<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:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
Amended COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] 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>
[LOGO OF C-TEC CORPORATION APPEARS HERE]
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.
/s/ Raymond B. Ostroski
Raymond B. Ostroski,
Executive Vice President,
General Counsel and
Corporate Secretary
Dated: September 9, 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
9, 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 9, 1997
1
<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; and (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 23,175,835 shares of C-TEC Common Stock and
4,308,793 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.
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.
2
<PAGE>
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 September 2, 1997, concerning the nominees for election as
Class I 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............ 48 President and Chief Executive Offi- 1993
cer, Kiewit Diversified Group, Inc.
("KDG"), a subsidiary of Peter Kie-
wit 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 Compa-
ny, Inc., ("MFSCC"), since 1988 and
Chief Executive Officer since No-
vember 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 Presi-
dent 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 Execu- 1990
tive Officer of Skanska Engineering
and Construction, Inc. since 1994
and has held various positions
throughout that company, being ap-
pointed Vice President of Opera-
tions in 1977. Mr. Graham is also
President and Chief Executive Offi-
cer 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.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME OF DIRECTOR AGE SINCE
---------------- --- --------
<C> <C> <S> <C>
Richard R. Jaros.......... 45 Mr. Jaros is a member of the Board 1993
of 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.
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 Corpo-
ration from 1963 to 1989.
Michael J. Mahoney........ 47 President and Chief Operating Offi- 1995
cer of the Company since February
1994; President and Chief Operating
Officer of Mercom since February
1994; director of Mercom since Jan-
uary 1994; Executive Vice Presi-
dent, Cable Television Group from
June 1991 to February 1994; Execu-
tive 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 Metro-
politan 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 Af-
fairs Network ("C-SPAN") since June
1995 and WorldCom, Inc. since De-
cember 1996
David C. Mitchell......... 56 Former President of Rochester Tele- 1993
phone Corporations Telephone Group
("RTC") as well as Corporate Execu-
tive Vice President and director of
Rochester Telephone Corporation.
Since 1963, Mr. Mitchell has held
various positions throughout RTC,
encompassing virtually all disci-
plines within RTC.
Eugene Roth............... 62 Partner, Rosenn, Jenkins and 1989
Greenwald (Attorneys) since 1964.
Mr. Roth is a director of the Penn-
sylvania 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., Val-
mont Industries, Inc., KDG and KTH
Mr. Scott was a director of
WorldCom from December 1996 to June
1997.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME OF DIRECTOR AGE SINCE
---------------- --- --------
<C> <C> <S> <C>
Michael B. Yanney......... 63 Chairman and Chief Executive Officer 1996
of America First Companies L.L.C.
since 1984. Mr. Yanney is a direc-
tor 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.
Set forth below is biographical information with respect to Michael I.
Gottdenker and John J. Whyte, as of September 2, 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........... 57 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
5
<PAGE>
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.
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 September 2, 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
C-TEC COMMON STOCK(1) COMMON STOCK ASSUMING CONVERSION
---------------------------- ---------------------------- ------------------------
NUMBER OF
NUMBER OF SHARES PERCENT OF NUMBER OF SHARES PERCENT OF SHARES PERCENT OF
BENEFICIALLY OUTSTANDING BENEFICIALLY OUTSTANDING BENEFICIALLY OUTSTANDING
NAME OF BENEFICIAL OWNER OWNED(2) SHARES(3) OWNED SHARES CARRIED(2) SHARES(3)
- ------------------------ ---------------- ----------- ---------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Michael A. Adams(4)..... 9,778 * 0 0 9,778 *
James Q. Crowe.......... 416 * 0 0 416 *
Bruce C. Godfrey(4)..... 19,736 * 0 0 19,736 *
Michael I. Gottdenk-
er(4).................. 9,223 * 0 0 9,223 *
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)... 22,099 * 0 0 22,099 *
David C. McCourt(4) (5). 44,676 * 6,000 * 50,676 *
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 Officers as a
Group
(19 Persons)(4) (5).... 196,933 * 44,347 * 241,280 1.04%
</TABLE>
- --------
(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
6
<PAGE>
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
SHARES THE ESPP IN TOTAL SHARES RESTRICTED ACQUIRED AND
PURCHASED LIEU OF CURRENT PURCHASED AND MATCHING RESTRICTED
OUTRIGHT COMPENSATION ACQUIRED SHARES MATCHING SHARES
--------- --------------- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Michael A. Adams........ 762 4,508 5,270 4,508 9,778
Bruce C. Godfrey........ 5,756 6,990 12,746 6,990 19,736
Michael I. Gottdenker... 1,053 4,085 5,138 4,085 9,223
David C. McCourt........ 8,636 18,020 26,656 18,020 44,676
Michael J. Mahoney...... 8,483 6,808 15,291 6,808 22,099
</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".
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
September 2, 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>
7
<PAGE>
- --------
(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.
PETER KIEWIT SONS' INC.
Set forth below is certain information regarding the beneficial ownership of
equity securities of PKS as of September 2, 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 per share. In addition, shares of both
classes can be voted cumulatively with respect to the election of directors.
8
<PAGE>
At September 2, 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 Holdings,
Inc.(1)................ 11,226,262 11,226,262 0 0 11,226,262 48.44% 13,320,485 57.47%
Mario J. Gabelli
Group(2)............... 1,575,537 1,576,037 0 0 1,576,037 6.8% 2,257,232 9.74%
</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 Holdings,
Inc.(1)................ 2,094,223 2,094,223 0 0 2,094,223 48.60%
Mario J. Gabelli
Group(2)............... 681,195 681,195 0 0 681,195 15.81%
</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.
(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
August 8, 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.
9
<PAGE>
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.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------- ----------------------------------------------
AWARDS PAYOUTS
---------- -------------------
RESTRICTED SECURITIES
STOCK UNDERLYING (1)/ ALL OTHER
NAME AND POSITION YEAR SALARY ($) BONUS ($) AWARDS ($) 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 Officer 1994 375,000 500,000 -- 250,000 387
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 Officer 1994 190,719 125,000 -- 100,000 5,585
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 Chief 1994 128,154 53,500 -- 70,000 165
Financial Officer
Michael I. Gottdenker... 1996 198,673 115,000 59,750 10,000 31,549
Executive Vice Presi-
dent 1995 53,365 100,000 -- 60,000 41,013
--Telephone Group 1994 (3) (3) (3) (3) (3)
Michael A. Adams........ 1996 138,673 155,000 36,950 -- 3,853
President--Technology 1995 122,885 46,000 34,200 20,000 3,991
and Network 1994 97,861 35,000 -- 35,000 192
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>
10
<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; $3,490--401(k) Company match.
(3) The information is not required since the named executive was not an
executive officer during 1994.
C-TEC OPTIONS/SAR GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
NUMBER % OF TOTAL POTENTIAL REALIZABLE
SECURITIES OPTIONS EXERCISE VALUE AT ASSUMED
UNDERLYING GRANTED OR BASE ANNUAL RATES OF STOCK
OPTIONS TO EMP. IN PRICE EXPIRATION PRICE APPRECIATION FOR
NAME GRANTED (#) FISCAL YR. 1996 ($/SH) DATE OPTION TERM
---- ----------- --------------- -------- ---------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
5%($) 10%($)
-- --
David C. McCourt........ -- -- -- -- -- --
Michael J. Mahoney...... -- -- -- -- -- --
Bruce C. Godfrey........ -- -- -- -- -- --
Michael I. Gottdenker... 10,000 10.53% 26.75 9/18/06 168,231 426,315
Michael A. Adams........ -- -- -- -- -- --
</TABLE>
FY-END OPTION VALUES (1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT 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.
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>
11
<PAGE>
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.
12
<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 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
13
<PAGE>
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 September 2, 1997, 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 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
14
<PAGE>
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."
15
<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>
16
<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 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.
17
<PAGE>
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:
(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
18
<PAGE>
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.
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
19
<PAGE>
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, 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
20
<PAGE>
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 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 NASDAQ SmallCap
Market was $38.00. 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.
21
<PAGE>
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
23,175,835 shares and 4,308,793 shares, respectively, to approximately
15,450,557 shares and approximately 2,872,529 shares, respectively, based on
share information as of September 2, 1997. The Reverse Stock Split would not
affect 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 102,263 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.
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
4,308,793 shares of Old C-TEC Class B Stock outstanding and 4,308,793 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
22
<PAGE>
Common Stock and (ii) assuming that the number of shares of New C-TEC Class B
Stock outstanding is 2,872,529, (66.67% of the number of shares of Old C-TEC
Class B Stock outstanding on September 2, 1997), 2,872,529 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 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
SPLIT AND AMENDMENT SPLIT AND AMENDMENT
NUMBER OF SHARES OF C-TEC COMMON STOCK TO CERTIFICATE TO CERTIFICATE
-------------------------------------- ------------------- -------------------
<S> <C> <C>
Authorized............................. 85,000,000 85,000,000
Outstanding............................ 23,175,835 15,450,557
Reserved for future issuance upon exer-
cise 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 con-
version of C-TEC Class B Stock........ 4,308,793 2,872,529
Available for future issuance by action
of the Board of Directors (after
giving effect to the above
reservations)......................... 54,538,540 64,206,572
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
PRIOR TO REVERSE AFTER REVERSE
NUMBER OF SHARES OF C- SPLIT AND AMENDMENT SPLIT AND AMENDMENT
TEC CLASS B STOCK TO CERTIFICATE TO CERTIFICATE
---------------------- ------------------- -------------------
<S> <C> <C>
Authorized............................ 15,000,000 15,000,000
Outstanding........................... 4,308,793 2,872,529
Available for future issuance by
action of the Board of Directors
(after giving effect to the above
reservations)........................ 10,691,207 12,127,471
</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 Revenue 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 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 shareholder's 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
24
<PAGE>
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 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.
25
<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
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.
26
<PAGE>
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,
/s/ Raymond B. Ostroski
Raymond B. Ostroski,
Executive Vice President,
General Counsel and
Corporate Secretary
Dated: September 9, 1997
27
<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.
28
<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 Q. 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.
