names
or those of their nominees for their expenses in forwarding soliciting
materials to their principals.
It is important that proxies be returned promptly. Therefore, shareholders
are urged to promptly fill in, date, sign and return the enclosed proxy in the
enclosed envelope, to which no postage need be affixed if mailed in the United
States.
SHAREHOLDERS' PROPOSALS
Any shareholder who desires to submit a proposal to be considered for
inclusion in the proxy statement and proxy of the Company relating to the 1996
Annual Meeting of Shareholders must submit such proposal in writing to the
Company by December 15, 1995. Such proposals should be hand delivered or
mailed, return receipt requested, to the Secretary of the Company.
By order of the Board of Directors.
Raymond B. Ostroski
Executive Vice President,
General Counsel and
Corporate Secretary
Dated: March , 1995
15
<PAGE>
ANNEX A
AMENDMENT
If approved, Sections 9. A. and 9. B. (1) of the Amended and Restated
Articles of Incorporation of the Company will be substituted with the following
new Sections 9. A. and 9. B (1):
9. A. Class and Number of Shares. The total number of shares of stock
which the Corporation shall have authority to issue is 125,000,000,
consisting of 85,000,000 shares of Common Stock, par value $1.00, per share
("Common Stock"), 15,000,000 shares of Class B Common Stock, par value
$1.00 per share ("Class B Stock") and 25,000,000 shares of Preferred Stock,
without par value ("Preferred Stock").
The Board of Directors is hereby empowered to the extent permitted by the
Business Corporation Law of the Commonwealth of Pennsylvania, as amended
from time to time, to amend these Amended and Restated Articles of
Incorporation by resolution or resolutions from time to time to divide the
Preferred Stock into one or more classes or series, to determine the
designation and the number of shares of any class or series of Preferred
Stock, to determine the voting rights, preferences, limitations and special
rights, if any, and other terms of the shares of any class or series of
Preferred Stock and to increase or decrease the number of shares of any
such class or series.
9. B. Powers and Rights of the Common Stock and the Class B Stock. The
designations, preferences and relative, participating, optional or other
special rights and the qualifications, limitations or restrictions in
respect of the shares of the Common Stock and the Class B Stock are as
follows:
(1) Voting Rights and Powers. With respect to all matters upon which
shareholders are entitled to vote or to which shareholders are entitled
to give consent, except as provided herein, the holders of the
outstanding shares of the Common Stock and the holders of any
outstanding shares of the Class B Stock shall vote together without
regard to class, and every holder of the outstanding shares of the
Common Stock shall be entitled to cast thereon one (1) vote in person
or by proxy for each share of the Common Stock standing in his name,
and every holder of any outstanding shares of the Class B Stock shall
be entitled to cast thereon fifteen (15) votes in person or by proxy
for each share of the Class B Stock standing in his name. With respect
to any proposed amendment, other than an amendment made by action of
the Board of Directors of the Company pursuant to the second paragraph
of Section 9. A. hereof, which would (i) increase or decrease the par
value of any class, (ii) alter or change the preferences,
qualifications, limitations, restrictions or special or relative rights
of the shares of any class so as to affect the holders of such class
adversely, (iii) increase the authorized number of shares of any class,
authorize a new class of shares (iv) senior or superior in any respect
to the shares of any class, or (v) increase the number of authorized
shares of any class senior or superior in any respect to the shares of
any class then authorized, the approval of a majority of the votes
entitled to be cast by the holders of the class affected by the
proposed amendment, voting separately as a class, shall be obtained in
addition to the approval of a majority of the votes entitled to be cast
by the holders of the Common Stock and the Class B Stock voting
together without regard to class as herein before provided. Except as
required by law, no shareholder approval of any amendment made by
action of the Board of Directors of the Company pursuant to the second
paragraph of Section 9. A. hereof shall be required.
16
