<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
C-TEC Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
C-TEC CORPORATION
105 Carnegie Center, Princeton, New Jersey 08540 * (609) 734-3700
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
October 1, 1997
The Annual Meeting of Shareholders of C-TEC Corporation ("C-TEC" or the
"Company") will be held at the Princeton Marriott, 201 Village Boulevard,
Princeton Forrestal Village, Princeton, New Jersey on Wednesday, October 1,
1997, at 11:00 A.M., local time. The meeting will be held for the following
purposes:
1. To elect four (4) Directors to Class I to serve for a term of three
(3) years;
2. To amend the C-TEC Articles of Incorporation, as amended, to effect a
two (2)-for-three (3) reverse stock split of C-TEC's Common Stock and
Class B Common Stock;
3. To ratify the appointment of Coopers & Lybrand, L.L.P. as independent
auditors of the Company for the fiscal year ending December 31, 1997;
and
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 September 2, 1997,
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.
RAYMOND B. OSTROSKI
Executive Vice President,
General Counsel and Corporate Secretary
Dated: September __, 1997
<PAGE>
C-TEC CORPORATION
PROXY STATEMENT
---------------
Annual Meeting of Shareholders to be Held on Wednesday, October 1, 1997
This Proxy Statement is being mailed to shareholders on or about September
2, 1997, in connection with the solicitation of proxies by the Board of
Directors of C-TEC Corporation ("C-TEC" or the "Company") for use at the Annual
Meeting of Shareholders (the "Annual Meeting") to be held on Wednesday, October
1, 1997, at 11:00 A.M., local time, at the Princeton Marriott, 201 Village
Boulevard, Princeton Forrestal Village, Princeton, New Jersey, and at any
adjournment or postponement thereof.
At the Annual Meeting, shareholders of C-TEC eligible to vote will consider
and vote upon proposals (i) to elect four (4) Class I Directors to serve for a
term of three (3) years; (ii) to amend the C-TEC Articles of Incorporation, as
amended, (the "Articles of Incorporation") to effect a two (2)-for-three (3)
reverse stock split of the C-TEC Common Stock, par value $1.00 per share ("C-TEC
Common Stock") and the C-TEC Class B Common Stock, par value $1.00 per share
("C-TEC Class B Stock"); (iii) to ratify the appointment of Coopers & Lybrand
L.L.P. as independent auditors of C-TEC for the fiscal year ending December 31,
1997; and (iv) to transact such other business as may properly come before the
meeting.
Any proxy may be revoked at any time prior to its exercise by notifying the
Secretary in writing, by delivering a duly executed proxy bearing a later date
or by attending the meeting and voting in person.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement in connection with the
solicitation made hereby, and if given or made, such information or
representation should not be relied upon as having been authorized by C-TEC.
__________________________
The date of this Proxy Statement is September __, 1997
2
<PAGE>
THE ANNUAL MEETING
Time, Date and Place
The Annual Meeting will be held at the Princeton Marriott, 201 Village
Boulevard, Princeton Forrestal Village, Princeton, New Jersey on Wednesday,
October 1, 1997, at 11:00 a.m., local time.
Purpose of the Annual Meeting
Shareholders of C-TEC will consider and vote upon proposals (i) to elect
four (4) Class I Directors to serve for a term of three (3) years; (ii) to amend
the C-TEC Articles of Incorporation to effect a two (2)-for-three (3) reverse
stock split of the C-TEC Common Stock and the C-TEC Class B Stock; and (iii) to
ratify the appointment of Coopers & Lybrand L.L.P. as independent auditors of
C-TEC for the fiscal year ending December 31, 1997; (iv) to transact such other
business as may properly come before the meeting.
Record Date, Quorum, Required Vote
The close of business on September 2, 1997 has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
Annual Meeting and at any adjournment or postponement thereof. On September 2,
1997, there were outstanding [20,444,404] shares of C-TEC Common Stock and
[11,093,442] shares of C-TEC Class B Stock. The presence at the Annual Meeting,
in person or by proxy, of shareholders entitled to cast a majority of the votes
entitled to be cast at the Annual Meeting shall constitute a quorum at the
Annual Meeting. Shareholders will be entitled to one vote per share for C-TEC
Common Stock and fifteen votes per share for C-TEC Class B Stock on all matters
to be submitted to a vote at the Annual Meeting. Shareholders have cumulative
voting rights with respect to the election of Directors. Under cumulative
voting, a shareholder's total vote (the number of votes to which such
shareholder is entitled 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 C-TEC Common Stock and
holders of C-TEC Class B Stock will vote as a single class on all matters.
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.
3
<PAGE>
Directors will be elected by a plurality of the votes cast at the Annual
Meeting. Abstentions and broker non-votes are not treated as votes cast, and
thus will not be the equivalent of votes against the election of a nominee.
The approval of Proposal 2 (regarding the amendment to the Articles of
Incorporation to effect the reverse stock split) requires the affirmative vote
of a majority of the votes entitled to be cast by all the holders of the C-TEC
Common Stock and the C-TEC Class B Stock voting as a single class. Abstentions
and broker non-votes are considered in determining the number of votes required
to pass Proposal 2. Thus, abstentions and broker non-votes will have the same
legal effect as votes against Proposal 2.
The approval of Proposal 3 (regarding ratification of the appointment of
independent auditors) requires the affirmative vote of a majority of the votes
cast by the holders of C-TEC Common Stock and the holders of C-TEC Class B Stock
voting together as a single class. Abstentions and broker non-votes, because
they are not treated as votes cast, will not be the equivalent of votes against
Proposal 3.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three (3) classes and is
currently comprised of thirteen (13) members. One class is elected each year
for a three-year term. Class I Directors whose term will expire at the Annual
Meeting include the following nominees, all of whom are presently Directors of
the Company: David C. McCourt, David C. Mitchell, Daniel E. Knowles and Walter
Scott, Jr. These four (4) nominees, if elected at the 1997 Annual Meeting, will
serve for a term of three (3) years expiring at the Annual Meeting of
Shareholders to be held in 2000.
It is not anticipated that any of these nominees will become unavailable for
any reason, but, if that should occur before the Annual Meeting, the persons
named on the enclosed Proxy reserve the right to substitute another person 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 these four (4) nominees as Class I Directors to serve for a term of
three (3) years.
DIRECTOR INFORMATION
Information as of June 30, 1997, concerning the nominees for election as
Class I Directors and for the other current Directors is set forth below.
4
<PAGE>
<TABLE>
<CAPTION>
Director
Name of Director Age Since
- ---------------- --- ---------
<S> <C> <C> <C>
James Q. Crowe 47 President and Chief Executive 1993
Officer, Kiewit Diversified Group,
Inc. ("KDG"), a subsidiary of Peter
Kiewit Sons' Inc. ("PKS"). Mr. Crowe was
Chairman of the Board, WorldCom,
Inc. ("WorldCom") from December 1996 to
June 1997. Mr. Crowe has served as Chairman
of the Board of MFS Communications Company,
Inc., ("MFSCC"), since 1988 and Chief
Executive Officer since November 1991
and was President of MFSCC from January
1988 to June 1989 and April 1990 to
January 1992. Mr. Crowe is a director
of PKS, CalEnergy Company, Inc.,
("CECI"), and Quest Communcations
International, Inc.
Bruce C. Godfrey 41 Executive Vice President and Chief 1996
Financial Officer of C-TEC since April
1994; Executive Vice President and Chief
Financial Officer of Mercom, Inc.
("Mercom") since April 1994;
director of Mercom since May 1994;
Senior Vice President and Principal,
Daniels & Associates from January
1984 to April 1994.
Stuart E. Graham 51 Chairman, President and Chief Executive 1990
Officer of Skanska Engineering and
Construction, Inc. since 1994 and has
held various positions throughout that
company, being appointed Vice President
of Operations in 1977. Mr. Graham is also
President and Chief Executive Officer of
Slattery Associates, Inc. since 1995.
Frank M. Henry 64 Chairman, Frank Martz Coach Company 1980
since 1995 and was President of Frank
Martz Coach Company from 1964 to 1995;
President, Gold Line, Inc. since 1975 and
director, First Union Corporation.
Richard R. Jaros 45 Mr. Jaros is a member of the Board of 1993
directors of WorldCom and CECI.
From 1980 to 1992 and from 1994 to 1997,
Mr. Jaros served as President of KDG and
Executive Vice President and Chief
Financial Officer of PKS. He served as
Chairman of CECI from 1993 to 1994 and as
President from 1992 to 1993.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Director
Name of Director Age Since
- ---------------- --- ---------
<S> <C> <C>
Robert E. Julian 58 Retired Executive Vice President and 1993
Chief Financial Officer of PKS from
1991 to 1993. Mr. Julian serves as
a director of PKS.
Daniel E. Knowles 67 Personnel Consultant of Cambridge 1995
Human Resources Consulting Group
since 1989; President of Personnel and
Administration, Grumman Corporation from
1963 to 1989.
Michael J. Mahoney 46 President and Chief Operating Officer 1995
of the Company since February 1994;
President and Chief Operating Officer
of Mercom since February 1994; director
of Mercom since January 1994; Executive
Vice President, Cable Television Group
from June 1991 to February 1994;
Executive Vice President of Mercom from
December 1991 to February 1994; and
Chief Operating Officer of Harron
Communications Corp. from April 1983 to
December 1990.
David C. McCourt 40 Chairman and Chief Executive Officer 1993
of the Company since October 1993;
President, Chief Executive Officer and
director of Kiewit Telecom Holdings,
Inc. ("KTH"); Chairman and Chief
Executive Officer of Mercom since October
1993; and President and a director of
Metropolitan Fiber Systems/McCourt, Inc.,
a subsidiary of MFS Telecom, Inc., since
1988. Mr. McCourt has been a director
of MFSCC since July 1990, Cable Satellite
Public Affairs Network ("C-SPAN") since
June 1995 and WorldCom, Inc. since
December 1996.
David C. Mitchell 56 Former President of Rochester Telephone 1993
Corporations Telephone Group ("RTC") as
well as Corporate Executive Vice President
and director of Rochester Telephone
Corporation. Since 1963, Mr.
Mitchell has held various positions
throughout RTC, encompassing virtually
all disciplines within RTC.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Director
Name of Director Age Since
- ---------------- --- ---------
<S> <C> <C>
Eugene Roth 61 Partner, Rosenn, Jenkins and Greenwald 1989
(Attorneys) since 1964. Mr. Roth is a
director of the Pennsylvania Regional
Board of First Fidelity Bank, N.A.
Walter Scott, Jr. 66 Chairman of the Board and President 1993
of PKS for over five years. Mr. Scott
is also a director of Berkshire Hathaway
Inc., Burlington Resources, Inc., CECI,
ConAgra, Inc., First Bank System, Inc.,
Valmont Industries, Inc., KDG and KTH
Mr. Scott was a director of WorldCom from
December 1996 to June 1997.
Michael B. Yanney 63 Chairman and Chief Executive Officer 1996
of America First Companies L.L.C. since
1984. Mr. Yanney is a director of
Burlington Northern Santa Fe Corporation,
Lozier Corporation, Forest Oil Corporation,
Freedom Communication, Inc. and Mid-America
Apartment Communities, Inc. Mr. Yanney was
a director of WorldCom from December 1996
to July 1997.
</TABLE>
_______________________
(1) Mr. Godfrey was appointed to the Board November 6, 1996.
The Board of Directors is divided into three classes. David C. McCourt,
David C. Mitchell, Daniel E. Knowles and Walter Scott, Jr. are members of Class
I whose term will expire at the Annual Meeting. Robert E. Julian, Frank M.
Henry, Eugene Roth, Michael B. Yanney and Bruce C. Godfrey are members of Class
II, with terms expiring in 1998. James Q. Crowe, Stuart E. Graham, Richard R.
Jaros and Michael J. Mahoney are members of Class III, with terms expiring in
1999.
In connection with the Restructuring (as defined below), it is anticipated
that (i) Robert E. Julian, Michael B. Yanney and Bruce C. Godfrey will resign
from their positions as Directors in Class 2, (ii) Michael I. Gottdenker and
John J. Whyte will be selected by the Board of Directors to fill two of the
vacancies in Class 2, (iii) the Board of Directors will eliminate the
additional vacancy in Class 2 create a vacancy in, Class 3 and select Bruce C.
Godfrey to fill that vacancy.
7
<PAGE>
Set forth below is biographical information with respect to Michael I.
Gottdenker and John J. Whyte as of June 30, 1997:
<TABLE>
<CAPTION>
Name Age Biographical Information
- ---- --- ------------------------
<S> <C> <C>
Michael I. Gottdenker 32 Executive Vice President-Telephone
Group-C-TEC (since September 1995);
Executive Vice President-Communication
Services Group (since August 1996);
Vice President of New Business
Development-Revlon Consumer Products
Corporation (1994-1995); General
Manager-State Beauty Supply (1993
-1994); Director of Corporate
Finance-Revlon Consumer Products
Corporation (1992-1993); Associate,
Real Estate Finance Department-Salomon
Brothers, Inc. (1988-1991); Financial
Analyst, Corporate Finance
Department-Salomon Brothers, Inc.
(1986-1988).
John J. Whyte 56 Former Partner, Stavisky, Sharpiro &
Whyte (Public Accounting Firm) for
seventeen years and in 1986,
Mr. Whyte founded Worldwide PCE
Corporation.
</TABLE>
Following the Restructuring, which will include the distribution of the
common stock of C-TEC's subsidiaries RCN Corporation ("RCN") and Cable Michigan,
Inc. ("Cable Michigan") to the holders of C-TEC Common Stock and C-TEC Class B
Stock, it is anticipated that (i) David C. McCourt will also serve as Chairman
and Chief Executive Officer and a member of the Board of Directors of RCN and
Cable Michigan; (ii) Michael J. Mahoney will resign from his position as
President and Chief Operating Officer of C-TEC and will serve as President and
Chief Operating Officer and a member of the Board of Directors of RCN; (iii)
Bruce C. Godfrey will also serve as Executive Vice President, Chief Financial
Officer and a member of the Board of Directors of RCN and as a member of the
Board of Directors of Cable Michigan; (iv) James Q. Crowe will also serve as a
member of the Board of Directors of RCN; (v) Stuart E. Graham will also serve as
a member of the Board of Directors of RCN; (vi) Frank M. Henry will also serve
as a member of the Board of Directors of Cable Michigan; (vii) Richard R. Jaros
will also serve as a member of the Board of Directors of RCN; (viii) David C.
Mitchell will also serve as a member of the Board of Directors of Cable
Michigan; (ix) Eugene Roth will also serve as a member of the Board of Directors
of RCN; (x) Walter Scott, Jr. will also serve as a member of the Board of
Directors of RCN; and (xi) Michael B. Yanney will serve as a member of the Board
of Directors of RCN.
____________________________
8
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
------------------------------------------------------
The Company
Set forth below is certain information regarding the beneficial ownership
of C-TEC Common Stock and C-TEC Class B Stock as of June 30, 1997, by each
Director, the named executive officers and by all persons, as a group, who are
currently Directors or executive officers of the Company. Because the shares of
C-TEC Class B Stock are convertible at the option of the holder into shares of
C-TEC Common Stock on a one-for-one basis at any time and from time to time, the
"Assuming Conversion" columns in the C-TEC Common Stock table reflect the total
shares of C-TEC Common Stock which would be beneficially owned by such person or
group assuming no other conversions. The "Percent of Class" columns represent
ownership not voting interest. Shares of C-TEC Common Stock have one vote per
share and shares of C-TEC Class B Stock have 15 votes per share. Each Director
or named executive officer has sole investment and voting power over the shares
listed opposite his name except as set forth in the footnotes hereto:
<TABLE>
<CAPTION>
C-TEC CLASS B ASSUMING CONVERSION
C-TEC COMMON STOCK(1) COMMON STOCK ------------------------
---------------------------- ---------------------------- Number of Percent
Number of Shares Percent of Number of Shares Percent of Shares of
Beneficially Outstanding Beneficially Outstanding Beneficially Outstanding
Owned (2) Shares(3) Owned(2) Shares(3) Carried (2) Shares
Name of Beneficial Owner ---------------- ----------- ---------------- ----------- ------------ ------
- ------------------------ (3)
<S> <C> <C> <C> <C> <C> <C>
Michael A. Adams(4) 9,244 * -0- -0- 9,244 *
James Q. Crowe 416 * -0- -0- 416 *
Bruce C. Godfrey (4) 19,702 * -0- -0- 19,702 *
Michael I. Gottdenker(4) 9,206 * -0- -0- 9,206 *
Stuart E. Graham 437 * 4,650 * 5,087 *
Frank M. Henry 41,466 * 23,097 * 64,563 *
Richard R. Jaros 380 * -0- -0- 380 *
Robert E. Julian 4,498 * -0- -0- 4,498 *
Daniel E. Knowles 937 * -0- -0- 937 *
Michael J. Mahoney (4) 22,071 * -0- -0- 22,071 *
David C. McCourt (4)(5) 42,544 * 6,000 * 48,544 *
David C. Mitchell 2,726 * -0- -0- 2,726 *
Eugene Roth 1,175 * 5,600 * 6,775 *
Walter Scott, Jr. 416 * -0- -0- 416 *
Michael B. Yanney 411 * -0- -0- 411 *
All Directors and Executive 196,671 * 44,347 * 241,018 1%
Officers as a Group(19
Persons)(4)(5)
</TABLE>
9
<PAGE>
(1) The C-TEC Class B Stock is convertible, at the option of the holder, into
shares of C-TEC Common Stock on a one-for-one basis at any time and from
time to time. The C-TEC Common Stock column has been prepared assuming that
no shares of C-TEC Class B Stock are converted into C-TEC Common Stock.
(2) Includes forfeitable Matching Shares (as defined below) and Share Units
(as defined below).
(3) Includes forfeitable Matching Shares but excludes Share Units.
(4) Under the C-TEC Executive Stock Purchase Plan ("ESPP"), participating
executive officers who forgo current compensation are credited with C-TEC
"Share Units", the value of which is based on the value of a share of C-TEC
Common Stock. ESPP participants who elect to receive Share Units in lieu of
current compensation are also credited with restricted "Matching Shares,"
which vest over a period of 3 years from the grant date, subject to
continued employment. Matching Shares, unless forfeited, have voting and
dividend rights. (In connection with the Restructuring, Share Units and
Matching Shares will be adjusted in an equitable manner.) The holdings
indicated include Share Units and Matching Shares. The table below shows,
in respect of each named executive officer, the number of shares of C-TEC
Common Stock purchased outright, Share Units relating to C-TEC Common Stock
acquired by each named executive officer in lieu of current compensation,
and the forfeitable Matching Shares of C-TEC Common Stock held by each
named executive officer:
<TABLE>
<CAPTION>
Share Units Total Shares
Acquired Under Purchased and
the ESPP In Total Shares Restricted Acquired and
Shares Purchased Lieu of Current Purchased And Matching Restricted
Outright Compensation Acquired Shares Matching Shares
----------------- --------------- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Michael A. Adams............... 762 4,504 5,003 4,504 9,244
Bruce C. Godfrey............... 5,756 6,973 12,729 6,973 19,702
Michael I. Gottdenker.......... 1,053 8,153 9,206 8,153 16,306
David C. McCourt............... 14,636 17,501 31,595 17,501 48,554
Michael J. Mahoney............. 8,483 6,794 15,277 6,794 22,071
</TABLE>
(5) Includes 225 shares of C-TEC Common Stock which are owned by Mr. McCourt's
wife. Mr. McCourt disclaims beneficial ownership of such shares.
The information set forth above and in "Director Information" does not give
effect to the ownership of Company securities by KTH. Certain executive
officers or directors of the Company are directly or indirectly affiliated with
KTH. For information with respect to the beneficial ownership of securities by
KTH, see "Security of Ownership Certain Beneficial Owners".
10
<PAGE>
Mercom, Inc.
Set forth below is certain information regarding the beneficial ownership
of the Common Stock of Mercom, a 61.92% owned subsidiary of the Company, as of
June 30, 1997, by each director, the named executive officers and by all
persons, as a group, who are currently directors and executive officers of the
Company. Each director or executive officer has sole investment and voting
power over the shares listed opposite his name except as set forth in the
footnotes hereto:
<TABLE>
<CAPTION>
Number of Shares Percent
Name of Beneficial Owner Beneficially Owned of Class
- -------------------------- ------------------ --------
<S> <C> <C>
Michael A. Adams -0- -0-
James Q. Crowe -0- -0-
Bruce C. Godfrey -0- -0-
Michael I. Gottdenker -0- -0-
Stuart E. Graham -0- -0-
Frank M. Henry -0- -0-
Richard R. Jaros -0- -0-
Robert E. Julian -0- -0-
Daniel E. Knowles -0- -0-
Michael J. Mahoney -0- -0-
David C. McCourt 50,000/(1)/ *
David C. Mitchell -0- -0-
Eugene Roth -0- -0-
Walter Scott, Jr. -0- -0-
Michael B. Yanney -0- -0-
All Directors and Executive
Officers as a Group (19 persons) 55,000/(1)/ *
</TABLE>
________________________
/(1)/ Includes 50,000 shares which are owned by Mr. McCourt's wife. Mr.
McCourt disclaims beneficial ownership of such shares.
(*) Less than 1% of the outstanding shares.
11
<PAGE>
Peter Kiewit Sons' Inc.
Set forth below is certain information regarding the beneficial ownership
of equity securities of PKS as of June 30, 1997, by each director, the named
executive officers and by all persons, as a group, who are currently directors
and executive officers of the Company. The equity securities of PKS are Class B
Construction & Mining Group Nonvoting Restricted Redeemable Convertible
Exchangeable Common Stock (none of which is owned by management), Class C
Construction and Mining Group Restricted Redeemable Convertible Exchangeable
Common Stock ("Class C"), and Class D Diversified Group Convertible Exchangeable
Common Stock ("Class D").
<TABLE>
<CAPTION>
Number of Percent of Number of Percent of
Class C Class C Class D Class D
Name Shares Shares (%) Shares Shares
- ---- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Michael A. Adams -0- -0- -0- -0-
James Q. Crowe -0- -0- 134,369 *
Bruce C. Godfrey -0- -0- -0- -0-
Michael I. Gottdenker -0- -0- -0- -0-
Stuart E. Graham -0- -0- -0- -0-
Frank M. Henry -0- -0- -0- -0-
Richard R. Jaros 25,772 * 121,128 *
Robert E. Julian -0- -0- 403,908 1.6
Daniel E. Knowles -0- -0- -0- -0-
Michael J. Mahoney -0- -0- -0- -0-
David C. McCourt -0- -0- 1,500 -0-
David C. Mitchell -0- -0- -0- -0-
Eugene Roth -0- -0- -0- -0-
Walter Scott, Jr. 250,000 2.5 3,393,374 13.8
Michael B. Yanney -0- -0- -0- -0-
All Directors and
Executive Officers
as a Group 275,772 2.7 4,054,279 15.4
</TABLE>
(*) Less than 1% of the outstanding shares of the class.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to the
beneficial ownership of shares of C-TEC Common Stock and C-TEC Class B Stock 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 C-TEC Class B Stock are convertible at the option of the holder into shares
of C-TEC Common Stock on a one-for-one basis at any time and from time to time,
the "Assuming Conversion" columns in the C-TEC Common Stock table reflect the
total shares of C-TEC Common Stock which would be beneficially owned upon
conversion by each person or group, as well as the related percentage
beneficially owned by such person or group assuming no other conversions. The
"Percent of Class" columns represent ownership not voting interest. Shares of
C-TEC Common Stock have one vote per share and shares of C-TEC Class B Stock
have 15 votes.
12
<PAGE>
per share. In addition, shares of both classes can be voted cumulatively with
respect to the election of directors.
At June 30, 1997
C-TEC COMMON STOCK
<TABLE>
<CAPTION>
Assuming
Without Conversion 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>
Kiewit Telecom 8,226,262 8,226,262 0 0 8,226,262 41% 13,320,485 66%
Holdings, Inc./(1)/
Mario J. 1,575,537 1,576,037 0 0 1,576,037 7% 2,257,232 11%
Gabelli Group/(2)/
</TABLE>
C-TEC Class B Stock
<TABLE>
<CAPTION>
Sole Sole Sole Sole Percent
Voting Investment Voting Investment of Class
Power Power Power Power TOTAL Approx.
----- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Kiewit Telecom 5,094,223 5,094,223 0 0 5,094,223 67%
Holdings, Inc./(1)/
Mario J. 681,195 681,195 0 0 681,195 8%
Gabelli Group/(2)/
</TABLE>
_____________
1. PKS is the sole stockholder of KDG, which holds 90% of the common stock of
KTH and all of the preferred stock of KTH. David C. McCourt owns the remaining
10% of the common stock of KTH. The address for each of KTH, KDG and PKS is
1000 Kiewit Plaza, Omaha, Nebraska 68131. KTH was formerly known as RCN
Corporation. KTH has indicated that prior to the Distributions (as defined
below) it intends to convert a portion of the shares of C-TEC Class B Stock it
owns into an equal number of shares of C-TEC Common Stock in order to reduce its
percentage of the total votes entitled to be cast by all outstanding shares of
C-TEC Class B Stock and C-TEC Common Stock to below 50%. Any such conversion
would not be effective until after the record date for the Annual Meeting, and
consequently, KTH will be entitled to vote its shares on a pre-conversion basis
at the Annual Meeting.
2. Based on information obtained from Schedule 13Ds and amendments thereto for
the C-TEC Common Stock and the C-TEC Class B Stock filed through June 30, 1997,
with the Securities and Exchange Commission (the "SEC") by Mario J. Gabelli,
together with GAMCO Investors, Inc., Gabelli Funds, Inc., Gabelli Performance
Partnership, L.P., Gabelli International Limited, Gabelli International II
Limited and Gabelli & Company, Inc., each of whose address is One Corporate
Center, Rye, New York 10580-1434.
COMPENSATION INFORMATION
EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years ending December 31,
1994, 1995, and 1996 the cash compensation, as well as certain other
compensation, paid or accrued to the named executive officers.
13
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payouts
Restricted Securities
Name and Stock Underlying All Other
Position Year Salary($) Bonus($) Awards($) /(1)/Options($) Compensation($)/(2)/
<S> <C> <C> <C> <C> <C> <C>
David C. McCourt 1996 491,154 700,000 238,333 -- 5,478
Chairman and 1995 397,885 700,000 220,000 250,000 5,612
Chief Executive 1994 375,000 500,000 -- 250,000 387
Officer
Michael J. Mahoney 1996 235,027 175,000 67,017 -- 5,478
President and 1995 222,462 100,000 65,000 -- 5,952
Chief Operating 1994 190,719 125,000 -- 100,000 5,585
Officer
Bruce C. Godfrey 1996 221,462 165,000 74,333 -- 4,965
Executive Vice 1995 183,731 150,000 67,000 -- 4,790
President and 1994 128,154 53,500 -- 70,000 165
Chief Financial
Officer
Michael I. Gottdenker 1996 198,673 115,000 59,750 10,000 31,549
Executive Vice 1995 53,365 100,000 -- 60,000 41,013
President -- 1994 (3) (3) (3) (3) (3)
Telephone Group
Michael A. Adams 1996 138,673 155,000 36,950 -- 3,853
President -- 1995 122,885 46,000 34,200 20,000 3,991
Technology and 1994 97,861 35,000 -- 35,000 192
Network Development
</TABLE>
- -------------------------------------------------------------------------------
(1) Represents the market value on the date of grant of restricted stock awards.
As of December 31, 1996, the aggregate holdings and value of restricted
stock awards were:
<TABLE>
<CAPTION>
Aggregate
Shares Value
------- ---------
<S> <C> <C>
David C. McCourt .........................................13,308 $322,709
Michael J. Mahoney ........................................3,744 $ 90,793
Bruce C. Godfrey ..........................................4,035 $ 97,846
Michael I. Gottdenker .....................................1,730 $ 41,950
Michael A. Adams...........................................2,015 $ 48,861
</TABLE>
Vesting of restricted shares is accelerated upon a change in control
of the Company. Restricted stock holdings for the executives as of
December 31, 1996 vest as follows:
<TABLE>
<S> <C>
December 1998.............................................10,617
On or before December 1999................................14,215
</TABLE>
14
<PAGE>
(2) Includes the following amounts for the last fiscal year:
David C. McCourt: $396 - Company paid life insurance; $5,082 - 401 (k) Company
match;
Bruce C. Godfrey: $396 - Company paid life insurance; $4,589 - 401 (k) Company
match;
Michael J. Mahoney: $396 - Company paid life insurance; $5,082 - 401 (k)
Company match;
Michael I. Gottdenker: $396 - Company paid life insurance; $1,777 - 401 (k)
Company match; 29,376 - relocation expenses;
Michael A. Adams: $363 - Company paid life insurance; $3,490 - 401(k) Company
match.
(3) The information is not required since the named executive was not an
executive officer during 1994.
C-TEC Options/SAR Grants in Fiscal year 1996
<TABLE>
<CAPTION>
% of
Number of Total Potential Realizable
Securities Options Exercise Value at Assumed
Underlying Granted or Base Annual Rates of Stock
Name Options to Emp. in Price Expiration Price Appreciation for
- ---- Granted (#) Fiscal Yr. 1996 ($/sh) Date Option Term
------------- ---------------- --------- ---------- ----------------------
<S> <C> <C> <C> <C> <C>
5%($) 10%($)
----- ------
David C, McCourt ---- ---- ---- ---- ---- ----
Michael J. Mahoney ---- ---- ---- ---- ---- ----
Bruce C. Godfrey ---- ---- ---- ---- ---- ----
Michael I. 10,000 10.53% 26.75 9/18/06 168,231 426,315
Gottdenker
Michael A. Adams ---- ---- ---- ---- ---- ----
</TABLE>
FY-End Option Values (1)
<TABLE>
<CAPTION>
Number of Securities Underlying
Unexercised Options at Value of Unexercised In-The-Money Options
December 31, 1996 /(2)/ at December 31, 1996/(2)(3)/
------------------ --------------------
Exercisable (#) Unexercisable (#) Exercisable ($) Unexercisable ($)
-------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
David C. McCourt....... 150,000 350,000 331,250 887,500
Michael J. Mahoney..... 40,000 60,000 -- --
Bruce C. Godfrey....... 28,000 42,000 -- --
Michael I. Gottdenker.. 12,000 58,000 -- --
Michael A. Adams....... 18,000 37,000 2,750 11,000
- --------------
</TABLE>
(1) No C-TEC stock options were exercised by the Named Executive Officers
during the fiscal year ended December 31, 1996.
(2) Denominated in shares of C-TEC Common Stock.
(3) The fair market value of C-TEC Common Stock at December 31, 1996, was
$24.25 per share.
15
<PAGE>
Pension Benefits
The following table shows the estimated annual benefits payable under the
Company's pension plan upon retirement for the named executive officers based
upon the compensation and years of services classifications indicated:
<TABLE>
<CAPTION>
Years of Service
-----------------
Average Compensation 15 20 25 30 35
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$125,000 $22,961 $30,615 $38,269 $45,923 $53,576
$150,000-$500,000 28,024 37,365 46,706 56,048 65,389
</TABLE>
Pensions are computed on a single 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
employee's 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, subject to the limitations imposed on tax-qualified plans.
C-TEC completed a comprehensive study of its employee benefit plans in
1996. As a result of this study, effective after December 31, 1996, the named
executive officers participating in the C-TEC defined benefit plan on such date
ceased to accrue benefits under such plan, but became fully vested in their
benefit accrued through that date. Such benefits, for the named executive
officers affected by this event, computed as the present value at July 31, 1997
(the expected payout date) of a life annuity beginning at age 65, are as
follows: Mr. McCourt, $11,679; Mr. Mahoney, $29,124; Mr. Godfrey, $10,874 and
Mr. Adams, $7,249.
16
<PAGE>
COMPENSATION COMMITTEE REPORT
The compensation programs for the Company's executive officers are
administered by the Compensation Committee ("Compensation Committee") of the
Company's Board of Directors. The Committee makes recommendations and/or
determinations with respect to executive compensation matters.
The Compensation Committee submits the following report on compensation for
the Company's executive officers for 1996.
Compensation Philosophy
The philosophy of the Company's compensation program is to offer
performance-based compensation to its executives in order to reward those
executives whose efforts enable the Company to achieve its business objectives
and enhance shareholder value. The Company's compensation plan policies and
philosophies are to:
1. Establish and implement the concept of Total Director Compensation ("TDC")
with a base salary slightly below that of the Company's peer group, a short term
bonus equivalent to that of the Company's peer group and a long-term bonus above
that of the Company's peer group.
2. Establish market-based levels or bands for the executive group that develop a
TDC for each band. Position placement in the bands is based on performance,
level of responsibility, scope and impact on decision making.
3. Provide that as an executive's level of responsibility increases, a greater
portion of the executive's potential total compensation opportunity is based on
performance incentives and less on base salary.
4. Align the interests of executives with the interests of shareholders through
ownership of Company stock.
Base salary structure guidelines were approved by the Board and became
effective February 1, 1994. The 1994 executive short-term incentive plan was
adopted in April 1994. The Plan established specific objectives and component
weightings for each executive level band. The long-term incentive components of
the TDC are the 1994 Stock Option Plan and the 1996 Equity Incentive Plan.
Since 1994, the Compensation Committee has used the TDC guidelines in their
determination of base salary, short-term incentive grants, and stock option
grants as they deemed appropriate and consistent with the compensation
philosophy of the Company.
In 1995, the Committee determined that the interests of the Company's
executives and shareholders should be further aligned by requiring key
executives to make a personal financial commitment to, and maintain, a
significant equity stake in the Company. Accordingly, guidelines were adopted
requiring all key executives to own by 2000 Company stock equal to 100% to 300%
(depending upon their title) of their
17
<PAGE>
annual base salary. To assist executives in accumulating this equity position on
a pre-tax basis, the Company implemented the Executive Stock Purchase Plan
pursuant to which an executive's purchase of Company stock through deferring
receipt of earned and otherwise payable compensation is matched by the Company.
In addition, the Committee recommended and, on November 7, 1996, the
Company adopted the 1996 Bonus Plan, which is intended to serve as a qualified
performance-based compensation program under Section 162(m) of the Internal
Revenue Code of 1986, as amended ("the Code").
Executive Officer Compensation
In conjunction with the market-based executive level position bands
referred to above, the Company increased executive salaries effective February
15, 1996. These increases were based upon the consideration of certain
employment data, an assessment of the Company's and the officers' performance
during the prior year and other contributions of the officers to the Company's
overall performance and certain subjective criteria.
The amount of cash bonuses paid to executive officers for 1996 pursuant to
the executive short-term incentive plan was determined through a combination of
factors including the attainment of certain corporate, business unit and
individual objectives (financial and non-financial), the compensation practices
of the Company's peer group, results of corporate and business unit financial
performances and other subjective criteria.
At June 30, 1996, 1,020,000 stock options were held by seven executive
officers, including Messrs. McCourt, Mahoney and Godfrey and an additional
455,500 stock options were held by thirty-two mid-level management employees of
the Company. Stock options were granted with an exercise price equal to or
greater than the fair market value of the Company's Common Stock at the time of
grant and generally become exercisable over a five year period with the first
portion of the options exercisable one year from the date of grant. The
Committee believes that such stock options provide an incentive for retention of
executive talent and the creation of shareholder value in the long term since
the full benefit of the compensation package cannot be realized unless the price
of the Company's stock appreciates over a specified number of years and the
optionee continues to perform services for the Company. The number of stock
options granted to each executive officer was based on the individual's salary
band, title and the Committee's evaluation of each executive's individual
performance and contribution to the Company's performance and future
positioning.
Chief Executive Officer Compensation
Mr. McCourt was paid a base salary and bonus of $491,154 and $700,000,
respectively for services rendered in 1996. The Committee determined that in
accordance with the compensation philosophy described above, Mr. McCourt's
salary should be $500,000 for 1997 to keep it slightly below that of similar
positions for companies in the Company's peer group. Mr. McCourt's short-term
incentive award reflects the
18
<PAGE>
accomplishment of certain strategic corporate objectives, and the attainment of
certain corporate financial and non-financial goals during 1996.
Compliance with Internal Revenue Code Section 162(m)
On November 7, 1996, the shareholders of the Company approved the C-TEC
Corporation 1996 Bonus Plan (the "Bonus Plan"). The Bonus Plan will be
administered by the Compensation Committee and is intended to serve as a
qualified performance-based compensation program under Section 162(m) of the
Code. Section 162(m) of the Code denies a deduction by an employer for certain
compensation in excess of $1 million per year paid by a publicly traded
corporation to the chief executive officer and the four most highly compensated
executive officers other than the chief executive officer unless said
compensation is awarded pursuant to a qualified performance-based program. The
Bonus Plan is intended to qualify for exemption from the deduction limit for
1997 compensation which exceeds the $1 million limit. Subject to the needs of
the Company, the Company's policy is to attempt to meet the requirements for
deductibility under Section 162(m).
COMPENSATION COMMITTEE
Eugene Roth, Chairman
Stuart E. Graham
Daniel E. Knowles
Michael B. Yanney
Dated: August 15, 1997
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Eugene Roth, Esq., Stuart E.
Graham, Daniel E. Knowles, and Michael B. Yanney.
Eugene Roth, Esq. is a partner at Rosenn, Jenkins and Greenwald, which
serves as counsel to the Company from time to time.
OTHER RELATED INFORMATION
PKS, the Company's controlling shareholder, and/or its affiliates has
a substantial stock ownership in CECI, KTH and the Company. These 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, Richard R. Jaros, a member of the
Company's Executive Committee, is on the compensation committee of CECI.
For information regarding certain potential or contemplated
transactions between the Company, including its subsidiaries and other
affiliates of PKS, see "Transactions with Management and Certain Concerns."
19
<PAGE>
Performance Graph
The following performance graph compares the performance of the C-TEC
Common Stock and the C-TEC Class B Stock to the NASDAQ Stock Market Index
("NASDAQ US Index") and the NASDAQ Telecommunications Index ("NASDAQ Telecom
Index"). The graph assumes that the value of the investment in C-TEC Common
Stock, C-TEC Class B Stock and each index was $100 at December 31, 1991 and that
all dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG C-TEC COMMON STOCK,
C-TEC CLASS B STOCK, THE NASDAQ STOCK MARKET-US INDEX AND NASDAQ TELECOM
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
C-TEC C-TEC CORP. NASDAQ NASDAQ STOCK
DATE CORPORATION CLASS B TELECOM MARKET-US
---- ----------- ------- ------- ---------
<S> <C> <C> <C> <C>
12/91 100 100 100 100
12/92 88 83 123 116
12/93 188 203 189 134
12/94 124 114 158 131
12/95 194 177 207 185
12/96 148 137 211 227
</TABLE>
20
<PAGE>
TRANSACTIONS WITH MANAGEMENT AND CERTAIN CONCERNS
David C. McCourt, Chairman, Chief Executive Officer and Director of the
Company, is a director of C-SPAN. In 1996, the Company paid $240,523 to C-SPAN
for programming services.
Frank Henry, together with his spouse, owns a 50% partnership interest
in Frank M. Henry Associates, which leased office space to the Company under a
lease which expired May 31, 1996. A total of $212,211 was paid by the Company
to Frank M. Henry Associates for rent, utility, parking and maintenance services
for the year ending December 31, 1996.
David C. Mitchell, a Director of the Company, serves as a consultant to the
Company and was paid $85,500 by the Company in 1996.
During 1996, the Company paid MFSCC $4,872,518 primarily for network costs.
Also during 1996, the Company earned $2,209,098 in revenue from MFSCC, primarily
for construction management services. MFSCC was an affiliate of PKS and is now
a WorldCom subsidiary.
OTHER MATTERS
In March 1996, C-TEC announced that it intended to distribute to its
shareholders, in a tax-free spin-off, its Pennsylvania-based local telephone
operations, its communications engineering operations, and certain other assets,
and that, following the spin-off, it intended to combine its domestic cable
television operations with a third party pursuant to a tax-free stock-for-stock
transaction (collectively, the "Prior Restructuring Plan"). Also in March 1996,
in connection with and in order to facilitate the Prior Restructuring Plan, C-
TEC signed a definitive agreement (the "Stock Purchase Agreement") for the sale
to KTH of the following businesses (collectively, the "Businesses Transferred
Under Contractual Arrangement"): (i) RCN International Holdings, Inc., the
subsidiary that owns the 40% interest in Megacable S.A. de C.V.; (ii) TEC Air,
Inc., which owns a corporate jet aircraft; (iii) C-TEC's long distance
operations; and (iv) C-TEC's interest (the "RCN Telecom Interest") in its
competitive telephone, cable television and Internet access business (the "RCN
Telecom Business").
The Businesses Transferred Under Contractual Arrangement were to be sold at
two separate closings. In April 1996, at the first closing, C-TEC sold the RCN
Telecom Interest to KTH for $17.5 million in cash in accordance with the Stock
Purchase Agreement. In addition, C-TEC retained a warrant to purchase
approximately 6% of the equity of the RCN Telecom Business (the "RCN Warrant").
The second closing, involving the sale of the other Businesses Transferred Under
Contractual Arrangement (the "Other Businesses"), was expected to take place in
the second half of 1996 subject to certain conditions. The purchase price for
the Other Businesses was expected to be approximately $106 million.
The Stock Purchase Agreement provided C-TEC an option, at its election, to
repurchase from KTH any or all of the Businesses Transferred Under Contractual
Arrangement, if C-TEC did not restructure its domestic
21
<PAGE>
cable television and local telephone operations by January 1, 1997. The Stock
Purchase Agreement further provided that if C-TEC elected to exercise its option
to rescind the sale of the Businesses Transferred Under Contractual Arrangement,
it would have the right and the obligation to purchase KTH's 80.1% interest in
Freedom New York, L.L.C. ("Freedom") and all related rights and liabilities
(collectively, the "Freedom Interest"). The Stock Purchase Agreement provided
that the repurchase price for the RCN Telecom Interest and the purchase price
for the Freedom Interest would be equal to KTH's investment in those assets plus
an amount to compensate for forgone interest on the amount invested. In March
1996, Freedom had acquired the wireless video services business of Liberty Cable
Television of New York from Bartholdi Cable Company.
In August 1996, in the wake of the newly issued rules under the 1996 Act,
depressed cable stock prices and other changed circumstances, C-TEC determined
not to proceed with the Prior Restructuring Plan. Following that determination,
(i) C-TEC exercised its option under the Stock Purchase Agreement to reacquire
the RCN Telecom Interest and to acquire from KTH the Freedom Interest and (ii)
C-TEC and KTH agreed that the closing of the purchase and sale of the Other
Businesses would not be consummated. The repurchase price for the RCN Interest
was approximately $28 million and the purchase price for the Freedom Interest
was approximately $29 million. In connection with the closing of those
transactions, C-TEC acquired from KTH a note issued by Freedom in connection
with a loan from KTH to Freedom. The purchase price for the note was
approximately $1.5 million, an amount equal to the accreted value of the note.
Shortly after the closing of these transactions, the RCN Warrant was canceled.
The Stock Purchase Agreement, the exercise of the repurchase option and all
of the related transactions were reviewed and approved by a special committee
of the Board of Directors of C-TEC composed of directors unaffiliated with KTH.
The special committee members were Messrs. Stuart E. Graham, Frank M. Henry,
Eugene Roth and Daniel E. Knowles.
At the time C-TEC announced that it would not pursue the Prior
Restructuring Plan, it also announced that it would continue to explore ways to
increase its profitability and value including other possible restructuring
transactions. Following that announcement, and at the direction of the C-TEC
Board of Directors, management of C-TEC and Merrill Lynch continued to analyze
the structure and strategy of C-TEC and its business groups. In the course of
the analysis, management determined that two of the primary goals to be achieved
in any restructuring would be the following: (i) facilitating the raising of
capital necessary for the development of the RCN Telecom Business and (ii)
facilitating the creation of targeted equity-based incentives for employees of
that business. The C-TEC Board of Directors was updated by management and
provided direction to management as the analysis and the restructuring plans
developed.
On February 12, 1997, the C-TEC Board of Directors approved a plan to
restructure C-TEC (the "Restructuring"). Under the Restructuring, C-TEC will be
separated into three different, publicly traded companies engaged, respectively,
in the following businesses:
22
<PAGE>
(i) the "RCN Businesses", which will be owned by RCN and will consist of
the RCN Telecom Business, C-TEC's New Jersey, New York (excluding New
York City) and Pennsylvania cable television operations, C-TEC's long
distance business (other than the portion of such business that
consists of providing long distance services to customers in the
franchise area of Commonwealth Telephone Company and in the
Pennsylvania communities of Wilkes-Barre, Scranton and Harrisburg (the
"Commonwealth Service Territory")) and RCN International Holdings,Inc.,
formerly C-TEC International, Inc., which owns a 40% interest in
Megacable S.A. de C.V., a Mexican Cable television provider;
(ii) the "Cable Michigan Business", which will be owned by Cable Michigan
and will consist of C-TEC's cable television business in Michigan,
including C-TEC's 61.92% interest in Mercom; and
(iii) the Pennsylvania Telephone and Engineering Business, which will be
owned by the Company and will consist of C-TEC's Commonwealth
Telephone Company business (Pennsylvania rural LEC operations), C-TEC's
Pennsylvania CLEC operations, Commonwealth Communications, Inc.
(telecommunications engineering business) and C-TEC's long distance
business in the Commonwealth Service Territory.
The Restructuring will include the following transactions: (i) the
incurrence of certain indebtedness by C-TEC and certain of its subsidiaries,
(ii) an internal restructuring to segregate C-TEC's businesses as set forth in
the preceding paragraph, (iii) following such internal restructuring, a
distribution by C-TEC to its common equity holders of all of the outstanding
capital stock of RCN and Cable Michigan (referred to herein as the
"Distributions") and (iv) within one year of the Distributions, an equity or
equity-linked financing by C-TEC. As part of the Restructuring, C-TEC will be
renamed Commonwealth Telephone Enterprises, Inc.
The C-TEC Board of Directors determined that the Restructuring and the
Distributions would be in the best interests of C-TEC, RCN, Cable Michigan and
the holders of the C-TEC Common Stock and C-TEC Class B Stock because it will,
among other things, (i) permit C-TEC to raise financing to fund the development
of the RCN Telecom Business on more advantageous economic terms than the other
alternatives available, (ii) facilitate possible future acquisitions and joint
venture investments by RCN and Cable Michigan and possible future offerings by
RCN, (iii) allow the management of each company to focus attention and financial
resources on its respective business and permit each company to offer employees
incentives that are more directly linked to the performance of its respective
business, (iv) facilitate the ability of each company to grow in both size and
profitability, and (v) permit investors and the financial markets to better
understand and evaluate C-TEC's various businesses.
23
<PAGE>
In July 1997, C-TEC received approval by the Internal Revenue Service to
conduct a tax-free spin-off of two segments of its existing businesses, to form
the three separate, publicly-traded companies.
C-TEC anticipates that the Restructuring will be completed by the end of
1997. The Restructuring is, however, subject to the receipt of certain
regulatory approvals and certain other conditions, and no assurance can be given
that the Restructuring will be consummated.
INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
The Board of Directors of the Company held nine meetings in 1996. The
Board of Directors has standing Executive, Audit, Compensation and Pension
Committees.
The Audit Committee of the Company held two meetings in 1996. 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 (iv) 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 three meetings in 1996.
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, 1994 Stock Option Plan, the 1996 Equity Incentive Plan, as well as the
Executive Stock Purchase Plan. The current Compensation Committee consists of
Eugene Roth, Chairman, Stuart E. Graham, Daniel E. Knowles and Michael B.
Yanney.
The Pension Committee of the Company held two meetings in 1996. 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, Michael J. Mahoney and Michael B. Yanney.
Directors' Compensation
Directors of C-TEC who are employees of the Company and its subsidiaries
receive no directors' fees. Non-employee Directors of the Company receive an
annual 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 1996, Stuart
E. Graham, Frank M. Henry, David C. Mitchell, Daniel E, Knowles, Eugene Roth and
Michael B. Yanney were paid $16,300, $18,200, $20,200, $20,500, $21,100, and
$6,600,
24
<PAGE>
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 MFS totaled $67,900(1), and
$15,700(2), respectively, in fiscal year 1996. In addition, Stuart E. Graham,
Frank M. Henry, Daniel E. Knowles and Eugene Roth were paid $21,000, $21,000,
$21,000 and $31,039, respectively, for special committee fees in connection with
the Company's Prior Restructuring Plan.
On February 12, 1997, the Board of Directors adopted the C-TEC Corporation
1997 Non-Management Directors' Stock Compensation Plan (the "Directors' Stock
Plan"). The purpose of the Directors' Stock Plan is to encourage non-management
Directors to have a personal financial stake in the Company through an ownership
interest in the Company's Common Stock, thereby aligning the interests of Non-
Management Directors with those of the Company's shareholders. The shares of C-
TEC Common Stock issuable pursuant to this Plan are in lieu of the annual
retainer and meeting fees payable to Non-Management Directors. Under the
Directors' Stock Plan, on January 1 of each year, non-employee directors are
paid an annual retainer of $10,800 in C-TEC Common Stock on January 1 of each
year, based upon the average fair market value of the C-TEC Common Stock during
the 10 trading days prior to such date. Non-employee directors are paid $1,000
in C-TEC Common Stock for Board of Directors meetings and Committee Chairmen and
other committee members are paid $500 and $300, respectively, in C-TEC Common
Stock for committee meetings on a quarterly basis, based upon the closing price
of the C-TEC Common Stock on the last trading day of the applicable quarter.
_________________________________________________
(1) Messrs. Jaros, Julian, Scott, and Stortz
(2) Mr. Crowe
PROPOSAL 2:
THE REVERSE STOCK SPLIT
General
The Board of Directors has determined that it would be advisable to amend the
Company's Articles of Incorporation to effect a two (2)-for-three (3) reverse
stock split (the "Reverse Stock Split") of the C-TEC Common Stock and the C-TEC
Class B Stock. The C-TEC Class B Stock and the C-TEC Common Stock are referred
to herein collectively as the "C-TEC Common Equity". A copy of the proposed
amendment to the Articles of Incorporation is attached hereto as Exhibit A (the
"Amendment"). If the Amendment is approved by the shareholders, each three
shares of C-TEC Common Stock (the "Old Common Stock") outstanding on the
Effective Date (as defined below) will be converted automatically into two
shares of new Common Stock, par value $1.00 per share (the "New Common Stock"),
and each three shares of C-TEC Class B Stock (the "Old Class B Stock" and,
together with the Old Common Stock, the "Old Common Equity") will automatically
be converted into two shares of Class B Stock, par value $1, per share (the "New
Class B Stock") and together with the New Common Stock, (the "New Common
Equity"). To avoid the existence of fractional shares of New Common Equity,
shareholders who would otherwise be entitled to receive fractional shares
25
<PAGE>
of New Common Equity shall receive cash in lieu thereof. See "Exchange of Stock
Certificates". The "Effective Date" of the Reverse Stock Split will be the date
on which the Amendment is filed with the Department of State of the Commonwealth
of Pennsylvania, which is anticipated to be as soon as practicable following the
date of the Annual Meeting.
Background of and Reasons for the Reverse Stock Split
On September 5, 1997, the Board of Directors adopted resolutions approving
the Amendment and directing that the Amendment be placed on the agenda for the
consideration of the shareholders at the Annual Meeting.
On September 2, 1997, the closing price per share of C-TEC Common Stock on
the Nasdaq Stock Market ("NASDAQ") was $39.25. On September 2, 1997, the closing
price per share of the C-TEC Class B Stock on the OTC Bulletin Board was
[$38.75.] These prices are based on the market perception of the value of all of
C-TEC's businesses, including the RCN Businesses and the Cable Michigan
Businesses which will be distributed to the holders of C-TEC Common Equity in
the Restructuring. Given the value of the RCN Businesses and the Cable Michigan
Business, the Board of Directors believes that, after the record date for the
distribution of the common stock of RCN and of Cable Michigan, the market prices
of the C-TEC Common Equity (the "Post Record Date Prices") will be reduced
significantly. The Board of Directors believes that the Post Record Date Prices
of the C-TEC Common Equity may impair the acceptablity of the C-TEC Common
Equity by portions of the financial community and the investing public.
The Board of Directors believes that the decrease in the number of shares
of C-TEC Common Equity outstanding as a consequence of the Reverse Stock Split
and the resulting anticipated corresponding increased price level will result in
greater interest in the C-TEC Common Equity by the financial community and the
investing public than if the Reverse Stock Split were not effected.
There can be no assurance, however, that the foregoing will occur or that
the market prices of the C-TEC Common Equity immediately after implementation of
the Reverse Stock split will increase, and if they increase, there can be no
assurance that such increases can be maintained for any period of time, or that
such market prices will approximate 1.5 times the market prices before the
Reverse Stock Split.
Dissenting shareholders have no appraisal rights under Pennsylvania law or
under the Company's Articles of Incorporation and Bylaws in connection with
Reverse Stock Split.
Effects of the Reverse Stock Split
General Effects. If the Amendment is approved by the shareholders, the
principal effect of the Reverse Stock Split will be to decrease the number of
outstanding shares of C-TEC Common Stock and C-TEC Class B Stock from
[19,937,835] shares and [7,308,793] shares, respectively, to approximately
[13,291,890] shares and approximately [4,872,529] shares, respectively, based on
share information as of September 2, 1997. The Reverse Stock Split would not
affect
26
<PAGE>
the proportionate equity interest in the Company of any holder of the C-TEC
Common Equity except as may result from the provisions for the elimination of
fractional shares as described below. The Reverse Stock Split will not affect
the registration of the C-TEC Common Equity under the Exchange Act or the
listing of the C-TEC Common Stock on the Nasdaq. The relative rights and
preferences on the New Common Stock and the New Class B Stock will be identical
to the relative rights and preferences of the Old Common Stock and the Old Class
B Stock, respectively.
In order that the Company may avoid the expense and inconvenience of
issuing and transferring fractional shares of New Common Equity, shareholders
who would otherwise be entitled to receive a fractional share of New Common
Equity (the "Fractional Shareholders") shall receive payment in cash in lieu of
receiving a fractional share of New Common Equity. See "Exchange of Stock
Certificates."
The Reverse Stock Split may leave certain shareholders with one or more
"odd lots" of New Common Equity, i.e., stock in amounts of less than 100 shares.
These odd lots may be more difficult to sell or require greater transactions
cost per share to sell, than shares in even multiples of 100.
Effect on Stock Options
As of September 2, 1997, there were outstanding options to purchase shares
of C-TEC Common Stock under the Company's equity incentive plans relating to an
aggregate of [1,519,800] shares of Old Common Stock. On that date [50,485,212]
shares of Old Common Stock remained available for grant under such plans. All of
the outstanding options include provisions for adjustments in the number of
shares covered thereby, and the exercise price thereof, in the event of a
reverse stock split by appropriate action of the Compensation Committee. If the
Reverse Stock Split is approved and effected, there would be reserved for
issuance upon exercise of all outstanding options a total of [1,013,200] shares
of New Common Stock. Each of the outstanding options would thereafter evidence
the right to purchase 66.67% of a share of New Common Stock, and the exercise
price per share would be 1.5 times the previous exercise price. The number of
additional shares available for grant under the Company's equity incentive plans
would be decreased to approximately [506,600] shares of New Common Stock
Effect on C-TEC Share Units
As of September 2, 1997, there were outstanding [101,904] C-TEC Share Units
under the ESPP, each of which has a value based on the value of a share of Old
Common Stock. The ESPP includes provisions for the adjustment of the number of
shares covered by the C-TEC Share Units in the event of a reverse stock split by
appropriate action of the Compensation Committee. If the Reverse Stock Split is
approved and effected, each outstanding Share Unit would thereafter have a value
based on the value of 66.67% of a share of New Common Stock.
27
<PAGE>
Effect on Conversion Rights of C-TEC Class B Stock
Each share of C-TEC Class B Stock is convertible at the option of the
holder into one share of C-TEC Common Stock. As of September 2, 1997, there were
[7,308,793] shares of Old C-TEC Class B Stock outstanding and [7,308,793]
shares of Old C-TEC Common Stock reserved for issuance on conversion of such
shares of Old C-TEC Class B Stock. If the Reverse Stock Split is approved and
effected, (i) each share of New C-TEC Class B Stock will be convertible into one
share of New C-TEC Common Stock and (ii) assuming that the number of shares of
New C-TEC Class B Stock outstanding is [4,872,529], (66.67% of the number of
shares of Old C-TEC Class B Stock outstanding on September 2, 1997), [4,872,529]
shares of New C-TEC Common Stock would be reserved for issuance on conversion of
such shares.
Effect on Convertible Preferred Stock
The Company has outstanding 4,100,000 shares of Preferred Stock, Series A,
with a stated value of $10.00 per share (the "Series A Preferred Stock"), and
1,100,000 shares of Preferred Stock, Series B, with a stated value of $10.00 per
share (the "Series B Preferred Stock" and, together with the Series A Preferred
Stock, the "Preferred Stock"). The Series A Preferred Stock is convertible into
shares of Old Common Stock at a price of $35.00 per share of Old Common Stock.
Based on the aggregate stated value of $41,000,000 and the conversion price of
$35.00, the Series A Preferred Stock is convertible into an aggregate of
1,171,428 shares of Old Common Stock. The Series B Preferred Stock is
convertible into Shares of Old Common Stock at a price of $38.50 per share of
Old Common Stock. Based on the aggregate stated value of $11,000,000 and the
conversion price of $38.50, the Series B Preferred Stock is convertible into an
aggregate of 285,714 shares of Old Common Stock. The Preferred Stock does not
provide for any adjustment of the conversion prices in the event of a reverse
stock split. Consequently, if the Reverse Stock Split is approved and effected,
there will be no adjustment of the conversion prices of the Preferred Stock, the
Series A Preferred Stock would be convertible into 1,171,428 shares of New
Common Stock and the Series B Preferred Stock would be convertible into an
aggregate of 285,714 shares of New Convertible Stock. The number of outstanding
shares of Preferred Stock and the stated value of those shares will not be
affected by the Reverse Stock Split.
Changes in Common Shareholders' Equity
As an additional result of the Reverse Stock Split, the Company's stated
common equity capital (which consists of (i) the par value per share of Common
Stock multiplied by the number of shares of Common Stock issued and (ii) the par
value per share of Class B Stock multiplied by the number of shares of Class B
Stock issued, will be reduced by approximately $10,512,615 to $21,025,231 on the
Effective Date. Following the Reverse Stock Split, the stated Common Equity
capital will be decreased because the number of shares of C-TEC Common Equity
issued and outstanding will be reduced. Correspondingly, the Company's common
equity capital in excess of par value, which consists of the difference between
the Company's stated common equity capital and the aggregate amount paid to the
Company upon
28
<PAGE>
the issuance by the Company of all currently outstanding C-TEC Common Equity,
will be increased by approximately $10,512,615.
The following table illustrates the principal effects of the Reverse Stock
Split discussed in the preceeding paragraphs:
<TABLE>
<CAPTION>
Prior to Reverse After Reverse
Number of Shares of Split and Amendment Split and Amendment
C-TEC Common Stock to Certificate to Certificate
- ------------------- ------------------- -------------------
<S> <C> <C>
Authorized.......................... 85,000,000 85,000,000
Outstanding......................... [20,444,404] [13,291,890]
Reserved for future issuance upon
exercise of options................ [1,519,800] [1,013,200]
Reserved for issuance upon
conversion of Preferred Stock...... [1,457,142] [1,457,142]
Reserved for future issuance upon
conversion of C-TEC Class B Stock [7,308,793] [4,872,529]
Available for future issuance by
action of the Board of Directors
(after giving effect to the above
reservations)...................... [54,776,430] [64,365,239]
</TABLE>
<TABLE>
<CAPTION>
Prior to Reverse After Reverse
Number of Shares Split and Amendment Split and Amendment
of C-TEC Class B Stock to Certificate to Certificate
- ---------------------- ------------------- ------------------
<S> <C> <C>
Authorized.......................... 15,000,000 15,000,000
Outstanding......................... [7,308,793] [4,872,529]
Available for future issuance
by action of the Board of
Directors (after giving effect
to the above reservations)......... [7,691,207] [10,127,471]
</TABLE>
Assuming the Amendment effecting the Reverse Stock Split is approved, the
Amendment will be filed with the Department of State of the Commonwealth of
Pennsylvania as promptly as practible thereafter. The Amendment and the
proposed Reverse Stock Split would become effective upon the Effective Date.
Federal Income Tax Consequences
The following summary of the federal income tax consequences of the Reverse
Stock Split is based on current law, including the Internal Revenie Code of
1986, as amended (the "Code"), and is for general information only. The tax
treatment of a stockholder may vary depending upon the particular facts and
circumstances of such stockholder. Certain shareholders, including insurance
companies, tax-exempt organizations, financial institutions, broker-dealers,
non-resident aliens, foreign corporations and persons who do not hold the C-TEC
Common Equity as a capital asset, may be subject to special rules not discussed
below.
ACCORDINGLY, EACH SHAREHOLDER SHOULD CONSULT HIS OR HER TAX ADVISOR TO DETERMINE
THE PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE REVERSE
29
<PAGE>
STOCK SPLIT, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL OR
FOREIGN INCOME TAX AND OTHER LAWS.
The receipt of shares of New Common Equity in the Reverse Stock Split will be
a nontaxable transaction to holders of Old Common Equity under the Code for
federal income tax purposes. Consequently, a stockholder receiving shares of
New Common Equity will not recognize either gain or loss, or any other type of
income, with respect to whole shares of New Common Equity received as a result
of the Reverse Stock Split. In addition, the aggregate tax basis of such
stockholder's shares of Old Common Equity prior to the Reverse Stock Split will
carry over as the tax basis of the shareholders shares of New Common Equity.
Each stockholder will be required to allocate such stockholder's basis in such
stockholder's shares of Old Common Equity ratably among the total number of
shares of New Common Equity owned following the Reverse Stock Split. The
holding period of the shares of New Common Equity will also include the holding
period during which the shareholder held the Old Common Equity, provided that
such Old Common Equity was held by the stockholder as a capital asset on the
Effective Date.
The receipt by a Fractional Stockholder of cash in lieu of a fractional share
of New Common Equity pursuant to the Reverse Stock Split will be a taxable
transaction for federal income tax purposes. The receipt of cash in lieu of
fractional shares of New Common Equity will generally result in gain or loss
(rather than dividend income) measured by the difference between the amount of
cash received and the adjusted basis of the fractional share assuming, as the
Company believes, that such cash distribution is undertaken solely for the
purpose of saving the Company the expense and inconvenience of issuing and
transferring fractional shares of New Common Equity. Fractional Shareholders
should consult their own tax advisors about the treatment of capital gain or
loss.
Based on certain exceptions contained in regulations issued by the Internal
Revenue Service, the Company does not believe that it or Fractional Shareholders
receiving cash in lieu of fractional shares will be subject to backup
withholding or information reporting with respect to the cash distributed to
such Fractional Shareholders.
Exchange of Stock Certificates
If the proposal to implement the Reverse Stock Split is adopted, shareholders
will be required to exchange their stock certificates for new certificates
representing the shares of New Common Equity. Shareholders of record, on the
Effective Date will be furnished the necessary materials and instructions for
the surrender and exchange of share certificates at the appropriate time by the
Company's Transfer Agent (the "Transfer Agent"). Shareholders will not have to
pay a transfer fee or other fee in connection with the exchange of certificates.
Shareholders should not submit any certificates until requested to do so.
As soon as practicable after the Effective Date, the Transfer Agent will
send a letter of transmittal to each stockholder advising such holder of the
procedure for surrendering stock certificates in exchange for new certificates
representing the ownership of New Common Equity. No
30
<PAGE>
certificates representing fractional shares shall be issued. In lieu thereof,
certificates evidencing the aggregate of all fractional shares otherwise
issuable (rounded, if necessary, to the next higher whole share) shall be issued
to the Transfer Agent or its nominee, as agent for the accounts of all holders
of Old Common Equity otherwise entitled to have a fraction of a share issued to
them in connection with the Reverse Stock Split. Sales of fractional interests
will be effected by the Transfer Agent as soon as practicable on the basis of
prevailing market prices of the New Common Stock on Nasdaq at the time of sale
and prevailing market prices of the New Class B Stock on the OTC Bulletin
Board at the time of the sale. After the Effective Date, the Transfer Agent
will pay to Fractional Shareholders their pro rata share of the net proceeds
derived from the sale of their fractional interests upon surrender of their
stock certificates. No service charges or brokerage commissions will be payable
by Fractional Shareholders in connection with the sale of fractional interests,
all of which costs will be borne by the Company.
Until they have surrendered their stock certificates for exchange,
shareholders will not be entitled to receive any dividends or other
distributions that may be declared and payable to holders of record after the
Effective Time. Upon the surrender of certificates representing Old Common
Equity, certificates representing New Common Equity together with any such
withheld dividends or other distributions, without interest, will be delivered.
At the same time or as soon as possible thereafter, any cash payment for a
fractional share will be paid (without interest). The distributions of common
stock of RCN and common stock of Cable Michigan in the Restructuring will be
based on a record date prior to the Effective Time and will therefore be sent to
shareholders regardless of whether such shareholders have surrendered their
certificates representing Old Common Equity.
Any stockholder whose certificate for Old Common Equity has been lost,
destroyed or stolen, will be entitled to issuance of a certificate representing
the shares of New Common Equity into which such shares have been converted upon
compliance with such requirements as the Company and the Transfer Agent
customarily apply in connection with lost, stolen or destroyed certificates.
Reservation of Rights
The Board of Directors reserves the right to abandon the proposed Amendment
and Reverse Stock Split without further action by the shareholders at any time
before the filing of the Amendment with the Department of State of the
Commonwealth of Pennsylvania notwithstanding authorization of the proposed
Amendment and Reverse Split Stock by the shareholders.
The Board of Directors recommends that all shareholders vote FOR the approval
of the Amendment to effect the Reverse Stock Split.
31
<PAGE>
PROPOSAL 3
RATIFICATION OF INDEPENDENT AUDITORS
The Company is asking the shareholders to ratify the appointment of
Coopers & Lybrand L.L.P. as the Company's independent auditors for the fiscal
year ending December 31, 1997.
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 reserves the right to select other independent auditors at its discretion.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at
the Annual Meeting, and will have the opportunity to make a statement if they
desire to do so and will be able to respond to appropriate questions.
Ratification of Coopers & Lybrand L.L.P. as the Company's independent auditors
for the year ending December 31, 1997, requires the affirmative vote of a
majority of the holders of C-TEC Common Stock and C-TEC Class B Stock voting
together as a single class.
The Board of Directors recommends that the shareholders vote FOR the
proposal to ratify the appointment of Coopers & Lybrand L.L.P. to serve as
independent auditors of the Company for the fiscal year ending December 31,
1997.
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 1996 Annual Report to Shareholders containing the
Consolidated Financial Statements of the Company, including the report thereon
dated March 26, 1997, of Coopers & Lybrand L.L.P., independent accountants,
accompanies this Proxy Statement.
Upon the written request of any person who on September 2, 1997, was a
record owner of C-TEC Common Stock or C-TEC 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 1996 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 of Investor Relations.
SOLICITATION OF PROXIES
32
<PAGE>
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 1998
Annual Meeting of Shareholders must submit such proposal in writing to the
Company by December 15, 1997. 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: September __, 1997
33
<PAGE>
EXHIBIT A
PROPOSED AMENDMENT TO THE ARTICLES
OF INCORPORATION OF C-TEC CORPORATION
If Proposal 2 to amend the Articles of Incorporation to effect the Reverse
Stock Split is approved and the Reverse Stock Split is effected, the following
new Section 9.C. will be included after the last paragraph of Section 9.B. of
the Articles of Incorporation:
9.C. Combination and Reclassification of Shares. Effective as of the
------------------------------------------
close of business on the date of filing in the Department of State of the
Commonwealth of Pennsylvania of these Articles of Amendment to the Articles
of Incorporation, as amended (the "Effective Time"), each three issued and
outstanding shares of Common Stock shall thereupon be combined into and
reclassified as two shares of validly issued, fully paid and nonassessable
Common Stock and (ii) each three issued and outstanding shares of the Class B
Stock shall thereupon be combined into and reclassified as two shares of
validly issued, fully paid and nonassessable Class B Stock. The number of
authorized shares, the number of shares of treasury stock and the par value
of the Common Stock and the Class B Stock shall not be affected by the
foregoing combination of shares. Each stock certificate that prior to the
Effective Time represented shares of Common Stock shall, following the
Effective Time, represent the number of shares of Common Stock into which the
shares of Common Stock represented by such certificate shall be combined, and
each certificate that prior to the Effective Time represented shares of Class
B Stock shall, following the Effective Time, represent the number of shares
of Class B Stock into which the shares of Class B Stock represented by such
certificate shall be combined. The Corporation shall not issue fractional
shares or scrip as the result of the combination of shares, but shall arrange
for the disposition of fractional shares on behalf of those record holders of
Common Stock and Class B Stock at the Effective Time who would otherwise be
entitled to fractional shares as a result of the combination of shares.
34
<PAGE>
C-TEC CORPORATION
PROXY -- ANNUAL MEETING OF SHAREHOLDERS -- OCTOBER 1, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned, hereby revoking any contrary proxy previously given, hereby
appoints James O. Crowe, Richard R. Jaros and David C. McCourt, and each of
them, his true and lawful agents and proxies, with full power of substitution
and revocation, to vote as indicated below, all the Common Stock and Class B
Common Stock of the undersigned in C-TEC CORPORATION (the "Company") entitled
to vote at the Annual Meeting of Shareholders of the Company to be held at the
Princeton Marriott, 201 Village Boulevard, Princeton, Forrestal Village,
Princeton, New Jersey, on October 1, 1997, at 11:00 a.m. local time, and at any
adjournment or postponement thereof, all as set forth in the related notice of
proxy statement for the 1997 Annual Meeting.
1. To elect four FOR all nominees listed WITHHOLD AUTHORITY to
(4) Directors to below (except as marked to vote for all nominees
Class I to serve the contrary below) [_] listed below [_]
for a term of
three (3) years;
and
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
David C. McCourt, David C. Mitchell, Daniel E. Knowles and Walter Scott, Jr.
2. TO AMEND THE C-TEC ARTICLES OF INCORPORATION, AS AMENDED, TO EFFECT A
2-FOR-3 REVERSE STOCK SPLIT OF C-TEC'S COMMON STOCK AND CLASS B COMMON STOCK.
FOR [_] AGAINST [_] ABSTAIN [_]
3. TO RATIFY THE SELECTION OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT AUDITORS
OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997; AND
FOR [_] AGAINST [_] ABSTAIN [_]
4. To act upon such other matters as may properly come before the meeting or
any adjournment or postponement thereof.
(Continued, and to be signed, on Reverse Side)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSALS
LISTED ON THE REVERSE SIDE. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF
THE PROPOSALS ON THE REVERSE SIDE.
The undersigned acknowledged receipt of the notice and proxy statement
relating to the 1997 Annual Meeting and the Company's annual report for 1996.
Date _______________________________
____________________________________
Signature
____________________________________
Signature, if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE.
