<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
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
Commonwealth Telephone Enterprises, Inc.
- --------------------------------------------------------------------------------
(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:
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Notes:
<PAGE>
[CTE LOGO]
100 CTE Drive
Dallas, Pennsylvania 18612
(570) 631-2700
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 11, 2000
The Annual Meeting of Shareholders of Commonwealth Telephone Enterprises,
Inc., ("CTE" or the "Company") will be held at the Princeton Marriott in
Forrestal Village, 201 Village Boulevard, Princeton, New Jersey 08540, on
Thursday, May 11, 2000, at 10:00 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 ratify the appointment of PricewaterhouseCoopers LLP as independent
auditors of the Company for the fiscal year ending December 31, 2000;
3. To approve amendments to the Company's 1997 Non-Management Directors'
Stock Compensation Plan;
4. To consider and act upon a proposal by a shareholder to declassify the
Board of Directors of the Company; and
5. To act upon such other matters as may properly come before the meeting
or any adjournment or postponement thereof.
Only shareholders of record at the close of business on March 20, 2000, 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/ John J. Jones
John J. Jones,
Executive Vice President,
General Counsel and Corporate
Secretary
Dated: April 19, 2000
<PAGE>
COMMONWEALTH TELEPHONE ENTERPRISES, INC.
100 CTE Drive
Dallas, Pennsylvania 18612
---------------
PROXY STATEMENT
---------------
Annual Meeting of Shareholders to be Held on Thursday, May 11, 2000
This Proxy Statement is being mailed to all shareholders on or about April
19, 2000, in connection with the solicitation of proxies by the Board of
Directors of Commonwealth Telephone Enterprises, Inc. ("CTE" or the "Company")
for use at the Annual Meeting of Shareholders (the "Annual Meeting") to be
held on Thursday, May 11, 2000, at 10:00 A.M., local time, at the Princeton
Marriott in Forrestal Village, 201 Village Boulevard, Princeton, New Jersey
08540, and at any adjournment or postponement thereof.
At the Annual Meeting, shareholders of CTE 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 ratify the appointment of
PricewaterhouseCoopers LLP as independent auditors of the Company for the
fiscal year ending December 31, 2000; (iii) to approve amendments to the
Company's 1997 Non-Management Directors' Stock Compensation Plan; (iv) to
consider and act upon a proposal by a shareholder to declassify the Board of
Directors of the Company; and (v) 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
Corporate Secretary of the Company 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 the
Company.
----------------
The date of this Proxy Statement is April 19, 2000.
<PAGE>
THE ANNUAL MEETING
Time, Date and Place
The Annual Meeting will be held at the Princeton Marriott in Forrestal
Village, 201 Village Boulevard, Princeton, New Jersey 08540, on Thursday, May
11, 2000, at 10:00 A.M., local time.
Purpose of the Annual Meeting
Shareholders of the Company will consider and vote upon proposals: (i) to
elect four (4) Class I Directors to each serve for a term of three (3) years;
(ii) to ratify the appointment of PricewaterhouseCoopers LLP as independent
auditors of the Company for the fiscal year ending December 31, 2000; (iii) to
approve amendments to the Company's 1997 Non-Management Directors' Stock
Compensation Plan; (iv) to consider and act upon a proposal by a shareholder
to declassify the Board of Directors; and (v) to transact such other business
as may properly come before the meeting.
Record Date, Quorum, Required Vote
The close of business on March 20, 2000 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 March
20, 2000, there were outstanding 20,239,173 shares of Common Stock of the
Company ("CTE Common Stock") and 2,088,005 shares of Class B Common Stock
("CTE Class B Common Stock," and together with the CTE Common Stock, the "CTE
Common Equity"). 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 of CTE Common Stock and
fifteen (15) votes per share of CTE Class B Common 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 CTE Common Stock and
holders of CTE Class B Common 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 of
Directors or can withhold authority to vote for certain nominees of Directors.
Directors will be elected by a plurality of the votes cast at the Annual
Meeting.
The approval of each of Proposal 2 (regarding ratification of the
appointment of independent auditors), Proposal 3 (regarding the approval of
amendments to the Company's 1997 Non-Management Directors' Stock Compensation
Plan) and Proposal 4 (regarding a shareholder proposal to declassify the Board
of Directors) requires the affirmative vote of a majority of the votes cast by
the holders of CTE Common Stock and CTE Class B Common Stock voting together
as a single class. Abstentions, votes withheld and broker non-votes (described
below) are counted in determining whether a quorum is present. Broker non-
votes occur when a broker or other nominee holding shares for a beneficial
owner does not receive voting instructions from the beneficial owner.
Abstentions and broker non-votes, because they are not treated as votes cast,
will have no effect on matters to be voted upon at the Annual Meeting.
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, Daniel E. Knowles, Walter Scott, Jr. and David
C. Mitchell. These four (4) nominees, if elected at the 2000 Annual Meeting,
will serve for a term of three (3) years expiring at the Annual Meeting of
Shareholders to be held in 2003.
It is not anticipated that any of the above nominees will become unavailable
for any reason, but, if any of the nominees should become so unavailable
before the Annual Meeting, the persons named on the enclosed Proxy reserve the
right to substitute another person of their choice as nominee in place of such
unavailable person, 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 concerning the nominees for re-election as Class I Directors and
the Other Directors of the Company is set forth below:
<TABLE>
<CAPTION>
Director Term
Name of Director Age Since Expiring In
---------------- --- -------- -----------
Nominees for Re-Election in
Class I
---------------------------
<C> <C> <S> <C> <C>
David C. McCourt 43 Chairman of the Company 1993 2000
since October 1993; Chairman
and Chief Executive Officer
of RCN Corporation ("RCN"),
an affiliate of the Company,
since September 1997; Chief
Executive Officer of the
Company from October 1993 to
November 1998; Chairman,
Director and Chief Executive
Officer of Cable Michigan,
Inc. from September 1997 to
November 1998. Mr. McCourt
was President and Chief
Executive Officer, as well
as a Director of Level 3
Telecom Holdings, Inc., an
affiliate of the Company
("LTH"), formerly Kiewit
Telecom Holdings, Inc. He
was also Chairman and Chief
Executive Officer as well as
a Director of Mercom, Inc.
from October 1993 to
November 1998. He was a
Director of MFS
Communications Company, Inc.
("MFS/WorldCom") from July
1990 to December 1996; and a
Director of WorldCom, Inc.
from December 1996 to March
1998; and President and
Director of Metropolitan
Fiber Systems/McCourt, Inc.,
a subsidiary of MFS Telecom,
Inc., from 1988 to 1997. He
is currently a Director of
Cable Satellite Public
Affairs Network ("C-SPAN")
and Level 3 Communications,
Inc. ("Level 3"), formerly
known as Peter Kiewit Sons',
Inc. ("PKS"), an affiliate
of the Company.
Daniel E. Knowles 70 President of Cambridge Human 1995 2000
Resources since 1989. He was
a Director of Cable Michigan
from September 1997 to
November 1998.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Director Term
Name of Director Age Since Expiring In
---------------- --- -------- -----------
Nominees for Re-Election
in Class I (cont'd)
------------------------
<C> <C> <S> <C> <C>
Walter Scott, Jr. 68 Chairman of Level 3 1993 2000
since 1979 and Director
of PKS since April 1964;
Chairman and Chief
Executive Officer of PKS
for over nineteen years.
He is also a Director of
Berkshire Hathaway,
Inc., Burlington
Resources, Inc.,
MidAmerican Energy
Holdings, Inc., formerly
known as CalEnergy
Company, Inc., ConAgra,
Inc., Valmont
Industries, Inc. and
RCN. Mr. Scott served as
Chairman of the Board of
WorldCom from December
1996 to July 1997.
David C. Mitchell 58 Former President of 1993 2000
Rochester Telephone
Corporation's Telephone
Group, Corporate
Executive Vice President
and Director of
Rochester Telephone
Corporation, now Global
Crossing, Inc. He is
also a Director of Lynch
Corporation, USN
Communications and HSBC
Bank, Inc., Rochester
Advisory Board. He was a
Director of Cable
Michigan from September
1997 to November 1998.
<CAPTION>
Other Directors of the
Company in Class II
----------------------
<C> <C> <S> <C> <C>
Michael I. Gottdenker 35 President and Chief 1997 2001
Executive Officer of the
Company since December
1998; President and
Chief Operating Officer
of the Company from
September 1997 to
December 1998; Executive
Vice President of the
Company's Telephone
Group from September
1995 to September 1997;
Executive Vice President
of the Company's
Communications Services
Group from August 1996
to September 1997.
Frank M. Henry 66 Chairman of Frank Martz 1980 2001
Coach Company ("Martz")
since 1995 and President
of Martz from 1964 to
1995. He is also a
Director of First Union
Corporation. Mr. Henry
was a Director of Cable
Michigan from September
1997 to November 1998.
Eugene Roth 64 Senior Partner at 1989 2001
Rosenn, Jenkins and
Greenwald L.L.P.
(Attorneys) since 1964.
He is also a Director of
the Pennsylvania
Regional Board of
Directors of First Union
National Bank, RCN, and
Geisinger Wyoming Valley
Medical Center.
John J. Whyte 59 President of Worldwide 1997 2001
PCE Corporation
(Professional Corporate
Executive Firm); Partner
of Stavisky, Shapiro &
Whyte, certified public
accountants, since 1981.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Director Term
Name of Director Age Since Expiring In
---------------- --- -------- -----------
Other Directors of the
Company in Class III
--------------------------
<C> <C> <S> <C> <C>
James Q. Crowe 50 President and Chief 1993 2002
Executive Officer since
August 1997 of Level 3;
President and Chief
Executive Officer of
MFS/WorldCom from June
1993 to June 1997 and
Chairman of the Board of
Directors of MFS/WorldCom
from 1992 to 1996. Mr.
Crowe is a Director of RCN
and Inacom Communications,
Inc. and he was Chairman
of the Board of Directors
of WorldCom, Inc. from
December 1996 to June
1997.
Michael A. Adams 42 President and Chief 1999 2002
Operating Officer of RCN
since October 1999;
President of the
Technology and Network
Development Group of RCN
since September 1997; Vice
President of Technology
with C-TEC Corporation
from November 1993 to
September 1997. He is also
a Director of RCN.
Stuart E. Graham 54 President of Skanska USA, 1990 2002
Inc. since 1994.
Previously, he has been
Chief Executive Officer of
several Skanska USA, Inc.
subsidiaries, including
Sordoni Skanska, Slattery
Skanska and Skanska E & C.
He is also a Director of
RCN.
Richard R. Jaros 48 Private Investor since 1993 2002
1998; President of Level 3
from 1996 to 1997 and
Executive Vice President
of PKS from 1993 to 1997;
Chief Financial Officer of
PKS from 1995 to 1997.
Chairman of CalEnergy
Company, Inc. ("CECI")
from 1993 to 1994 and
President of CECI from
1992 to 1993. Mr. Jaros
served in various
capacities at PKS between
1980 and 1993. Mr. Jaros
is also a Director of
Level 3, MidAmerican
Energy Holdings, Inc.
(formerly known as CECI),
Home Services.com and RCN.
Timothy J. Stoklosa 39 Executive Vice President 1999 2002
and Chief Financial
Officer of RCN since
January 2000; Senior Vice
President and Treasurer of
RCN from September 1997 to
January 2000; Executive
Vice President and Chief
Financial Officer, as well
as a Director of Mercom,
Inc. from 1997 to 1998;
Treasurer of the Company
from 1994 to 1997. He is
also a Director of RCN.
</TABLE>
5
<PAGE>
INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
The Board of Directors of the Company held five (5) meetings during 1999,
the Audit Committee met four (4) times and the Compensation/Pension Committee
met three (3) times. The Company currently does not have a nominating
committee.
Executive Committee
The Executive Committee exercises, to the maximum extent permitted by law,
all powers of the Board of Directors between board meetings, except those
functions assigned to specific committees. The current Executive Committee
consists of David C. McCourt, Chairman, Michael I. Gottdenker, James Q. Crowe
and Walter Scott, Jr.
Audit Committee
The principal functions of the Audit Committee are to (i) make
recommendations to the full Board of Directors concerning the appointment of
independent accountants; (ii) review the audit scope of the independent
accountants and internal auditors and related fees; (iii) be briefed on the
Company's accounting principles, policies and reporting practices by the
independent accountants, internal auditors and management; (iv) review with
the independent accountants the results of their audit and determine what
action, if any, is required with respect to the Company's internal audit
function; (v) meet at least two (2) times annually with the independent
accountants and the internal auditors; (vi) consider other audit and non-audit
matters from time to time as requested by the full Board of Directors; and
(vii) review the Annual Report on Form 10-K. The current Audit Committee
consists of John J. Whyte, Chairman, Stuart E. Graham and Frank M. Henry.
Compensation/Pension Committee
The Compensation/Pension 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/Pension Committee also administered the
Company's Short-Term Incentive Plan, 1994 Stock Option Plan, 1996 Equity
Incentive Plan, as well as the Executive Stock Purchase Plan. The
Compensation/Pension 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 Compensation/Pension
Committee consists of Eugene Roth, Esq., Chairman, Daniel E. Knowles and John
J. Whyte.
Directors' Compensation
Directors of CTE who are employees of the Company and its subsidiaries
receive no Directors' fees. Non-employee Directors of the Company receive an
annual Directors' fee of $9,000 in CTE Common Stock based upon the average
fair market value of the CTE Common Stock during the ten (10) trading days
prior to the grant date, plus $750 in cash per Board of Directors meeting. The
Committee Chairmen and other committee members are paid $1,000 and $750 in
cash, respectively, for each committee meeting attended. Pursuant to the 1997
Non-Management Directors' Compensation Plan, each non-employee Director will
receive an annual grant of non-qualified options covering 2,000 shares of CTE
Common Stock on the date of the Annual Meeting of Shareholders (based upon the
average fair market value of the CTE Common Stock during the ten (10) trading
days prior to such date).
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is certain information regarding the beneficial ownership of
CTE Common Stock and CTE Class B Common Stock as of March 31, 2000, held by
(i) each Director of the Company, (ii) the named executive officers below,
(iii) all persons who are currently Directors or executive officers of the
Company as a group, and (iv) each person known to the Company to own
beneficially more than 5% of the outstanding shares of CTE Common Stock or CTE
Class B Common Stock. Because the shares of CTE Class B Common Stock are
convertible at the option of the holder into shares of Common Stock on a one-
for-one basis at any time and from time to time, the "Assuming Conversion"
columns in the CTE Common Stock table reflect the total shares of CTE Common
Stock which would be beneficially owned by such person or group assuming no
other conversions. The "Percent of Outstanding Shares" columns represent
ownership, not voting interest. Shares of CTE Common Stock have one vote per
share and shares of CTE Class B Common Stock have fifteen (15) votes per
share. Each Director or named executive officer has investment and voting
power over the shares listed opposite his name except as set forth in the
footnotes hereto:
<TABLE>
<CAPTION>
CTE Class B
CTE Common Stock(1) Common Stock Assuming Conversion
------------------------ ------------------------ ------------------------
Number of Number of Number of
Shares Percent of Shares Percent of Shares Percent of
Beneficially Outstanding Beneficially Outstanding Beneficially Outstanding
Name of Beneficial Owner Owned(2) Shares(2) Owned Shares Carried(2) Shares(2)
- ------------------------ ------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Michael A. Adams(3)(7).. 45,993 * -- -- 45,993 *
John Butler(7).......... 13,289 * -- -- 13,289 *
Donald P. Cawley(4)(7).. 20,986 * -- -- 20,986 *
James Q. Crowe(5)(15)... 18,856 * -- -- 18,856 *
James DePolo(6)......... 30,200 * -- -- 30,200 *
Michael I.
Gottdenker(7)(8)....... 169,002 * -- -- 169,002 *
Stuart E. Graham(5)..... 4,810 * 3,101 * 7,911 *
Frank M. Henry(5)....... 40,977 * 15,398 * 56,375 *
Richard R.
Jaros(5)(15)........... 5,273 * -- -- 5,273 *
Daniel E. Knowles(9).... 5,711 * -- -- 5,711 *
David C.
McCourt(7)(10)(15)..... 405,950 2% 3,333 * 409,283 2%
David C. Mitchell(5).... 6,872 * -- -- 6,872 *
Eugene Roth(5).......... 4,238 * 3,999 * 8,237 *
Walter Scott,
Jr.(5)(15)............. 114,289 * -- -- 114,289 *
Timothy J.
Stoklosa(11)........... 9,181 * -- -- 9,181 *
David G.
Weselcouch(7)(12)...... 11,070 * -- -- 11,070 *
John J. Whyte(5)........ 4,811 * -- -- 4,811 *
All Directors and
Executive Officers as a
group (22 persons)..... 952,696 5% 25,831 1% 978,527 4%
Level 3 Telecom
Holdings, Inc.(13)..... 9,639,326 48% 1,017,061 49% 10,656,387 48%
Mario J. Gabelli
Group(14).............. 1,421,872 7% 275,570 13% 1,697,442 8%
</TABLE>
- --------
(*) Less than one percent of the outstanding shares of the class.
(1) The CTE Class B Common Stock is convertible, at the option of the
holder, into shares of CTE Common Stock on a one-for-one basis at any
time and from time to time. The CTE Common Stock column has been
prepared assuming that no shares of CTE Class B Common Stock are
converted into CTE Common Stock.
(2) Includes vested matching share units and share units pursuant to
participants' contributions under the CTE Executive Stock Purchase Plan
(further described below) at March 31, 2000.
(3) Includes options to purchase 40,020 shares of CTE Common Stock
exercisable within 60 days after March 31, 2000.
(4) Includes options to purchase 13,337 shares of CTE Common Stock
exercisable within 60 days after March 31, 2000.
7
<PAGE>
(5) Includes options to purchase 4,000 shares of CTE Common Stock
exercisable within 60 days after March 31, 2000.
(6) Includes options to purchase 28,000 shares of CTE Common Stock
exercisable within 60 days after March 31, 2000.
(7) Under the CTE Executive Stock Purchase Plan ("ESPP"), participants who
defer current compensation are credited with "Share Units" with a value
equal to the amount of the deferred pretax compensation. The value of a
Share Unit is based on the value of a share of CTE Common Stock. The
Company also credits each participant's matching account under the ESPP
with 100 percent of the number of Share Units credited based on the
participant's elective contributions. Share Units credited to
participants' elective contribution accounts are fully and immediately
vested. Share Units credited to participants' matching accounts
generally vest on the third anniversary of the date they are credited,
subject to continued employment. Share Units credited to a participant's
matching account become fully vested on a change in control of the
Company, or on the participant's death or disability while actively
employed. The Company has established a grantor trust to hold CTE Common
Stock corresponding to the number of Share Units credited to
participants' accounts in the ESPP. Participants do not have the right
to vote Share Units, provided that the Company may, but is not required
to, make arrangements for participants to direct the trustee of the
grantor trust as to how to vote a number of shares held by the grantor
trust corresponding to the number of Share Units credited to the
participants' matching account. The table below shows with respect to
each named participant, Share Units relating to the CTE Common Stock
acquired by each such participant in lieu of current compensation and
the vested Share Units credited to the ESPP account of each such
participant as of March 31, 2000 including matching share units
scheduled to vest within 60 days thereafter:
<TABLE>
<CAPTION>
Total Shares
Acquired and
Vested Restricted
Name Matching Shares
---- -----------------
<S> <C>
Michael A. Adams........... 5,974
John Butler................ 1,432
Donald P. Cawley........... 1,054
Michael I. Gottdenker...... 14,194
David C. McCourt........... 24,336
David G. Weselcouch........ 1,067
</TABLE>
(8) Includes options to purchase 144,018 shares of Common Stock exercisable
within 60 days after March 31, 2000.
(9) Includes options to purchase 2,000 shares of Common Stock exercisable
within 60 days after March 31, 2000.
(10) Includes options to purchase 333,500 shares of Common Stock exercisable
within 60 days after March 31, 2000.
(11) Includes options to purchase 7,342 shares of Common Stock exercisable
within 60 days after March 31, 2000.
(12) Includes options to purchase 8,800 shares of Common Stock exercisable
within 60 days after March 31, 2000.
8
<PAGE>
(13) As a result of PKS separating its construction and mining management
businesses ("Construction Group") from its other businesses on March 31,
1998 (the "Split-Off"), PKS no longer owns any interest in the
Construction Group. Following the Split-Off, PKS changed its name to
"Level 3 Communications, Inc.," the company formed in the Split-Off to
hold the Construction Group's business, changed its name to "Peter
Kiewit Sons', Inc." Level 3 holds 90% of the common stock of LTH and all
of the preferred stock of LTH. David C. McCourt owns the remaining 10%
of the common stock of LTH. The address of Level 3 and LTH is 1025
Eldorado Blvd., Broomfield, Colorado 80021.
(14) Based on information obtained from Schedule 13Ds and amendments thereto
for the CTE Common Stock and the CTE Class B Common Stock filed through
March 31, 2000, 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.,
the address of each is One Corporate Center, Rye, New York 10580-1434.
(15) Does not include shares beneficially owned by LTH. As an officer,
Director or shareholder of Level 3 or LTH, this person may be deemed to
beneficially own all of the shares of CTE Common Equity beneficially
owned by LTH.
9
<PAGE>
COMPENSATION INFORMATION
EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years ending December 31,
1999, 1998 and 1997, the cash compensation, as well as certain other
compensation, paid or accrued to the Chairman and the top five most highly
compensated executive officers (the named executive officers).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual
Compensation(1) Long-Term Compensation Awards
------------------- ------------------------------------
All Other
Compen- Restricted Securities Compen-
sation/ Stock Underlying sation
Name and Position Year Salary($) Bonus ($) Awards ($) (2) Options (#) ($) (3)
- ----------------- ---- --------- --------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
David C. McCourt........ 1999 (4) (4) (4) -- (4)
Chairman 1998 (4) (4) (4) -- (4)
1997 500,000 1,400,000 380,000 -- 8,144
Michael I. Gottdenker... 1999 350,000 500,000 125,000 180,000 6,140
President and Chief
Executive Officer 1998 269,999 275,000 104,000 180,000 6,454
1997 209,038 250,000 64,808 -- 6,563
James DePolo (5)........ 1999 240,000 250,000 -- -- --
Executive Vice
President 1998 229,000 125,000 -- 70,000 --
and Chief Operating
Officer 1997 138,713 45,000 -- -- --
John Butler (6)......... 1999 157,115 125,000 42,623 -- 11,820
Former Executive Vice
President 1998 22,500 65,000 -- 50,000 19,941
and Chief Financial
Officer 1997 (7) (7) (7) (7) (7)
Donald P. Cawley........ 1999 113,750 75,000 22,750 -- 4,283
Vice President and 1998 101,134 37,500 -- 15,000 3,847
Chief Accounting
Officer 1997 92,230 30,000 -- 6,670 --
David G. Weselcouch..... 1999 124,519 37,500 24,904 -- 4,867
Vice President of
Investor Relations and 1998 92,308 35,000 -- 22,000 2,375
Corporate
Communications 1997 (7) (7) (7) (7) (7)
</TABLE>
- --------
(1) Includes the amount of deferred compensation contributed by the named
executive officers to purchase share units pursuant to the ESPP. Such
contributions are matched by the Company. Refer to Footnote (2) below.
(2) Represents the market value on the date of grant of matching share units
acquired in lieu of cash compensation pursuant to the ESPP. See also
Footnote (7) under "Security Ownership of Certain Beneficial Owners and
Management." In connection with the distribution of CTE Common Stock as
well as RCN Common Stock and Cable Michigan Common Stock to holders of CTE
Common Equity in September 1997 (the "Distribution"), share units of CTE
Common Stock purchased under the ESPP and share units awarded under the
ESPP that relate to CTE Common Stock were adjusted so that, following the
Distribution, each such participant was credited with an aggregate
equivalent value of share units of common stock of CTE, RCN and Cable
Michigan. On October 1, 1997, the shareholders voted to approve a 2-for-3
reverse stock split. Share units have been retroactively restated to
reflect the reverse split.
10
<PAGE>
As of December 31, 1999, the aggregate holdings and the value of share units
for CTE Common Stock were:
<TABLE>
<CAPTION>
Share Units Aggregate
Name (#) Value ($)
---- ----------- ---------
<S> <C> <C>
David C. McCourt ................................... 25,304 1,337,949
Michael I. Gottdenker .............................. 20,254 1,070,930
James DePolo ....................................... -- --
John Butler ........................................ 2,052 108,500
Donald P. Cawley ................................... 1,150 60,806
David G. Weselcouch ................................ 1,258 66,517
</TABLE>
Vesting of Share Units is accelerated upon a change in control of the
Company. Dividends, if any, are paid on restricted shares. Subject to
continued employment, restricted share units credited to participants'
accounts vest in three (3) calendar years following the date on which the
share units were initially credited to the participant's account.
(3) Includes the following amounts for the last fiscal year:
(i) David C. McCourt: None; (ii) Michael I. Gottdenker: $541--Company paid
life insurance; $5,600--401(k) Company match; (iii) James DePolo: None;
(iv) Donald P. Cawley: $302--Company paid life insurance; $3,981--401(k)
Company match; (v) John Butler: $316--Company paid life insurance;
$7,196--relocation; $4,308--401(k) Company match; (vi) David G.
Weselcouch: $514--Company paid life insurance; $4,353--401(k) Company
match.
(4) Mr. McCourt received no direct compensation from the Company for 1999. He
is an employee of and is compensated by RCN, and his compensation is
determined by the compensation committee of RCN. The Company pays a
management fee to RCN in respect of the services provided by RCN to the
Company, which includes the services of Mr. McCourt.
(5) Mr. DePolo is employed as an independent consultant for the Company.
(6) Mr. Butler resigned from the Company on March 17, 2000.
(7) The information is not required since the named executive was not an
executive officer in 1997.
CTE Options/SAR Grants in Fiscal Year 1999
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Number of % of Total Annual Rates of
Securities Options Stock Price
Underlying Granted Exercise Appreciation for
Options to Emp. In Or Base Option Term
Granted Fiscal Yr. Price Expiration ---------------------
Name (#) 1999 ($/sh) Date 5%($) 10%($)
- ---- ---------- ---------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
David C. McCourt........ -- -- -- -- -- --
Michael I. Gottdenker... 180,000 54.8 31.75 2/4/09 3,594,133 9,108,238
James DePolo............ -- -- -- -- -- --
John Butler............. -- -- -- -- -- --
Donald P. Cawley........ -- -- -- -- -- --
David G. Weselcouch .... -- -- -- -- -- --
</TABLE>
11
<PAGE>
FY-End Option Values(1)
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Options at In-The-Money Options at
December 31, 1999 December 31, 1999(2)
------------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
Name (#) (#) ($) ($)
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
David C. McCourt............ 300,150 33,350 13,132,063 1,469,735
Michael I. Gottdenker....... 72,018 334,672 2,562,404 8,326,429
James DePolo................ 14,000 56,000 395,500 1,582,000
John Butler................. 10,000 40,000 277,500 1,110,000
Donald P. Cawley............ 9,003 16,002 341,276 506,196
David G. Weselcouch......... 4,400 17,600 124,300 497,200
</TABLE>
- --------
(1) No stock options were exercised by the named executive officers during the
fiscal year ending December 31, 1999.
(2) The fair market value of CTE Common Stock at December 31, 1999 was $52.875
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 service classifications indicated:
<TABLE>
<CAPTION>
Years of Service
--------------------------------------
Average Compensation 5 10 15 20 25
-------------------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$100,000.............................. $5,843 $11,685 $17,528 $23,370 $29,213
$125,000.............................. 7,530 15,060 22,590 30,120 37,650
$150,000.............................. 9,218 18,435 27,653 36,870 46,088
$160,000--$250,000.................... 9,893 19,785 29,678 39,570 49,463
</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."
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 Compensation Committee makes recommendations
and/or determinations with respect to all executive compensation matters.
The Compensation Committee submits the following report on compensation for
the Company's executive officers for the 1999 fiscal year.
Compensation Philosophy
In connection with the September 30, 1997 distribution of 100 percent of the
outstanding shares of common stock of RCN and Cable Michigan to the
shareholders of a predecessor to the Company (the "Distribution"), certain
principal executive officers of RCN provided certain services to the Company.
Some of these officers of RCN were also executive officers of the Company, but
received no compensation from the Company including the Office of the
Chairman, the General Counsel and certain other officers. Such RCN executive
officers, including Mr. McCourt, were compensated by RCN or one of its
affiliates.
The philosophy of the Company's compensation program is, generally, to
provide a performance-based executive compensation program that rewards
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 Direct Compensation
("TDC"), which is intended to provide a base salary slightly below that
of the Company's peer group, a short-term bonus opportunity equivalent
to that of the Company's peer group, and a long-term bonus opportunity
above that of the Company's peer group.
(2) Establish market-based levels or "bands" for the executive group and
develop a TDC profile for each band. An executive's placement in the
bands will be based on individual performance, level and scope of
responsibility, and impact on decision making.
(3) Make a greater portion of an executive's potential total compensation
opportunity conditional on attainment of performance incentives, with a
smaller portion derived from base salary, as an executive's level of
responsibility increases.
(4) Align the interests of executives with the interests of shareholders
through ownership of Company stock.
For the other executive officers of the Company, the Chief Executive
Officer, with the review and approval of the Compensation Committee,
determines base salaries and makes recommendations with respect to short term
incentive grants and stock option grants as he deems appropriate and
consistent with the TDC guidelines and the compensation philosophy of the
Company.
To further align the interests of the Company's executives with that of
shareholders, the Company encourages executives to acquire and maintain a
significant equity stake in the Company. 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 may purchase Company stock
through deferral of earned and otherwise payable compensation, which is
matched by the Company.
Executive Officer Compensation
The salaries paid to executive officers by the Company for 1999 were
targeted to be slightly below that of executive officers in the Company's peer
group and were based upon the consideration of certain employment
13
<PAGE>
data, an assessment of the Company's and the officers' performance during the
prior year and certain subjective criteria.
The amount of cash bonuses paid to executive officers for 1999 pursuant to
the bonus plan as adopted by the Company 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, corporate and business unit financial
performances and certain subjective criteria. Special emphasis was placed on
the officers' contribution to the outstanding results at Commonwealth
Telephone Company ("CT") and CTSI, Inc.
Stock options were granted to certain executive officers named in the
Summary Compensation Table. The Compensation Committee believes that stock
options assist in recruiting, incenting, and retaining 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 executive continues
to perform services for the Company. The number of stock options granted to
each executive officer and/or mid-level management employee was based on the
individual's salary band, title and the evaluation of each executive's
individual performance and contribution to the Company's performance presented
to the Compensation Committee.
Chief Executive Officer Compensation
Michael I. Gottdenker is the President and Chief Executive Officer of the
Company. In 1999, Mr. Gottdenker was paid a base salary and bonus of $350,000
and $500,000, respectively. Mr. Gottdenker's compensation for 1999 was
structured so that his base compensation was slightly below the level paid to
persons holding similar positions at similarly situated companies. Mr.
Gottdenker's short-term incentive award, which was earned under the short-term
plan adopted by the Company, reflects the extraordinary corporate activity
that took place in 1999, the accomplishments of certain strategic corporate
objectives and the attainment of certain financial and non-financial goals.
Chairman of the Board of Directors Compensation
Mr. McCourt is Chairman of the Company's Board of Directors. The Company
does not pay any compensation to Mr. McCourt for his services. Mr. McCourt's
services are provided to the Company under the terms of the Distribution
Agreement dated September 5, 1997, as described in Transactions with Related
Parties, on page 16.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended (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 (4) most highly compensated executive officers other than
the Chief Executive Officer, unless such compensation is awarded pursuant to a
qualified performance-based program. Subject to the needs of the Company, the
Company's compensation plans are generally intended to qualify for such
qualified performance-based exemption. The Company adopted the 1996 Bonus
Plan, which is intended to serve as a qualified performance-based compensation
program under Section 162(m).
COMPENSATION COMMITTEE
Eugene Roth, Esq., Chairman
Daniel E. Knowles
John J. Whyte
Dated: April 12, 2000
14
<PAGE>
Performance Graph
The following performance graph compares the performance of CTE Common Stock
and CTE Class B Common Stock to the Nasdaq Stock Market (U.S.) Index and the
Nasdaq Telecommunications Index. The graph assumes that the value of the
investment in CTE's Common Stock, CTE Class B Common Stock and each index was
$100 at December 31, 1994. The CTE Common Stock and CTE Class B Common Stock
assumes the reinvestment of dividends.
[GRAPH]
Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99
------ ------ ------ ------ ------ ------
CTCO 100 156 122 313 405 640
CTCOB 100 158 123 326 411 821
NASDAQ Stock Market (U.S.) Index 100 141 174 213 300 542
NASDAQ Telecommunications Index 100 131 134 196 322 561
15
<PAGE>
TRANSACTIONS WITH RELATED PARTIES
The Company entered into an agreement with RCN Long Distance Company whereby
Commonwealth Long Distance Company ("CLD") and CTSI, Inc. ("CTSI") purchased
long-distance service from RCN Long Distance Company for resale to customers
of CLD and CTSI. In 1999, CLD and CTSI incurred approximately $8,070,000 of
expenses associated with this long-distance resale agreement and related
customer service expenses. This agreement is the result of arm's length
negotiation and fees are paid to RCN Long Distance Company based on usage. In
addition, the Company paid RCN Long Distance Company $143,000 for network
costs.
RCN agreed to provide or cause to be provided to CTE certain specified
services (management services) for a transitional period pursuant to the
Distribution Agreement dated as of September 5, 1997. The transitional
services to be provided included the following: (i) accounting, (ii) payroll,
(iii) management supervision and Office of the Chairman, (iv) cash management,
(v) human resources and benefit plan administration, (vi) insurance
administration, (vii) legal, (viii) tax, (ix) internal audit, (x) investor and
public relations and (xi) other miscellaneous administrative services. The fee
per year for these services was 3.5% of the first $175 million of revenue of
CTE and 1.75% of any additional revenue. The total fees for 1999 and 1998 were
approximately $5,234,000 and $7,016,000, respectively. During 1999, the
majority of the transitional services were transferred to CTE from RCN and
therefore the fee was adjusted downward accordingly. The transitional services
remaining in 2000 include legal and Office of the Chairman. The fee for these
services in 2000 is estimated to be approximately $2,000,000.
During 1999 Commonwealth Telephone Company ("CT") leased certain facilities
owned by RCN. As a result of arm's length negotiation, CT paid rent on such
facilities totaling approximately $47,000 in 1999.
As a result of arm's length negotiation, CT and CTSI received approximately
$1,560,000 in access charges from RCN Long Distance Company as a result of RCN
originating and terminating traffic on CT and CTSI's networks. CT also
received approximately $420,000 in long-distance switch rental revenue from
RCN Long Distance Company. In addition, CT and CTSI received approximately
$1,000,000 in local service, telephone access, toll and vertical service
revenue from related parties, primarily RCN companies.
As a result of arm's length negotiation, CTE provided to RCN lockbox
services, storage facilities, MIS support and miscellaneous administrative
services in the amount of approximately $67,000. These services are no longer
provided to RCN. CTE also provided lockbox services to Cable Michigan through
May 1999 in the amount of approximately $50,000.
As a result of arm's length negotiation, Commonwealth Communications ("CC"),
the Company's engineering design and consulting service business, received
approximately $310,000 in 1999 for services provided to various RCN companies.
CT and CC provided telephone service and engineering consulting services to
First Union Corporation in the amount of approximately $100,000. Mr. Roth, a
Director of the Company, is a Director of the Pennsylvania Regional Board of
Directors of First Union National Bank. Also, Mr. Henry, a Director of the
Company, is also a Director of First Union Corporation. First Union serves as
administrator of the Company's Employee Stock Purchase Plan. In 1999, the
company paid approximately $20,000 to First Union for such services.
Level 3, the Company's controlling shareholder, and/or its affiliates, has a
substantial stock ownership in LTH and the Company. These companies share
certain mutual director representation on their respective boards.
A three-year promissory note and security agreement dated December 29, 1998
was entered into by Michael I. Gottdenker and in favor of CTE in the amount of
$250,000 at an interest rate of 4.28 percent per annum.
16
<PAGE>
PROPOSAL 2
RATIFICATION OF INDEPENDENT AUDITORS
The Company is asking the shareholders to ratify the appointment of
PricewaterhouseCoopers LLP as the Company's independent auditors for the
fiscal year ending December 31, 2000.
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 PricewaterhouseCoopers LLP are expected to be present at
the Annual Meeting, 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 PricewaterhouseCoopers LLP as the Company's independent
auditors for the year ending December 31, 2000, requires the affirmative vote
of a majority of the votes cast by holders of CTE Common Stock and CTE Class B
Common Stock voting together as a single class.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP TO SERVE AS
INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31,
2000.
PROPOSAL 3
APPROVAL OF AMENDMENTS TO THE COMPANY'S 1997
NON-MANAGEMENT DIRECTORS' STOCK COMPENSATION PLAN
The Board believes that granting stock options and awarding shares in
respect of meeting fees and annual retainers payable to non-employee Directors
promotes the interests of the Company and its shareholders by increasing the
proprietary interest of non-employee Directors in the growth and performance
of the Company. In order to continue this practice, the Board, on March 2,
2000, approved an increase in the number of shares available for award
pursuant to the 1997 Non-Management Directors' Stock Compensation Plan (the
"Non-Employee Director Plan").
The Current Plan. As in effect prior to March 2, 2000, a total of 25,000
shares of CTE Common Stock were subject to award under the Non-Employee
Director Plan. Only Directors who are not also employees of the Company or its
affiliates are eligible for awards. Non-employee Directors receive both non-
qualified stock options and outright grants of stock pursuant to the Non-
Employee Director Plan. Specifically, at the Annual Meeting, non-employee
Directors are granted a fully vested non-qualified stock option to purchase
2,000 shares of CTE Common Stock. The purchase price is 100% of the fair
market value of the shares on the date of grant. In addition, non-employee
Directors receive grants of shares as of each January 1 in an amount equal to
the quotient obtained by dividing the annual retainer for that year by the
average closing price of CTE Common Stock for the ten (10) trading days prior
to the applicable January 1.
Upon exercise of the options, the optionee will recognize ordinary income in
an amount equal to the difference between the fair market value of the share
of common stock acquired and the aggregate exercise price. CTE will receive a
deduction at that time in a like amount. Upon grant of shares, the non-
employee Director will recognize ordinary income in an amount equal to the
fair market value of the shares. CTE will receive a deduction at that time in
a like amount.
Since the adoption of the Non-Employee Director Plan effective February 12,
1997, non-employee Directors of CTE have received options for 36,000 shares of
stock and have been granted 7,299 shares of stock. The Non-Employee Director
Plan is administered by the Board. The Board may amend the Non-Employee
Director Plan at any time, but the Board may not, without the approval of the
shareholders, (i) increase the number of shares
17
<PAGE>
that may be purchased pursuant to options (either individually or in the
aggregate), other than an adjustment due to a change in the corporate
structure affecting the shares, such as a stock split; (ii) change the
requirement that options be priced at fair market value; (iii) modify the
class of individuals who are eligible to participate; or (iv) materially
increase the benefits accruing to participants under the Non-Employee Director
Plan.
The Plan Amendment. Under the amendment adopted by the Board and being voted
on by the shareholders at the meeting, the number of shares of common stock
available for award pursuant to the Non-Employee Director Plan will be
increased from 25,000 to 125,000. As noted above, shareholder approval is
required for this amendment to be effective. A total of 18,000 stock options
will be granted at the Annual Meeting to the Company's nine (9) non-employee
Directors. In addition, the Board amended the Non-Employee Director Plan to
extend the term to December 31, 2003.
On April 10, 2000, the last reported sales price of CTE Common Stock as
reported on Nasdaq was $50.00 per share.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE
AMENDMENTS TO OUR NON-EMPLOYEE DIRECTOR PLAN AS DESCRIBED IN THIS PROPOSAL 3.
18
<PAGE>
PROPOSAL 4
STOCKHOLDER REQUEST TO DECLASSIFY THE BOARD OF DIRECTORS
Shareholder Proposal
The Company has been informed that Mr. Ray Kissenger, P.O. Box 325, Grantz,
PA 17030, who has represented that he holds Common Stock of the Company with a
market value of at least $2,000, has submitted the following proposal for
inclusion in this Proxy Statement and has stated his intention to have such
proposal presented for consideration at the Annual Meeting.
Resolved, that the stockholders request the Board of Directors to take
the steps that may be necessary in accordance with state law, and without
affecting the unexpired terms of previously elected directors, to
declassify the Board of Directors so that all directors may be elected
annually.
Statement of Support
The election of directors is the primary means by which stockholders may
influence corporate policies and hold management accountable for the
implementation of those policies. However, this avenue of influence is
limited by the fact that the CTE Board is divided into three classes of
directors that serve for staggered three-year terms.
This means that individual directors will face election only once every
three years. Stockholders are deprived of the opportunity to hold two-
thirds of the directors accountable for their conduct during the past year.
A declassified Board would allow shareholders an opportunity to annually
register their views on the performance of the board collectively and each
director individually.
A classified board might also be seen as an impediment to a potential
takeover of CTE's stock at a premium price. With the inability to replace
the majority of the Board at one annual meeting, an outside suitor might be
reluctant to make an offer in the first place.
The Investor Responsibility Research Center has determined that proposals
to repeal classified boards within its research universe won an average of
44.9 percent of the votes during the 1997 proxy season.
Concerns that the annual election of directors would leave CTE without
experienced board members in the event that all incumbents are voted out
are unfounded. If the owners should choose to replace the entire Board, it
would be obvious that the incumbent directors' contributions were not
valued.
Repeal of the classified board is in the best interests of the Company
and its stockholders because the Board would be likely to deliberate more
carefully about issues of corporate governance and management if all
directors know that they must stand for re-election at each annual meeting.
The annual election of directors will impose the level of management
accountability necessary to enhance stockholder value over the long term.
Please VOTE FOR this proposal.
19
<PAGE>
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSAL 4.
The Board of Directors unanimously recommends a vote AGAINST the proponent's
proposal to declassify the Board of Directors so that all directors may be
elected annually. The Board believes it is in the best interests of the
Company and its shareholders to continue to have a classified Board.
The Board of Directors has been divided into three (3) classes since the
shareholders of Commonwealth Telephone Company voted at the 1978 Annual
Meeting of Shareholders to amend the By-laws to permit a classified Board of
Directors. Subsequently, through the formation of a holding company, the
creation of C-TEC Corporation and ultimately the restructuring of C-TEC
Corporation in September 1997, which resulted in C-TEC Corporation changing
its name to Commonwealth Telephone Enterprises, Inc., the Board of Directors
has always remained divided into three (3) classes. The classified election of
Directors is a common practice that has been adopted by the shareholders of
many major corporations and is consistent with Pennsylvania State law. The
Board is confident that the election of Directors by classes is in the best
interest of the Company and its shareholders and should not be changed for a
number of reasons.
The Board believes that the election of Directors by classes assures
continuity and stability in the management of the affairs of the Company,
because, at any given time, a majority of the Board generally will have had
prior experience as directors of the Company. This serves to provide solid
knowledge of the business and industry, long-term strategic planning, informed
oversight of corporate policies and orderly development of strategies and
operations to enhance shareholder value. This also permits a more orderly
process for a change in the composition of the Board and Company policies and
strategies.
Moreover, the Board believes that Directors elected for classified terms are
not any less accountable or responsive to shareholders than they would be if
elected annually. The same standards of performance apply to all of the
Directors regardless of the term of service. Further, the shareholders retain
their ability to replace incumbent Directors or propose and elect alternative
nominees for the class of Directors to be elected each year. Thus, the
shareholders continue to enjoy a significant opportunity to express their
views regarding the Board's performance and to influence the Board's
composition. Finally, your Board believes that the continuity and quality of
leadership resulting from the classified Board creates long-term value for the
Company's shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "AGAINST" THE PROPOSAL BY A
SHAREHOLDER TO DECLASSIFY THE BOARD OF DIRECTORS AS DESCRIBED IN THIS PROPOSAL
4.
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 1999 Annual Report to Shareholders containing the
Consolidated Financial Statements of the Company, including the report thereon
dated March 3, 2000 of PricewaterhouseCoopers LLP, independent accountants,
accompanies this Proxy Statement.
Upon the written request of any person who, on March 20, 2000, was a record
owner of CTE Common Stock or CTE Class B Common Stock, or who represents in
good faith that he or she was on such date a
20
<PAGE>
beneficial owner of such stock entitled to vote at the Annual Meeting, the
Company will furnish, without charge, a copy of the Company's 1999 Annual
Report on Form 10-K, including the financial statements, schedules and
exhibits, filed with the SEC. Written requests for the Annual Report should be
directed to: Investor Relations Department, Commonwealth Telephone
Enterprises, Inc., 100 CTE Drive, Dallas, Pennsylvania 18612, Attn: David G.
Weselcouch, Vice President of Investor Relations and Corporate Communications,
e-mail: [email protected].
Solicitation of Proxies
The Company will bear the cost of solicitation of proxies. In addition to
the use of the mail, proxies may be solicited by officers, Directors and
regular employees of the Company, personally or by telephone, telecopy or
telegraph, and the Company may reimburse persons holding stock in their names
or those of their nominees for their expenses in forwarding soliciting
materials to their principals.
It is important that proxies be returned promptly. Therefore, shareholders
are urged to promptly fill in, date, sign and return the enclosed proxy in the
enclosed envelope, to which no postage need be affixed if mailed in the United
States.
Shareholders' Proposals
In order for a shareholder proposal to be considered for inclusion in the
Company's Proxy Statement and form of proxy relating to the 2001 Annual
Meeting of Shareholders, in addition to meeting the requirements of the SEC's
rules governing such proposals, the proposal must be received by the Company
at its principal executive offices not later than December 27, 2000. In the
event that the Company receives notice not later than March 3, 2001 of a
shareholder proposal intended to be presented at the 2001 Annual Meeting of
Shareholders and which is not included in the Company's proxy materials, then,
so long as the Company includes in its proxy statement for such Annual Meeting
advice on the nature of the matter and how the named proxyholders intend to
vote the shares for which they have received discretionary authority, such
proxyholders may exercise discretionary authority with respect to such
proposal, except to the extent limited by the SEC's rules governing
shareholder proposals.
By order of the Board of Directors,
/s/ John J. Jones
John J. Jones
Executive Vice President,
General Counsel and Corporate
Secretary
Dated: April 19, 2000
21
<PAGE>
Appendix A
AMENDMENT 2000-1
COMMONWEALTH TELEPHONE ENTERPRISES, INC. 1997
NON-MANAGEMENT
DIRECTORS' STOCK COMPENSATION PLAN
______________________________________________________________________________
WHEREAS, Commonwealth Telephone Enterprises, Inc.(the "Corporation")
has adopted the Commonwealth Telephone Enterprises, Inc. 1997 Non-Management
Directors' Stock Compensation Plan (the "Plan"); and
WHEREAS, pursuant to Section 9 of the Plan, the Corporation has
reserved the right to amend the Plan;
NOW, THEREFORE, BE IT RESOLVED, the Corporation hereby amends the Plan
as follows:
1.
Section 3 is amended in its entirety to read as follows:
"Shares Subject to Plan. The shares issued or issuable under the Plan
shall not exceed 125,000 shares of Common Stock. Such shares may be
authorized and unissued shares or treasury shares."
2.
Section 12 is amended in its entirety to read as follows:
"Duration of the Plan. The Plan shall remain in effect through
December 31, 2003."
FURTHER RESOLVED, that this Amendment 2000-1 shall be effective on the
date of execution indicated below.
Executed this ___ day of ______________, 2000
Commonwealth Telephone Enterprises, Inc.
Attest: ______________________ By: ________________________
Title: ________________________
<PAGE>
COMMONWEALTH TELEPHONE ENTERPRISES, INC.
100 CTE DRIVE
DALLAS, PENNSYLVANIA 18612-9774
PROXY - Annual Meeting of Shareholders - May 11, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, hereby revoking any contrary proxy previously given,
hereby appoints David C. McCourt, James Q. Crowe and Richard R. Jaros, 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 COMMONWEALTH TELEPHONE ENTERPRISES, INC. (the
"Company") entitled to vote at the Annual Meeting of Shareholders of the Company
to be held at the Princeton Marriott in Forrestal Village, 201 Village
Boulevard, Princeton, New Jersey 08540, on May 11, 2000, at 10:00 a.m., local
time, and at any adjournment or postponement thereof, all as set forth in the
related notice and proxy statement for the 2000 Annual Meeting.
This proxy also delegates discretionary authority with respect to any other
matter as may properly come before the Annual Meeting and at any adjournment or
postponement thereof.
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS JUST
SIGN THE REVERSE SIDE; NO BOXES NEED TO BE MARKED. PLEASE RETURN PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
Change of Address
- --------------------------------------------------------------------------------
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email:--------------------------------------------------------------------------
(Continued, and to be Signed and Dated, on Reverse Side)
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<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED AS RECOMMENDED BY THE BOARD
OF DIRECTORS.
Please mark
your votes as
indicated in
the sample | X |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2, AND 3.
1. Election of four (4) Directors to Class I to serve for a term of three (3)
years.
VOTE FOR ALL
NOMINEES
| |
VOTE WITHHELD
FROM ALL
NOMINEES
| |
(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
Daniel E. Knowles
Walter Scott, Jr.
David C. Mitchell
2. Ratification of the appointment of
PricewaterhouseCoopers LLP as independent
auditors of the Company for the fiscal year ending
December 31, 2000.
FOR AGAINST ABSTAIN
| | | | | |
3. Approval of Amendments to the Company's 1997 Non-Management Directors' Stock
Compensation Plan.
FOR AGAINST ABSTAIN
| | | | | |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSAL 4.
4. To consider and act upon a proposal by a shareholder to declassify the Board
of Directors.
FOR AGAINST ABSTAIN
| | | | | |
Signature Signature Date
--------------------------- -------------------- ----------
Please sign exactly as your name(s) appear on Proxy. If held in joint tenancy,
all persons must sign. Trustees, administrators, etc., should include title and
authority.
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