SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A) of the Securities Exchange Act of 1934
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-b(e)(2))
|x| Definitive Proxy Statement
| | Definitive Additional Materials
| | Soliciting Material Pursuant to (ss.)240.14a-11(c) or (ss.)240.14a-12
D & E COMMUNICATIONS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
|x| No Fee Required
| | $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
| | $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
| | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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| | 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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D & E COMMUNICATIONS, INC.
124 EAST MAIN STREET
P.O. BOX 458
EPHRATA, PA 17522-0458
717-733-4101
ANNE B. SWEIGART
Chairman, President and Chief
Executive Officer
April 4, 1997
To Our Shareholders:
You are cordially invited to attend the 1997 Annual Meeting of Shareholders
to be held at the Brossman Business Complex, 124 East Main Street, Ephrata,
Pennsylvania 17522, on Tuesday, April 29, 1997, at 10:30 a.m. local time.
We will be serving a continental breakfast at 9:30 a.m. prior to the
meeting. As always, I would be most pleased to have you in attendance for this
social period.
This year, in addition to being asked to elect three (3) nominees to the
Board of Directors of D & E Communications, Inc. (the "Company") and to ratify
the Board of Director's selection of Coopers & Lybrand L.L.P. as independent
auditors for 1997, you are also being asked to approve a proposal to amend and
restate in their entirety the Company's Articles of Incorporation in order to
increase the size of the Board of Directors from nine (9) members to twelve (12)
members and to make certain other nonsubstantive clarifications (the
"Amendment"), and if the Amendment is approved, to elect one (1) additional
nominee to the Board of Directors.
The expansion of the Board of Directors will provide the Company with
access to additional qualified individuals whose experience will add expertise
to the Company as it pursues its goals for the future, including positioning the
Company to enter a new age in telecommunications. FOR THIS REASON, THE BOARD OF
DIRECTORS CONSIDERS THIS PROPOSED AMENDMENT TO BE IN THE BEST INTERESTS OF THE
COMPANY AND ITS SHAREHOLDERS AND STRONGLY RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION.
Detailed information as to the business to be transacted at the meeting is
contained in the accompanying Notice of Annual Meeting and Proxy Statement.
At your earliest convenience, please mark, sign and date the enclosed Proxy
Card and the Meeting Attendance Card and return them to us in the envelope
provided. In addition, if you are also a participant in the Company's Dividend
Reinvestment Plan, please mark and return to us at the same time the
Participant's Direction Card also enclosed herewith. Duly executed but unmarked
Proxy Cards and Participant's Direction Cards will be voted FOR the election of
the three (3) nominees for director, FOR the Amendment, FOR the election of the
one (1) additional nominee for director (if the Amendment is approved) and FOR
the ratification of Coopers & Lybrand as independent auditors for 1997. If you
attend the meeting, you may, of course, choose to revoke your proxy and
personally cast your vote.
<TABLE>
<S> <C>
Sincerely yours,
(Mrs.) Anne B. Sweigart
Chairman of the Board, President
Enclosures and Chief Executive Officer
</TABLE>
<PAGE>
D & E COMMUNICATIONS, INC.
124 EAST MAIN STREET
P.O. BOX 458
EPHRATA, PA 17522-0458
717-733-4101
ANNE B. SWEIGART
Chairman, President and Chief
Executive Officer
April 4, 1997
To Our Employee Stock Ownership Plan Participants:
You are cordially invited to attend the 1997 Annual Meeting of Shareholders
to be held at the Brossman Business Complex, 124 East Main Street, Ephrata,
Pennsylvania 17522, on Tuesday, April 29, 1997, at 10:30 a.m. local time.
We will be serving a continental breakfast at 9:30 a.m. prior to the
meeting. As always, I would be most pleased to have you in attendance for this
social period.
This year, in addition to being asked to elect three (3) nominees to the
Board of Directors of D & E Communications, Inc. (the "Company") and to ratify
the Board of Director's selection of Coopers & Lybrand L.L.P. as independent
auditors for 1997, you are also being asked to approve a proposal to amend and
restate in their entirety the Company's Articles of Incorporation in order to
increase the size of the Board of Directors from nine (9) members to twelve (12)
members and to make certain other nonsubstantive clarifications (the
"Amendment"), and if the Amendment is approved, to elect one (1) additional
nominee to the Board of Directors.
The expansion of the Board of Directors will provide the Company with
access to additional qualified individuals whose experience will add expertise
to the Company as it pursues its goals for the future, including positioning the
Company to enter a new age in telecommunications. FOR THIS REASON, THE BOARD OF
DIRECTORS CONSIDERS THIS PROPOSED AMENDMENT TO BE IN THE BEST INTERESTS OF THE
COMPANY AND ITS SHAREHOLDERS AND STRONGLY RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION.
Detailed information as to the business to be transacted at the meeting is
contained in the accompanying Notice of Annual Meeting and Proxy Statement.
At your earliest convenience, please mark, sign and date: (1) the enclosed
Participant's Direction Card and return it to the plan trustee, CoreStates Bank,
and (2) the enclosed Meeting Attendance Card and return it to the Company in the
envelopes provided.
<TABLE>
<S> <C>
Sincerely yours,
(Mrs.) Anne B. Sweigart
Chairman of the Board, President
Enclosures and Chief Executive Officer
</TABLE>
<PAGE>
D & E COMMUNICATIONS, INC.
124 EAST MAIN STREET
P.O. BOX 458
EPHRATA, PA 17522-0458
717-733-4101
ANNE B. SWEIGART
Chairman, President and Chief
Executive Officer
April 4, 1997
To Our Shareholders:
You are cordially invited to attend the 1997 Annual Meeting of Shareholders
to be held at the Brossman Business Complex, 124 East Main Street, Ephrata,
Pennsylvania 17522, on Tuesday, April 29, 1997, at 10:30 a.m. local time.
We will be serving a continental breakfast at 9:30 a.m. prior to the
meeting. As always, I would be most pleased to have you in attendance for this
social period.
At your earliest convenience, please mark and sign the enclosed Meeting
Attendance Card and return it to us in the envelope provided.
<TABLE>
<S> <C>
Sincerely,
(Mrs.) Anne B. Sweigart
Chairman of the Board, President
Enclosures and Chief Executive Officer
</TABLE>
<PAGE>
D & E COMMUNICATIONS, INC.
Ephrata, Pennsylvania
NOTICE OF 1997 ANNUAL MEETING
TO SHAREHOLDERS AND PARTICIPANTS
IN THE DIVIDEND REINVESTMENT PLAN
The Annual Meeting of the Shareholders of D & E Communications, Inc. ("the
Company") will be held in accordance with the By-Laws of the Company on Tuesday,
April 29, 1997, at 10:30 a.m. local time, at the Brossman Business Complex, 124
East Main Street, Ephrata, Pennsylvania 17522, for the purposes stated below,
which are more fully described in the accompanying Proxy Statement:
1. To elect three (3) Class B Directors for a term to expire in the year
2000 (and until their successors are duly elected and qualified);
2. To amend and restate the Articles of Incorporation of the Company in
their entirety in order to increase the size of the Board of Directors from nine
(9) members to twelve (12) members and to make certain other nonsubstantive
clarifications (the "Amendment");
3. If the Amendment is approved, to elect one (1) additional Class B
Director for a term to expire in the year 2000 (and until his successor is duly
elected and qualified);
4. To ratify the Board of Directors' selection of Coopers & Lybrand L.L.P.
as independent auditors in 1997; and
5. To act upon such other business as may properly come before the meeting.
Only holders of common stock of record on the books of the Company at the
close of business on March 14, 1997, will be entitled to vote at the Annual
Meeting or any adjournment thereof.
The Company, as trustee of the D & E Communications, Inc. Dividend
Reinvestment Plan (the "DRP") is the record owner of the shares which have been
allocated to your DRP account. Pursuant to the DRP, you are entitled to direct
the Trustee on how to vote the shares allocated to your account by returning the
enclosed Participant's Direction Card. A copy of the Proxy Statement, the 1996
Annual Report of the Company, the Independent Auditors' Report, a Proxy Card and
a Participant's Direction Card are being mailed to you simultaneously prior to
the Annual Meeting. The Board of Directors' nominees for directors are set forth
in the accompanying Proxy Statement, as well as further information on the
foregoing matters.
THE ENCLOSED PROXY AND PARTICIPANT'S DIRECTION, WHICH IS BEING SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS, CAN BE RETURNED IN THE ENCLOSED ENVELOPE,
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<TABLE>
<S> <C>
By Order of the Board of Directors
April 4, 1997 W. Garth Sprecher
Secretary
Enclosures
</TABLE>
<PAGE>
D & E COMMUNICATIONS, INC.
EPHRATA, PENNSYLVANIA
------------------------
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
TO PARTICIPANTS OF THE D & E COMMUNICATIONS, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
------------------------
The Annual Meeting of the Shareholders of D & E Communications, Inc. ("the
Company") will be held in accordance with the By-Laws of the Company, on
Tuesday, April 29, 1997, at 10:30 a.m. local time, at the Brossman Business
Complex, 124 East Main Street, Ephrata, Pennsylvania 17522, for the purposes
stated below, which are more fully described in the accompanying Proxy
Statement:
1. To elect three (3) Class B Directors for a term to expire in the
year 2000 (and until their successors are duly elected and qualified);
2. To amend and restate the Articles of Incorporation of the Company
in their entirety in order to increase the size of the Board of Directors
from nine (9) members to twelve (12) members and to make certain other
nonsubstantive clarifications (the "Amendment");
3. If the Amendment is approved, to elect one (1) additional Class B
Director for a term to expire in the year 2000 (and until his successor is
duly elected and qualified);
4. To ratify the Board of Directors' selection of Coopers & Lybrand
L.L.P. as independent auditors in 1997; and
5. To act upon such other business as may properly come before the
meeting.
Only holders of common stock of record on the books of the Company at the
close of business on March 14, 1997, will be entitled to vote at the Annual
Meeting or any adjournment thereof. CoreStates Bank, the trustee (the "Trustee")
of the D & E Communications, Inc. Employee Stock Ownership Plan (the "ESOP"), is
the record owner of the shares which have been allocated to your ESOP account.
Pursuant to the ESOP, you are entitled to direct the Trustee on how to vote the
shares allocated to your account by returning the enclosed Participant's
Direction Card. A copy of the Proxy Statement, the 1996 Annual Report of the
Company, the Independent Auditors' Report and a Participant's Direction Card are
being mailed to you simultaneously prior to the Annual Meeting. The Board of
Directors' nominees for directors are set forth in the accompanying Proxy
Statement, as well as further information on the foregoing matters.
THE ENCLOSED PARTICIPANT'S DIRECTION, WHICH IS BEING SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS, SHOULD BE RETURNED TO THE TRUSTEE IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
April 4, 1997 By Order of the Board of Directors
W. GARTH SPRECHER
Secretary
Enclosures
<PAGE>
PROXY STATEMENT
Proxies in the accompanying form are being solicited by the Board of
Directors (the "Board") of D & E Communications, Inc. ("the Company"), for use
at the annual meeting of the Shareholders (as defined below) to be held at 10:30
a.m. on Tuesday, April 29, 1997 at the Brossman Business Complex, 124 East Main
Street, Ephrata, Pennsylvania 17522 (the "Annual Meeting"). This proxy statement
and the form of proxy are being mailed to the Shareholders (as defined below)
commencing on or about April 4, 1997.
Only holders of shares of the common stock, par value $0.16 per share, of
the Company (the "Common Stock") of record on the books of the Company at the
close of business on March 14, 1997 (the "Record Date") will be entitled to vote
at the meeting. On the Record Date, there were 5,764,619 shares of the Common
Stock outstanding. Holders of record of the Common Stock at the close of
business on the Record Date (the "Shareholders"), or their proxies, are entitled
to cumulative voting rights in the election of directors at the Annual Meeting.
Under cumulative voting, a Shareholder, or the Shareholder's proxy, may vote the
number of shares of the Common Stock owned by the Shareholder for as many
persons as there are directors to be elected, or may cumulate such votes and
give to one, or distribute among two or more nominees, as many votes as shall
equal the number of directors to be elected multiplied by the number of the
Shareholder's shares of the Common Stock. Those persons receiving the highest
number of votes are declared to be elected directors of the Company. For all
other purposes, the Shareholders, or their proxies, are entitled to one vote per
each share of the Common Stock at the Annual Meeting.
Judges of election are appointed by the Board to conduct the tabulation of
votes with respect to the election of directors and the other matters to come
before the Annual Meeting and to report the results thereof.
On June 11, 1996, the Denver and Ephrata Telephone and Telegraph Company
(the "Telco") effected a restructuring into a holding company structure whereby
the Company, which had been a wholly-owned subsidiary of Telco, became the
parent company and 100% owner of the shares of the common stock of the Telco,
and all of the holders of common stock of the Telco became the holders of all of
the Common Stock of the Company. Accordingly, references in this proxy statement
to the Company in an historical context are intended to be the Company after
June 11, 1996 and to the Telco before June 11, 1996.
PROPOSAL 1: ELECTION OF THREE (3) DIRECTORS
The Board currently consists of nine (9) members divided into three (3)
classes which are classified with respect to the year in which their term shall
expire. Each class of directors holds office for a term of three (3) years (and
until their successors are duly elected and qualified), and the three (3)
classes of the Board are staggered. Accordingly, one of the three (3) classes,
comprising one-third of the directors, is elected each year to succeed the
directors whose terms are expiring. Currently, the directors in Class B are
serving terms expiring this year. The directors in Classes A and C are serving
terms expiring at the annual meeting of the shareholders in 1999 and 1998,
respectively.
The Board has nominated for re-election to Class B two (2) directors whose
terms expire this year, namely Robert M. Lauman and Ronald E. Frisbie, and one
(1) additional person who has not previously served on the Board, namely Thomas
H. Bamford, to replace Charles E. Thomas who has decided not to submit his name
for re-election. If elected, their terms are to expire in the year 2000 (and
until their successors are duly elected and qualified). There are no
arrangements or understandings between any director or nominee and any other
person pursuant to which the director or nominee was or is to be elected as a
director.
The Company has been advised by the persons named in the accompanying proxy
that they intend to vote pursuant to the proxy for the election of Messrs.
Lauman and Frisbie (who are presently directors of the Company with regular
terms expiring this year) and Mr. Bamford (as a new director in Class B) and to
exercise cumulative voting, if necessary, to secure their election. Each
individual
1
<PAGE>
nominated for election as director has agreed to serve if elected. However, the
Company is informed that in the event of the refusal or inability of any of the
foregoing nominees for director to serve, the persons named in the accompanying
proxy intend to vote at the Annual Meeting pursuant to the proxy for the
election of such person(s), if any, as may be nominated by the Board, subject to
the right of the persons named in the proxy to exercise cumulative voting rights
as described above.
DIRECTORS
Information follows about each nominee to serve in Class B and the other
directors serving in Classes A and C.
Nominees For Class B Directors For Terms To Expire In 2000
Robert M. Lauman, age 71, has been the Executive Vice President and Chief
Operating Officer of the Company since 1990. He joined the Company in 1983 and
was previously employed by Bell of Pennsylvania from 1946 to 1983, at which time
he retired as a Director and as Chief Operating and Planning Officer. Mr. Lauman
is a registered Professional Engineer, a member of the Pennsylvania Society of
Professional Engineers and a member of the Institute of Electrical and
Electronics Engineers, Inc. He has been a director of the Company since 1983 and
is a member of the Executive Committee and the Compensation Committee.
Ronald E. Frisbie, age 74, retired from the Company in 1992. He was
employed by the Western Electric Company from 1947 to 1949 and the Commonwealth
Telephone Company from 1949 to 1953 at which time he became employed by the
Company as Wire Chief. Mr. Frisbie was a Vice President of the Company from 1971
until 1992, Secretary, Treasurer and Assistant to the President from 1985 until
1992 and has been a Director since 1983.
Thomas H. Bamford, age 56, is Director of Community Relations for the
Lancaster Health Alliance. He joined the Alliance in 1995 upon his retirement
after nearly 27 years with CoreStates Bank. At his retirement, he was Senior
Vice President, Director of Corporate Communications and Lancaster Area
Executive Officer for CoreStates Bank. Mr. Bamford is an accredited member of
the Public Relations Society of America. He is currently a director of the
United Way of Lancaster County, the Louise Von Hess Foundation for Medical
Education, the Lancaster Housing Opportunities Partnership, the Lancaster YMCA
Foundation and the Rotary Club of Lancaster. He is a member of the Marketing and
Communications Council of the Lancaster Chamber of Commerce and Industry and the
Lancaster County Health Partnership. Mr. Bamford is a past president of the
United Way of Lancaster County, the Lancaster YMCA Foundation, and Lancaster
Celebration 250, Inc.
Class A Directors Whose Terms Expire In 1999
John Amos, age 64, became a member of the Board on January 25, 1990. He has
been in the commercial fruit and produce growing business for more than 39 years
in Grand Traverse County, Michigan. Mr. Amos is a member of the Audit Committee.
W. Garth Sprecher, age 45, is Vice President and Secretary of the Company
and Chief Executive Officer of D & E Marketing Corp. He joined the Company in
1984 as a Communications Consultant for Red Rose Communications, Inc. (f.k.a.
Red Rose Systems, Inc.). He was named Commercial Manager of the Company in 1988.
In 1990, he assumed the position of Assistant Secretary and Director of External
Affairs, and in 1996, he assumed his present position. Mr. Sprecher became a
Director of the Company on March 27, 1993. He is a member of the Board of
Directors of the Lancaster Chamber of Commerce and Industry and is a director of
the Ephrata Chamber of Commerce. He is also a member of the Board of Directors
of the Mid-Atlantic Chapter of the American Society of Corporate Secretaries.
Mr. Sprecher is a member of the Executive Committee.
G. William Ruhl, age 57, is the Senior Vice President of the Company and
Chief Executive Officer of Telco. He joined the Company in 1991 and was
previously employed by Bell of Pennsylvania from 1961 to 1991, at which time he
retired as Director of Network Architecture and
2
<PAGE>
Deployment Planning. Mr. Ruhl is a registered Professional Engineer and a member
of the Institute of Electrical and Electronics Engineers, Inc. He is also on the
Board of Directors of the Central Pennsylvania Symphony. He became a director of
the Company on March 27, 1993; and is a member of the Executive Committee.
Class C Directors Whose Terms Expire In 1998
Anne B. Sweigart, age 82, is the Chief Executive Officer, President and
Chairman of the Board of the Company. She became a director in 1952 and has been
Chairman of the Board since July 1985. Mrs. Sweigart served as Executive Vice
President from March 1981 to July 1985. Her employment began in 1936,
twenty-five years after her father founded the Company. From that time until
today she has always been involved in the management affairs of the Company. She
serves on numerous Boards and is currently a Trustee of Rider University, an
Associate Trustee of Elizabethtown College, an Honorary Trustee of Lebanon
Valley College and a Trustee of Linden Hall School for Girls. Mrs. Sweigart is a
member of the Audit Committee and serves as Chairman of the Executive Committee.
Paul W. Brubaker, age 53, is a Director, Executive Vice President and
Corporate Secretary of the Ephrata National Bank, where he has been employed
since 1961. He is a member of the American Institute of Banking and of the
Finance Committee of the Ephrata Economic Development Board, and he has served
as Vice Chairman of the National Board of the Church of the Brethren in Elgin,
Illinois. He has been a director of the Company since 1990. Mr. Brubaker is
Chairman of the Audit Committee and a member of the Compensation Committee.
Steven B. Silverman, age 64, became a member of the Board on September 8,
1994. He is a senior partner in the law firm of Rothenberg & Silverman, Elkins
Park, Pennsylvania. In addition to his private practice, he serves as an adjunct
professor of labor law at Dickinson School of Law in Carlisle, Pennsylvania. Mr.
Silverman is a member of the Audit Committee and Compensation Committee.
GENERAL INFORMATION REGARDING THE BOARD OF DIRECTORS
Director Attendance at Board Meetings
The board held a total of twelve (12) regularly scheduled meetings during
the year ended December 31, 1996. Each incumbent director attended in excess of
75% of the nineteen (19) aggregate meetings of the Board and the Board's
following three (3) standing committees: the Audit Committee, the Compensation
Committee, and the Executive Committee.
Compensation of Directors
The directors were each paid $950.00 per meeting which they attended
($500.00 per meeting in which they did not participate) and $100.00 per any
committee meeting of the Board not held in conjunction with a Board meeting.
Actual travel and lodging expenses were also reimbursed.
BOARD COMMITTEES
Audit Committee
The current Audit Committee, consisting of Anne B. Sweigart, Steven B.
Silverman, Paul W. Brubaker (Chairman) and John Amos, is responsible for
recommending to the Board the firm of independent public accountants responsible
to audit the Company's financial statements. This Committee also reviews with
the independent public accountants the results of their audit work. The Audit
Committee held two (2) meetings during 1996.
3
<PAGE>
Compensation Committee
The current Compensation Committee, consisting of Robert M. Lauman, Charles
E. Thomas (Chairman), Paul W. Brubaker and Steven B. Silverman, reviews and
makes recommendations to the Board regarding the compensation practices of the
Company. The Compensation Committee held three (3) meetings during 1996.
Executive Committee
The current Executive Committee, consisting of Anne B. Sweigart (Chairman),
Robert M. Lauman, G. William Ruhl and W. Garth Sprecher, is designed to perform
and uphold the duties and responsibilities of the Board as dictated by the
By-Laws of the Company and within the limitations set by the Board. The
Executive Committee held two (2) meetings during 1996.
SECURITY OWNERSHIP OF MANAGEMENT
As of March 6, 1997 (the "Most Practicable Date"), there were 5,764,619
shares of the Company's Common Shares outstanding. The table below sets forth
the ownership of the Common Stock held, as of the Most Practicable Date, by each
of (i) the directors (and nominees), (ii) the executive officers and (iii) all
directors and officers as a group.
<TABLE>
<CAPTION>
NATURE AND AMOUNT PERCENT
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
- -------------------------------------------------------------------- ----------------------- --------
<S> <C> <C>
John Amos........................................................... 63,150(4,7) *
Thomas H. Bamford (nominee)......................................... 500
Paul W. Brubaker.................................................... 3,375(1) *
Ronald E. Frisbie................................................... 49,730(1,3,4) *
Donald R. Kaufmann.................................................. 518(1,2,6) *
Robert M. Lauman.................................................... 46,548(1,2,5,6) *
Thomas E. Morell.................................................... 1,317(2,5) *
G. William Ruhl..................................................... 2,963(1,2,5,6) *
Steven B. Silverman................................................. 602(6) *
Emily B. Sprecher................................................... 302,643(1) 5.25%
W. Garth Sprecher................................................... 94,430(1,2,4,5,6) 1.64%
Anne B. Sweigart.................................................... 370,927(1,2,4,5,6) 6.43%
D. Mark Thomas (nominee)............................................ 1,300(8)
All Directors and Officers as a group............................... 902,003(1,2,3,4,5,6,7) 15.65%
</TABLE>
- ------------------
* Less than 1 percent.
(1) Includes shares owned in their individual capacities, but held by the D & E
Communications, Inc. Voting Trust (f/k/a Denver and Ephrata Telephone and
Telegraph Company Voting Trust) (the "Voting Trust") as of the Most
Practicable Date as follows: 3,375 for Mr. Brubaker, 49,430 for Mr. Frisbie,
300 for Mr. Kaufmann, 44,315 for Mr. Lauman, 672 for Mr. Ruhl, 266,643 for
Mrs. Sprecher, 93,283 for Mr. Sprecher, 332,457 for Mrs. Sweigart, 36,000
for Mrs. Sweigart and Mrs. Sprecher as joint trustees (which are included in
both Mrs. Sweigart's and Mrs. Sprecher's shares shown above), and 826,475
for all directors and officers as a group. Mrs. Sweigart and Messrs. Amos,
Frisbie and Sprecher are Voting Trustees of the Voting Trust.
(2) Includes shares held in the Company's Employee Stock Ownership Plan as of
the Most Practicable Date as follows: 214 for Mr. Kaufmann, 426 for Mr.
Lauman, 977 for Mr. Morell, 1,099 for Mr. Ruhl, 858 for Mr. Sprecher, 459
for Mrs. Sweigart and 4,033 for all directors and officers as a group. All
fractional shares are rounded to the nearest whole share.
(3) Does not include 920 shares owned by Mr. Frisbie's wife, with respect to
which Mr. Frisbie disclaims beneficial ownership.
4
<PAGE>
(4) Does not include shares not owned in their own capacities, but held by the
Voting Trust, for which Mrs. Sweigart and Messrs. Amos, Frisbie and Sprecher
serve as Trustees, as to which shares each of the Trustees disclaims
beneficial ownership.
(5) Includes shares held in the Company's Employee Stock Purchase Plan as of the
Most Practicable Date as follows: 788 for Mr. Lauman, 340 for Mr. Morell,
857 for Mr. Ruhl, 269 for Mr. Sprecher, 1,700 for Mrs. Sweigart and 3,954
for all directors and officers as a group.
(6) Includes shares held in the Company's Dividend Reinvestment Plan as of the
Most Practicable Date as follows: 4 for Mr. Kaufmann, 719 for Mr. Lauman, 35
for Mr. Ruhl, 2 for Mr. Silverman, 20 for Mr. Sprecher, 11 for Mrs. Sweigart
and 791 for all directors and officers as a group.
(7) Includes shares held in the John Amos Living Trust, of which Mr. Amos is
trustee. Does not include 65,709 owned by the Mary P. Amos Living Trust, of
which Mr. Amos' wife is trustee, and to which Mr. Amos disclaims beneficial
ownership.
(8) Includes 300 shares held as custodian for Emily Thomas and 600 shares held
as custodian for David Thomas for which Mr. Thomas does not disclaim
beneficial ownership.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The following persons who are subject to Section 16 reporting compliance
failed to timely file their Form 5 reports disclosing their beneficial ownership
in the Company as of December 31, 1996: Donald R. Kaufmann, Robert M. Lauman,
Thomas E. Morell, G. William Ruhl, Steven B. Silverman, Emily B. Sprecher, W.
Garth Sprecher and Anne B. Sweigart. In addition, Mr. Kaufmann became an
executive officer of the Company during 1996 and a Form 3 was not filed on his
behalf.
IDENTIFICATION OF EXECUTIVE OFFICERS
The following table sets forth the names, ages, and positions of the
executive officers of the Company. All officers of the Company serve for terms
of one year and until re-elected or until a successor is duly elected at the
annual organizational meeting of directors, which follows the annual
shareholders' meeting. No officers have any arrangements or understandings with
any other person pursuant to which such officer was or is to be selected as an
officer.
<TABLE>
<CAPTION>
POSITION
NAME AGE POSITION HELD SINCE
- --------------------------------- --- ------------------------------------------------------------ ----------
<S> <C> <C> <C>
Anne B. Sweigart................. 82 Chairman, President, and Chief Executive Officer 1985
Robert M. Lauman................. 71 Executive Vice President and Chief Operating Officer 1990
G. William Ruhl.................. 57 Senior Vice President 1991
Thomas E. Morell................. 36 Vice President, Chief Financial Officer and Treasurer (1) 1995
Emily B. Sprecher................ 90 Assistant Treasurer 1980
W. Garth Sprecher................ 45 Vice President and Secretary (1) 1993
Donald R. Kaufmann............... 54 Vice President 1996
</TABLE>
- ------------------
(1) Both Messrs. Morell and Sprecher were elected as a Vice President in 1996.
Emily B. Sprecher, age 90, is Assistant Treasurer of the Company. Mrs.
Sprecher had an early career as a public school teacher. Since 1958, she has
been employed by the Company in various capacities, including Assistant
Secretary and Assistant Treasurer from 1980 to 1990 and Assistant Treasurer
since 1990. She is the daughter of the founder of the Company, William F.
Brossman, a sister of Anne B. Sweigart, and the mother of W. Garth Sprecher.
Thomas E. Morell, age 36, is Vice President, Chief Financial Officer and
Treasurer of the Company and Chairman of D & E Marketing Corp. Mr. Morell is a
Certified Public Accountant and is a member of the Pennsylvania Institute of
Certified Public Accountants. From 1982 to 1984, he was employed by Coopers &
Lybrand L.L.P. as an auditor. Mr. Morell was Assistant Controller of the
5
<PAGE>
Company from 1984 to 1990, Controller from 1990 to 1995 and Chief Financial
Officer and Treasurer since August 22, 1995.
Donald R. Kaufmann, age 54, is Vice President of the Company and Chief
Executive Officer of the Company's subsidiary, Red Rose Communications, Inc.
From 1965 to 1995, Mr. Kaufmann was employed by Bell Atlantic. When Mr. Kaufmann
left Bell Atlantic, he was Director of Network Investment Management.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation received for services to
the Company and its subsidiaries during each of the last three (3) fiscal years
by the Company's CEO and, in addition, the individual who during 1996 was the
most highly compensated executive officer of the Company and who received in
excess of $100,000 in salary and bonus.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------------------
OTHER ANNUAL ALL OTHER
SALARY BONUS COMPENSATION COMPENSATION
NAME AND PRINCIPAL POSITION YEAR $ ($)(A) ($)(B) ($)(C)
- ------------------------------------------- ---- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Anne B. Sweigart .......................... 1996 $148,124 $21,945 $ 0 $149,319
Chairman, President & CEO 1995 141,131 21,105 0 142,122
1994 134,515 13,400 0 134,709
Robert M. Lauman .......................... 1996 $137,730 $20,550 $ 0 $ 41,908
Executive Vice President 1995 131,738 19,695 21,263 20,681
& Chief Operating Officer 1994 125,485 12,500 0 19,751
</TABLE>
- ------------------
(A) Bonuses are established pursuant to the Company's Management Incentive Plan
under performance targets for the year established by the Compensation
Committee.
(B) Except in the case of Mr. Lauman, the aggregate amounts paid to the named
executive officers did not exceed the lesser of (i) $50,000 or (ii) 10% of
the total annual salary and bonus reported for each individual. In 1995,
amounts paid to Mr. Lauman include an initiation and membership fee of
$13,820, which was greater that 25% of his total "other annual compensation"
in such year.
(C) The amounts shown in this column are for the following persons for the
following items in the years 1996, 1995, and 1994, respectively: (i) Anne B.
Sweigart: $19,684, $19,919 and $20,152 for Split Dollar Life Insurance;
$2,926, $2,672 and $2,690 for the 401(k) Company Match; $126,709, $119,531
and $111,867, Pension Benefits (over age 70 1/2); and (ii) Robert M. Lauman:
$15,606, $15,790 and $15,981 for the Split Dollar Life Insurance; $0, $2,256
and $1,260 for Term Life Insurance; $2,714, $2,635 and $2,510 for the 401(k)
Company Match; $23,588 in 1996 for Pension Benefits (over age 70 1/2).
Compensation Committee Report On Executive Compensation
The Company's executive compensation program is administered by the
Compensation Committee (the "Committee") comprised of Directors Charles E.
Thomas (Chairman), Robert M. Lauman, Paul W. Brubaker and Steven B. Silverman.
In establishing the base salaries of the executive officers of the Company,
including the Chief Executive Officer, Mrs. Sweigart, and Chief Operating
Officer, Mr. Lauman, the Committee considers a number of factors, including
salary ranges for comparable positions at other companies, the historical
financial performance of the Company, the level of responsibility of the
employee, the quality and affordability of the service provided to the Company's
customers and the level of inflation for the period. For 1996, a compensation
consultant retained by the Committee developed recommended salary ranges for
executive officers of the Company based on a comparison of salaries paid at
comparable telephone and other companies for positions with equivalent levels of
responsibility.
6
<PAGE>
(There is, however, no intentional relation between the companies used for
compensation purposes and the companies in the Standard and Poor's Telephone
Index (S&P Tel) used in the Stock Performance Graph below.) Using the
consultant's recommendations, and based on the Committee's subjective evaluation
of the factors listed above, including the Company's performance, the base
salary of the Chief Executive Officer was increased by 16.2% for 1996 from 1995,
and the base salary of the Chief Operating Officer was increased 6.9% for 1996
from 1995.
Beginning in 1993, the Committee also provided an annual incentive
opportunity to the Company's executive officers pursuant to the Company's
Management Incentive Plan. Under the Plan, the Committee establishes performance
targets for the year, including targets for net income, operating cash flow and
expense control. In 1996, the performance goals established by the Committee at
the beginning of the year were achieved, and bonuses of $21,945 and $20,550 were
paid to Mrs. Sweigart and Mr. Lauman, respectively.
Respectfully Submitted,
The Compensation Committee
Charles E. Thomas
Paul W. Brubaker
Robert M. Lauman
Steven B. Silverman
7
<PAGE>
Insider Participation in Compensation Decisions
During the year ended December 31, 1996, Messrs. Thomas (Chairman),
Brubaker, Silverman and Lauman served on the Compensation Committee of the
Board. Mr. Lauman is an executive officer of the Company.
Pension Plan Table
The Company's pension plan is a noncontributory defined benefit plan
computed on an actuarial basis covering all eligible employees. The plan
provides benefits based on years of service and the employee's compensation as
the average of the highest three years of the previous ten years prior to
retirement. Accrued benefits are vested after five years of service. Normal
retirement age is 65, but an employee who has attained the age of 55 and has at
least 25 years of service (The Rule of Eighty) may retire without any actuarial
reduction of his benefit. Benefit amounts are not subject to any deduction for
Social Security or other amounts.
The following table illustrates the maximum annual benefit payable upon
retirement pursuant to the Company's pension plan for employees with specified
average final compensation and years of service, assuming normal retirement age
and payment as a single life annuity.
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE
FINAL -------------------------------------------------------
COMPENSATION 15 20 25 30 35
- ----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 100,000 $24,000 $32,000 $40,000 $48,000 $56,000
110,000 26,400 35,200 44,000 52,800 61,600
120,000 28,800 38,400 48,000 57,600 67,200
130,000 31,200 41,600 52,000 62,400 72,800
140,000 33,600 44,800 56,000 67,200 78,400
150,000 36,000 48,000 60,000 72,000 84,000
160,000 38,400 51,200 64,000 76,800 89,600
170,000 40,800 54,400 68,000 81,600 95,200
</TABLE>
Compensation included in the pension plan base consists of the salaries
shown in the Salary and Bonus columns of the Summary Compensation Table. As of
December 31, 1996, Mrs. Sweigart and Mr. Lauman had 60 and 13 years of service,
respectively, for purposes of the pension plan.
8
<PAGE>
STOCK PERFORMANCE GRAPH
The following is a graphical comparison of five-year cumulative total
return on shares of the Company's Common Shares.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
S & P 500.............. $100.00 $107.62 $118.46 $120.03 $165.13 $203.05
S & P Tel.............. $100.00 $109.73 $126.73 $121.49 $183.02 $184.85
D & E.................. $100.00 $129.80 $205.99 $260.63 $289.64 $286.64
</TABLE>
Assumes $100 invested in each of the Standard and Poor's (S & P) 500 Index,
the S & P Telephone Index (S & P Tel) and the Company's Common Stock, on
December 31, 1991 and that all dividends were reinvested.
The Common Stock is currently traded on the NASDAQ National Market tier of
the NASDAQ Stock Market under the Symbol DECC ("NASDAQ"). Prior to being traded
on NASDAQ, the Common Stock was traded on the over-the-counter market. For the
years represented on the graph, the comparative prices are an average of the
high and low bid prices of the Common Stock on the last trading day before the
beginning of each fiscal year reported above, as reported on the interdealer
quotation system and summarized in the "Pink Sheets" published by the National
Quotation Bureau. Such quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions.
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following shares are shown as of the Record Date.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
- ------------------------------------------------------------------------------ ----------------------- --------
<S> <C> <C>
The Voting Trust D & E Communications, Inc. .................................. 3,158,106(1) 54.78%
(the "Voting Trust")
P.O. Box 458
Ephrata, PA 17522
The Ephrata National Bank, Trustee of the William and 1,100,100(2) 19.08%
Jemima Brossman Charitable Foundation (the "Charitable Foundation") ........
P.O. Box 457
Ephrata, PA 17522
Anne B. Sweigart ............................................................. 370,867(3) 6.43%
207 East Main Street
Ephrata, PA 17522
Emily B. Sprecher ............................................................ 302,643(4) 5.25%
150 East Main Street
Ephrata, PA 17522
</TABLE>
- ------------------
(1) Certain shareholders are parties to that certain Voting Trust Agreement,
dated as of November 19, 1992, pursuant to which the Voting Trustees named
therein have the right to exercise sole voting power on all matters
submitted to the Company's shareholders for a vote, but not investment
power, with respect to the shares held by such shareholders. By its terms,
the Voting Trust expires November 18, 2002. The Trustees of the Voting Trust
are Anne B. Sweigart, Ronald E. Frisbie, W. Garth Sprecher, Kay W. Shober
and John Amos, each of whom, except for Mr. Shober, is a director of the
Company. Each of the Voting Trustees disclaims beneficial ownership of the
shares held by the Voting Trust, except such shares held in each Trustee's
capacity as a participant of the Voting Trust.
(2) The Charitable Foundation is a member of the Voting Trust. Therefore, the
number of shares shown above as held by the Charitable Foundation is also
included in the number of shares shown above held by the Voting Trust.
Ephrata National Bank, as trustee of the Charitable Foundation, exercises
sole investment power, but not the voting power, with respect to the shares
held by the Charitable Foundation.
(3) Mrs. Sweigart is a member of the Voting Trust and has the sole investment
power, but not the voting power, with respect to such shares, except in her
capacity as Voting Trustee. Therefore, the number of shares shown above as
held by Mrs. Sweigart is also included in the number of shares shown above
as held by the Voting Trust.
(4) Mrs. Sprecher is a member of the Voting Trust and has the sole investment
power, but not the voting power, with respect to such shares. Therefore, the
number of shares shown above as held by Mrs. Sprecher is also included in
the number of shares shown above as held by the Voting Trust.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Steven B. Silverman, a director of the Company, is a senior partner in
the law firm of Rothenberg & Silverman, which is currently retained as counsel
to the Company.
Mr. D. Mark Thomas, a nominee for election as a Class B director of the
Company (as discussed below), is a partner in the law firm of Thomas, Thomas,
Armstrong & Niesen, which is currently retained as counsel to the Company.
10
<PAGE>
Mrs. Anne B. Sweigart, Chairman of the Board, President and Chief Executive
Officer, and Mrs. Emily B. Sprecher, Assistant Treasurer, are sisters. W. Garth
Sprecher, Vice President and Secretary of the Company is Mrs. Sprecher's son.
THE BOARD RECOMMENDS THE ELECTION OF ITS THREE (3) NOMINEES AS CLASS B
DIRECTORS.
PROPOSAL 2: AMENDING AND RESTATING
THE ARTICLES OF INCORPORATION OF THE COMPANY IN THEIR ENTIRETY
The Board recommends that the Articles of Incorporation of the Company (the
"Articles") be amended and restated in their entirety in the form attached
hereto as Exhibit A (the "Amendment") such that the bracketed language in
Exhibit A is deleted from the Articles and the double underscored language in
Exhibit A is added to the Articles. The Amendment would increase the size of the
Board from nine (9) members to twelve (12) members and would make certain other
nonsubstantive clarifications in the existing Articles. The expansion of the
Board will provide the Company with access to additional qualified individuals
whose experience will add expertise to the Company as it pursues its goals for
the future, including positioning the Company to enter a new age in
telecommunications, and making the nonsubstantive clarifications will remedy
certain stylistic issues and [TWO (2)] mistaken cross-references in the Articles
as recently adopted during the formation of the holding company structure. This
proposal is being submitted to the Shareholders for approval, which requires the
affirmative vote of a majority of the votes cast by all shareholders entitled to
vote thereon.
THE BOARD RECOMMENDS THE SHAREHOLDERS VOTE IN FAVOR OF THE AMENDMENT.
PROPOSAL 3: ELECTION OF ONE (1) ADDITIONAL DIRECTOR
Subject to the approval of Proposal 2 by the Shareholders, the Board is
recommending D. Mark Thomas for election as a Class B director. If elected, his
term is to expire in the year 2000 (and until his successor is duly elected and
qualified). There is no arrangement or understanding between Mr. Thomas and any
other person pursuant to which he was or is to be elected as a director. The
Company has been advised by the persons named in the accompanying proxy that if
Proposal 2 is approved by the Shareholders, they intend to vote pursuant to the
proxy for the election of Mr. Thomas and to exercise cumulative voting, if
necessary, to secure his election. Mr. Thomas has agreed to serve if elected.
However, the Company is informed that if Proposal 2 is approved by the
Shareholders, in the event of the refusal or inability of Mr. Thomas to serve,
the persons named in the accompanying proxy intend to vote at the Annual Meeting
pursuant to the proxy for the election of such person, if any, as may be
nominated by the Board, subject to the right of the persons named in the proxy
to exercise cumulative voting rights as described above.
Please refer to Proposal 1 for general information concerning the election
of directors. Set forth below is information about Mr. Thomas whom the Board has
nominated for election to Class B, subject to approval by the Shareholders of
Proposal 2.
D. Mark Thomas, age 49, has been a managing partner in the law firm of
Thomas, Thomas, Armstrong & Niesen, Harrisburg, PA, since the formation of the
firm in 1991, concentrating primarily in public utility and telecommunications
law. Previous thereto, he was a partner in the law firm of Thomas & Thomas from
1977 to 1990. He is also a director of ConQuest Telecommunications Service Corp.
THE BOARD RECOMMENDS THE ELECTION OF ITS ONE (1) ADDITIONAL NOMINEE AS A
CLASS B DIRECTOR, IF PROPOSAL 2 IS APPROVED BY THE SHAREHOLDERS.
11
<PAGE>
PROPOSAL 4:
RATIFICATION OF INDEPENDENT AUDITORS
The Board, upon recommendation of its Audit Committee, appointed Coopers &
Lybrand L.L.P., as auditors of the Company's Financial Statements for 1997. The
recommendation is being submitted to the Shareholders for approval, which
requires the affirmative vote of a majority of the votes cast by all
shareholders entitled to vote thereon. A representative of Coopers & Lybrand
L.L.P., is expected to be present at the Annual Meeting and will be available to
respond to appropriate questions.
THE BOARD RECOMMENDS THE SHAREHOLDERS VOTE IN FAVOR OF RATIFYING COOPERS &
LYBRAND L.L.P. AS INDEPENDENT AUDITORS FOR 1997.
1998 SHAREHOLDER PROPOSALS
Proposals of shareholders intended for inclusion in the Company's proxy
statement relating to the 1998 Annual Meeting must be received at the Company's
principal executive offices, 124 East Main Street, Ephrata, PA 17522 (please
address to the attention of W. Garth Sprecher, Vice President and Secretary), no
later than Friday, November 28, 1997. Any such proposal must comply with Rule
14a-8 of Regulation 14A of the proxy rules of the Securities and Exchange
Commission.
OTHER MATTERS
The Board is not aware that any matter other than those listed in the
Notice of 1997 Annual Meeting of Shareholders is to be presented for action at
the Annual Meeting. If any of the Board's nominees are unavailable for election
as a director or if any matter should properly come before the Annual Meeting,
it is intended that votes will be cast pursuant to the proxy in respect thereof
in accordance with the best judgment of the person or persons acting as proxies.
Any Shareholder who executes and returns the proxy may revoke the same at
any time before it is exercised by filing with the Secretary of the Company
written notice of such revocation or a duly executed proxy bearing a later date
or by attending the Annual Meeting and voting in person. Attendance at the
Annual Meeting will not in and of itself constitute revocation of a proxy.
The Company will pay the expenses in connection with printing, assembling
and mailing the Notice of 1997 Annual Meeting of Shareholders, this Proxy
Statement and the accompanying form of proxy. In addition to the use of mails,
proxies may be solicited by directors, officers and other employees of the
Company personally or by telephone. The Company may request persons holding
stock in their names or names of nominees to send proxy material to, and obtain
proxies from, their principals, and the Company will reimburse such persons for
their expense in so doing.
Items included in this Proxy Statement are as of December 31, 1996, unless
otherwise stated.
UPON WRITTEN REQUEST BY ANY SHAREHOLDER TO W. GARTH SPRECHER, VICE
PRESIDENT AND SECRETARY, D & E COMMUNICATIONS, INC., 124 EAST MAIN STREET,
EPHRATA, PA 17522, A COPY OF THE COMPANY'S 1996 ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1996 WILL BE PROVIDED WITHOUT CHARGE.
April 4, 1997
12
<PAGE>
EXHIBIT A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
D & E COMMUNICATIONS, INC.
1. Name. The name of the corporation is D & E Communications, Inc. (herein
called the "Corporation").
2. [2.1] Registered Office. The location and post office address of the
Corporation's registered office in the Commonwealth of Pennsylvania is 124 East
Main Street, Brossman Business Complex, Ephrata, Lancaster County, Pennsylvania
17522.
[2.2 Sole Incorporator. The name and address of the sole incorporator
is Kimberly Ross Lieb, 301 Grant Street, 20th Floor, Pittsburgh, PA 15219.]
3. Purpose and Powers. The Corporation is incorporated under the Business
Corporation Law of 1988, as amended, and shall have unlimited power to engage in
and to do any lawful act concerning any or all lawful business for which
corporations may be incorporated under said Business Corporation Law.
4. Term of Existence. The term for which the Corporation shall exist is
perpetual.
5. Capital Stock.
5.1 Authorized Shares. The aggregate number of shares which the
Corporation shall have authority to issue is:
5.1.1 20,000,000 shares of Preferred Stock, without par value; and
5.1.2 30,000,000 shares of Common Stock, par value of $0.16 per share.
5.2 Preferred Stock. The Preferred Stock may be divided into one or more
classes or series as determined by the Board of Directors as hereinafter
provided. Each class or series of Preferred Stock may have full, limited,
multiple or fractional, or no voting rights, and such designations, preferences,
limitations, qualifications, privileges, options, restrictions and special
rights as determined by the Board of Directors as hereinafter provided. The
division of the Preferred Stock into classes or series, the determination of the
designation and the number of shares of any such class or series and the
determination of the voting rights, preferences, limitations, qualifications,
privileges, options, restrictions and special rights of the shares of any such
class or series may be accomplished by an amendment to this Section 5.2, which
amendment may be made solely by action of the Board of Directors, which shall
have the full authority permitted by law to make such division and
determinations. Unless otherwise provided in a resolution or resolutions
establishing any particular class or series of Preferred Stock, the aggregate
number of authorized shares of Preferred Stock may be increased by an amendment
to the Articles approved solely by the holders of the Common Stock and of any
Preferred Stock which is entitled pursuant to its voting rights designated by
the Board to vote thereon, if at all, voting together as a class.
5.3 Common Stock. Except for and subject to those rights expressly
granted to holders of the Preferred Stock or any series thereof by one or more
amendments to these Articles adopted by the Board of Directors and except as may
be provided by the laws of the Commonwealth of Pennsylvania, holders of the
Common Stock shall have exclusively all other rights of shareholders. The
holders of shares of the Common Stock shall have one vote per share. All shares
of Common Stock issued or to be issued shall be alike in every particular.
6. Shareholder Meetings.
6.1 Business to be Transacted. At any annual meeting or special meeting
of shareholders, only such business as is properly brought before the meeting in
accordance with this Article 6 may be
A-1
<PAGE>
transacted, and there will be no opportunity to cure any deficiencies in any
notice given pursuant to this [Section] Article 6.
6.2 Proposed Business. To be properly brought before any shareholder
meeting, any proposed business must be either:
6.2.1 Specified in the notice of the meeting of the shareholders (or
any supplement thereto) given by or at the direction of the Board of
Directors;
6.2.2 Otherwise properly brought before the meeting of the
shareholders by or at the direction of the Board of Directors; or
6.2.3 If brought before an annual meeting of the shareholders by a
shareholder, then:
A. The shareholder must have been a shareholder of record on the
record date for the determination of shareholders entitled to vote at
the annual meeting of the shareholders;
B. Written notice of such proposed business must have been received
by the Secretary of the Corporation not later than 120 days in advance
of the annual meeting of the shareholders at which the business is
proposed to be transacted; provided, however, that in the event that
less than 120 days notice or prior public disclosure of the date of the
annual meeting of the shareholders is given, notice from the shareholder
to be timely must be received not later than the tenth day following the
date on which such notice of the date of the annual meeting of the
shareholders was mailed or such public disclosure was made, whichever
first occurs;
C. Such written notice must set forth the following:
(a) The name and address of the shareholder proposing such
business;
(b) A brief description of such business;
(c) The class, series and number of shares of the Corporation's
capital stock owned by such shareholder;
(d) A description of all arrangements or understandings between
such shareholder and any other person or persons in connection with
such business or any special interest such shareholder may have in
connection with such business;
(e) All other information as would be required to be included
in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had proxies been submitted with
respect to such business by the Board of Directors; and
(f) A representation that the shareholder is a holder of record
of stock of the Corporation entitled to vote at such meeting and
intends to appear in person or by proxy at such meeting to bring
such business before such meeting.
7. Board of Directors.
7.1 Powers. The property, business and affairs of the Corporation shall
be managed and controlled by or under the direction of a Board of Directors. The
Board of Directors may exercise all the powers of the Corporation and do all
things for and in the name of the Corporation except such as are by statute,
these Articles or the By-Laws conferred upon or reserved to the shareholders.
7.2 Number. The Board of Directors shall consist of not less than five
(5) nor more than twelve (12) directors, the exact such number of persons to be
fixed from time to time by a majority vote of the Board of Directors, plus such
number of additional directors as the holders of any class or series of stock
having a preference over the Common Stock as to dividends or assets, voting
separately as a class or series, shall have the right from time to time to
elect.
7.3 Classes, Election and Terms. The directors elected by the holders of
Voting Stock shall be classified in respect of the time for which they shall
severally hold office by dividing them into
A-2
<PAGE>
three classes, as nearly equal in number as possible. If such classes of
directors are not equal, the Board of Directors by a majority vote shall
determine which class shall contain an unequal number of directors. The initial
Board of Directors shall serve as directors of the Corporation for the
respective terms for which the class of which they are members has been elected
by the shareholders at the first called meeting of the shareholders, and at each
annual meeting of the shareholders thereafter, the shareholders shall elect
directors of the class whose term then expires, to hold office until the third
succeeding annual meeting. Except as otherwise expressly provided in these
Articles, each director shall hold office for the term for which he or she is
elected and until his or her successor shall have been elected and qualified, or
until such director's earlier death, resignation or removal in the manner
provided in Section 7.4 hereof.
7.4 Removal of Directors.
7.4.1 Any director, any class of directors or the entire Board of
Directors may be removed from office by shareholder vote at any time only
for cause and only if, in addition to any vote required by any other
provision of law, these Articles or the By-Laws of the Corporation, such
removal is approved by the affirmative vote of:
A. The holders of at least 80% of the voting power of all the then
outstanding shares of Voting Stock, voting together as a single class;
and
B. The holders of at least a majority of the voting power of the
outstanding shares of Voting Stock of the Corporation which are not
beneficially owned by an Interested Shareholder, voting together as a
single class.
7.4.2 If shareholders are entitled to vote cumulatively in the
election of directors, no individual director shall be removed, unless the
entire Board of Directors or a class of the Board of Directors is removed,
in case the votes of a sufficient number of shares are cast against the
resolution for his removal, which, if cumulatively voted at a meeting of
the shareholders for the election of directors, would be sufficient to
elect one or more directors to the Board of Directors or to the class.
7.4.3 In case the Board of Directors or a class of the Board of
Directors or any one or more directors are so removed, new directors may be
elected at the same meeting.
7.5 Vacancies. Vacancies in the members of the Board of Directors
elected by the holders of Voting Stock, including vacancies resulting from an
increase in the number of directors, shall be filled only by a majority vote of
the Disinterested Directors then in office, though less than a quorum, or by a
sole remaining director, except as otherwise required by law. All such directors
elected to fill vacancies shall hold office for a term expiring at the annual
meeting of shareholders at which the term of the class to which they have been
elected expires and until the election and qualification of his successor. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
7.6 Nominations of Director Candidates.
7.6.1 Nominations for the election of directors may be made only by
the Board of Directors or a committee appointed by the Board of Directors
or by any holder of record of stock entitled to vote in the election of the
directors to be elected at a meeting of the shareholders; provided,
however, that a nomination may be made by a shareholder if written notice
of such nomination has been received by the Secretary of the Corporation
not later than 120 days in advance of the meeting of the shareholders at
which the election is to be held; provided further, however, that in the
event that less than 120 days notice or prior public disclosure of the date
of the meeting of the shareholders is given, notice from the shareholder,
in order to be timely, must be received not later than the tenth day
following the date on which such notice of the date of the meeting of the
shareholders was mailed or such public disclosure was made, whichever first
occurs.
7.6.2 Each such notice shall set forth the following:
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A. The name and address of the shareholder who intends to make the
nomination and of the person or persons to be nominated;
B. A representation that the shareholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice;
C. A description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or nominations
are to be made by the shareholder;
D. Such other information regarding each nominee proposed by such
shareholder as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange
Commission, had the nominee been nominated by the Board of Directors;
and
E. The consent of each nominee to serve as a director of the
Corporation if so elected.
7.6.3 If the Corporation receives notice from a shareholder pursuant
to Section 7.6.2 hereof and such notice, in the judgment of the Board of
Directors, fails to comply, in any respect, with the requirements set forth
in Section 7.6.2 hereof, then the Corporation shall notify the shareholder
of the deficiencies with such notice within ten days of the Corporation's
receipt of such notice. Commencing on the day of receipt of the deficiency
notification from the Corporation, the shareholder shall have ten days to
cure all deficiencies and provide the Corporation with notice which
conforms to the requirements of Section 7.6.2 hereof. A shareholder shall
be entitled to re-submit a notice as provided in Section 7.6.2 hereof only
once for each annual meeting of the shareholders. Only candidates who have
been nominated in accordance with Section 7.6.2 hereof shall be eligible
for election by the shareholders as directors of the Corporation.
7.7 Exception for Preferred Stock. Whenever the holders of any class or
series of stock having a preference over the Common Stock of the Corporation as
to dividends or assets shall have the right, voting separately as a class or
series, to elect one or more directors of the Corporation or to take any other
action, none of the provisions of Sections 7.2, 7.3, 7.4, 7.5 and 7.6 hereof
shall apply with respect to the director or directors elected or the action
taken by the holders of such class or series.
7.8 Authority to Amend By-Laws.
7.8.1 The Board of Directors, by vote including a majority of the
Disinterested Directors then in office, may adopt, amend, alter, modify,
add to or repeal the By-Laws with respect to those matters which are not,
by statute, reserved exclusively to the shareholders. No By-Law may be
adopted, amended, altered, modified, added to or repealed by the
shareholders unless, in addition to any other affirmative vote required by
law, these Articles or otherwise, such action is approved by the
affirmative votes of:
A. The holders of at least 80% of the voting power of all then
outstanding shares of Voting Stock, voting together as a single class;
and
B. The holders of at least a majority of the voting power of the
then outstanding shares of Voting Stock which are not beneficially owned
by any Interested Shareholder, voting together as a single class.
7.8.2 The additional affirmative votes required by Section 7.8.1 shall
not apply to any shareholder adoption, amendment or repeal of any By-Law
provision if:
A. Such action is recommended and submitted to the shareholders for
their consideration by the affirmative vote of a majority of the
Disinterested Directors; and
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B. At the time of such recommendation the Disinterested Directors
constitute at least a majority of the full Board of Directors, excluding
any directors elected by the holders of any class or series of stock
having a preference over the Common Stock as to dividends or assets.
8. Votes Required for Certain Business Combinations.
8.1 Business Combinations.
8.1.1 Special Votes for Certain Business Combinations. In addition to
any affirmative vote required by law, these Articles or otherwise, and
except as otherwise expressly provided in Section 8.2 hereof, approval of
the following actions shall require the votes as required in Section 8.1.2
hereof:
A. Any merger, consolidation or share exchange of the Corporation
or any Subsidiary with any Interested Shareholder or with any other
person (whether or not itself an Interested Shareholder) which is, or
after such merger, consolidation or share exchange would be, an
Affiliate or Associate of an Interested Shareholder or which does not
include in its articles of incorporation the substance of the terms of
this Article 8, in each case without regard to which person is the
surviving person;
B. Any sale, lease, exchange, mortgage, pledge, transfer or other
disposition or security arrangement, investment, loan, advance,
guarantee, agreement to purchase, agreement to pay, extension of credit,
joint venture participation or other arrangement (in one transaction or
a series of transactions) to, with or for the benefit of any Interested
Shareholder or any Affiliate or Associate of any Interested Shareholder
involving any assets, securities or commitments of the Corporation or
any Subsidiary having an aggregate Fair Market Value, or involving
aggregate commitments equal to, 5% or more of Total Assets;
C. The issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of transactions) of any securities of
the Corporation or any Subsidiary to any Interested Shareholder or any
Affiliate or Associate of any Interested Shareholder in exchange for
cash, securities or other consideration (or a combination thereof)
having an aggregate Fair Market Value equal to 5% or more of Total
Assets;
D. The adoption of any plan or proposal for the liquidation,
dissolution or division of the Corporation proposed by or on behalf of
any Interested Shareholder or any Affiliate or Associate of any
Interested Shareholder;
E. Any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or otherwise involving an
Interested Shareholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any
class of equity securities or securities convertible into equity
securities of the Corporation or any Subsidiary which is directly or
indirectly beneficially owned by any Interested Shareholder or any
Affiliate or Associate of any Interested Shareholder; or
F. Any other transaction or series of transactions similar in
purpose or effect to, or any agreement, contract or other arrangement
providing for, any one or more of the transactions specified in this
Section 8.1.1.
8.1.2 Required Votes. Approval of the actions specified in Section
8.1.1 hereof shall require the affirmative votes of, and such affirmative
votes shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by law or in any
agreement with any national securities exchange or otherwise, the
following:
A. The holders of at least 80% of the voting power of all then
outstanding shares of Voting Stock, voting together as a single class;
and
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B. The holders of at least a majority of the voting power of the
then outstanding shares of Voting Stock which are not beneficially owned
by such Interested Shareholder, voting together as a single class.
8.2 Exceptions to Special Vote Requirements. The provisions of Section
8.1 shall not be applicable to any Business Combination, and such Business
Combination shall require only such affirmative vote (if any) as is required by
law, any other provision of these Articles, any agreement with any national
securities exchange or otherwise, if all of the following conditions are met:
8.2.1 Approval by Disinterested Directors. The Business Combination
shall have been approved by a majority of the Disinterested Directors; or
8.2.2 Price and Procedural Requirements. All of the following six
conditions shall have been met:
A. The aggregate amount of the cash and the Fair Market Value as of
the date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders of
Common Stock in such Business Combination shall be at least equal to the
highest of the following:
(a) If applicable, the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid in order to acquire any shares of Common Stock at any time
beneficially owned by the Interested Shareholder which were acquired
(i) within the two-year period immediately prior to the first public
announcement of the proposed Business Combination or (ii) in the
transaction in which it became an Interested Shareholder;
(b) The Fair Market Value per share of Common Stock, whichever
is higher, (i) on the Announcement Date or (ii) on the date on which
the Interested Shareholder became an Interested Shareholder; or
(c) If applicable, the price per share equal to the Fair Market
Value per share of Common Stock determined pursuant to Section
8.2.2(A)(b) immediately preceding, multiplied by the ratio of (i)
the highest per share price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid in order to
acquire any shares of Common Stock at any time beneficially owned by
the Interested Shareholder which were acquired within the two-year
period immediately prior to the Announcement Date or (ii) the Fair
Market Value per share of Common Stock on the first day in such
two-year period on which the Interested Shareholder beneficially
owned any shares of Common Stock;
B. The aggregate amount of the cash and the Fair Market Value as of
the date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders of
shares of any other class or series of Voting Stock shall be at least
equal to the highest of the following (it being intended that the
requirements of this Section 8.2.2(B) shall be required to be met with
respect to every class or series of outstanding Voting Stock, whether or
not the Interested Shareholder beneficially owns any shares of a
particular class or series of Voting Stock):
(a) If applicable, the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid in order to acquire any shares of such class or series of
Voting Stock at any time beneficially owned by the Interested
Shareholder which were acquired (i) within the two-year period
immediately prior to the Announcement Date or (ii) in the
transaction in which it became an Interested Shareholder;
(b) If applicable, the highest preferential amount per share to
which the holders of shares of such class or series of Voting Stock
are entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
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(c) The Fair Market Value per share of such class or series of
Voting Stock on the Announcement Date or on the Determination Date,
whichever is higher; and
(d) If applicable, the price per share equal to the Fair Market
Value per share of such class or series of Voting Stock determined
pursuant to Section 8.2.2(B)(c) hereof immediately preceding,
multiplied by the ratio of (i) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid in order to acquire any shares of such class or
series of Voting Stock at any time beneficially owned by the
Interested Shareholder which were acquired within the two-year
period immediately prior to the Announcement Date to (ii) the Fair
Market Value per share of such class of Voting Stock on the first
day in such two-year period on which the Interested Shareholder
beneficially owned any shares of such class or series of Voting
Stock.
C. The consideration to be received by holders of each class or
series of outstanding Voting Stock (including Common Stock) shall be in
cash or in the same form as was previously paid in order to acquire
shares of Voting Stock which are beneficially owned by the Interested
Shareholder. If the Interested Shareholder beneficially owns shares of
Voting Stock which were acquired with varying forms of consideration,
the form of consideration to be received by holders of each class or
series of Voting Stock shall be either cash or the form used to acquire
the largest number of shares of Voting Stock (regardless of class or
series) beneficially owned by the Interested Shareholder. All per share
prices referred to in Sections 8.2.2(A) and (B) hereof shall be
appropriately adjusted to reflect any intervening stock dividend, stock
split, combination of shares or similar event.
D. After the Determination Date and prior to the consummation of
such Business Combination:
(a) Except as approved by a majority of the Disinterested
Directors, there shall have been no failure to declare and pay at
the regular date therefor any full quarterly dividends (whether or
not cumulative) on any outstanding capital stock of the Corporation
having preference over the Common Stock as to dividends or upon
liquidation;
(b) There shall have been (i) no reduction in the annual rate
of dividends paid on the Common Stock (except as necessary to
reflect any subdivision of the Common Stock), except as approved by
a majority of the Disinterested Directors, and (ii) in the event of
any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which
has the effect of reducing the number of outstanding shares of the
Common Stock, an increase in such annual rate of dividends (as
necessary to prevent any such reduction), unless the failure so to
increase such annual rate is approved by a majority of the
Disinterested Directors; and
(c) Such Interested Shareholder shall not have become the
beneficial owner of any additional shares of Voting Stock except as
part of the transaction in which it became an Interested
Shareholder.
E. After the Determination Date, such Interested Shareholder shall
not have received the benefit, directly or indirectly (except
proportionately as a shareholder), of any loans, advances, guarantees,
pledges or other financial assistance or any tax credits or other tax
advantages provided by the Corporation, whether in anticipation of or in
connection with such Business Combination or otherwise.
F. If the proposed Business Combination otherwise requires a
shareholder vote, such Business Combination shall be submitted to the
holders of capital stock of the Corporation entitled to vote thereon,
and their proxies for approval of such transaction shall be solicited in
accordance with the requirements of the Act, and the rules and
regulations promulgated thereunder, and in any event (whether or not a
shareholder vote is required), a proxy or
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information statement describing the proposed Business Combination and
complying with such requirements shall be mailed to all holders of
Voting Stock and the holders of any other class or series of stock
entitled to vote thereon at least 30 days prior to the earlier of the
date of the shareholder meeting to vote on such Business Combination or
the consummation of such Business Combination (whether or not such proxy
or information statement is required to be mailed pursuant to the Act or
the rules and regulations promulgated thereunder). The first page of
such proxy or information statement shall prominently display any
statement regarding the advisability (or inadvisability) of the proposed
Business Combination which a majority of the Disinterested Directors
then in office may choose to make. Such proxy or information statement
shall also contain, if a majority of the Disinterested Directors then in
office so requests, an opinion of a reputable investment banking firm
(which firm shall be selected by a majority of the Disinterested
Directors then in office, furnished with all information it reasonably
requests, and paid a reasonable fee for its services by the Corporation
upon the Corporation's receipt of such opinion) as to the fairness (or
lack of fairness) from a financial point of view of the terms of the
proposed Business Combination to the holders of Voting Stock other than
the Interested Shareholder and its Affiliates or Associates.
8.3 No Effect on Fiduciary Obligations of Interested
Shareholder. Nothing contained in this Article 8 shall be construed to relieve
any Interested Shareholder from any fiduciary obligation imposed by law or
equity.
8.4 Board Not Limited by Compliance. The fact that any Business
Combination complies with the conditions set forth in Section 8.2.2 hereof shall
not be construed to impose any fiduciary duty, obligation or responsibility on
the Board of Directors, or any member thereof, to approve such Business
Combination or recommend its adoption or approval to the shareholders of the
Corporation, nor shall such compliance limit, prohibit or otherwise restrict in
any manner the business judgment of the Board of Directors, or any member
thereof, with respect to evaluations of or actions and responses taken with
respect to such Business Combination.
9. Definitions; Interpretations; Amendments.
9.1 Definitions. For the purposes of these Articles:
9.1.1 The "Act" shall mean the Securities Exchange Act of 1934, as
amended.
9.1.2 An "Affiliate" of a specified person shall mean any person
which, directly or indirectly through one or more intermediaries, controls,
is controlled by or is under common control with the person specified.
9.1.3 "Announcement Date" shall have the meaning set forth in Section
8.2.2(A)(a)(i) hereof.
9.1.4 An "Associate" of a specified person shall mean:
A. Any director, officer or partner of, or any beneficial owner,
directly or indirectly, of 5% or more of any class of equity securities
of, such person or any of its Affiliates;
B. Any corporation or organization (other than the Corporation or a
Subsidiary) of which such person is a director, officer or partner or
is, directly or indirectly, the beneficial owner of 10% or more of any
class of equity securities;
C. Any trust or other estate (other than an employee benefit plan
of the Corporation or a Subsidiary) in which such person has a
substantial beneficial interest or as to which such person serves as
trustee or in a similar fiduciary capacity;
D. Any relative or spouse of such person, or any relative of such
spouse, who has the same home as such person or who is a director or
officer of the Corporation or any of its parents or Subsidiaries; and
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E. Any investment company registered under the Investment Company
Act of 1940 for which such person or any Affiliate or Associate of such
person serves as investment advisor.
9.1.5 A person shall be a "beneficial owner" of any shares of Voting
Stock:
A. Which such person or any of its Affiliates or Associates owns,
directly or indirectly;
B. Which such person or any of its Affiliates or Associates has:
(a) The right to acquire (whether or not such right is
exercisable immediately) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, revocation of a trust, or otherwise; or
(b) The right to vote, or to direct the voting of, pursuant to
any agreement, arrangement or understanding; or
C. Which are owned, directly or indirectly, by any other person
with which such person or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock.
9.1.6 "Business Combination" shall mean any transaction which is
referred to in Section 8.1.1 hereof. In the event of any Business
Combination in which the Corporation survives, the phrase "consideration
other than cash to be received" as used in Section 8.2.2 hereof shall
include the shares of Common Stock and/or the shares of any other class or
series of outstanding Voting Stock retained by the holders of such shares.
9.1.7 "Determination Date" shall have the meaning set forth in Section
8.2.2(A)(b)(ii) hereof.
9.1.8 With respect to the term "Disinterested Director":
A. The term shall mean a director of the Corporation who is not an
Interested Shareholder or an Affiliate, Associate or representative of
an Interested Shareholder and either:
(a) Was a director of the Corporation immediately prior to the
time the Interested Shareholder became an Interested Shareholder; or
(b) Is a successor to a Disinterested Director and is
recommended or elected to succeed a Disinterested Director by a
majority of the then Disinterested Directors.
B. Whenever the holders of any class or series of stock having a
preference over the Common Stock as to dividends or assets shall have
the right, voting separately as a class or series, to elect one or more
directors of the Corporation, the term "Disinterested Director" shall
not include any director elected by the holders of such class or series.
C. As used with respect to any particular transaction in Article 8
hereof or with respect to a determination or interpretation as to such
transaction under Sections 9.1.9 or 9.2 hereof, the term "Disinterested
Director" shall include all directors who are Disinterested Directors
with respect to the Interested Shareholder involved in such transaction.
D. In all other cases, unless the context otherwise clearly
requires, the term "Disinterested Director" shall mean only those
directors who are Disinterested Directors with respect to all persons
who are then Interested Shareholders.
9.1.9 "Fair Market Value" shall mean:
A. In the case of stock, the highest closing sale price during the
30-day period immediately preceding the date in question of a share of
such stock on a national securities exchange registered under the Act on
which such stock is listed, or if such stock is not listed, the highest
closing sale price, or if none, the highest closing bid quotation, with
respect to a
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share of such stock during the 30-day period preceding the date in
question on the National Association of Securities Dealers, Inc.
Automated Quotation System, or any such similar system then in use, or
if there are no such quotations available, the highest closing bid
quotation as reported in the "pink sheets" of the National Association
of Securities Dealers, or if not so reported, the fair market value on
the date in question of a share of such stock as determined in good
faith by a majority vote of the Disinterested Directors; and
B. In the case of property other than stock or cash, the fair
market value of such property on the date in question as determined in
good faith by a majority vote of the Disinterested Directors or by a
qualified appraiser retained by them for such purpose.
9.1.10 With respect to the term "Interested Shareholder":
A. The term at any particular time shall mean any person (other
than the Corporation or a Subsidiary, an employee benefit plan of the
Corporation or a Subsidiary, the Voting Trust of the Denver and Ephrata
Telephone and Telegraph Company (the "Voting Trust"), the William and
Jemima Brossman Charitable Foundation (the "Charitable Foundation"), a
successor trust to the Voting Trust, a successor foundation to the
Charitable Foundation, Anne B. Sweigart, Emily B. Sprecher, W. Garth
Sprecher, any heir of W. Garth Sprecher, a trustee or fiduciary of the
Voting Trust, the Charitable Foundation or any such plan when acting in
such capacity and any other person deemed by a majority of the
Disinterested Directors not to be an Interested Shareholder) which:
(a) Is at such time the beneficial owner, directly or
indirectly, of more than 10% of the voting power of the outstanding
Voting Stock;
(b) Is at such time an Affiliate of the Corporation and at any
time within the two-year period immediately prior to such time was
the beneficial owner, directly or indirectly, of more than 10% of
the voting power of the then outstanding Voting Stock;
(c) Is at such time an assignee of or has otherwise succeeded
to the beneficial ownership of any shares of Voting Stock which were
at any time within the two-year period immediately prior to such
time beneficially owned by any Interested Shareholder, if such
assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933, as
amended; or
(d) With respect to any particular transaction, any of the
foregoing involved in such transaction, any Affiliate or Associate
of such Interested Shareholder and any other member of a group
acting in concert with such Interested Shareholder.
B. For the purposes of determining whether a person is an
Interested Shareholder pursuant to this Section 9.1.10, the number of
shares of Voting Stock deemed to be outstanding shall include shares
deemed owned by an Interested Shareholder through application of Section
9.1.5 hereof but shall not include any other shares of Voting Stock
which may be issuable pursuant to any agreement, arrangement or
understanding, or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise.
9.1.11 A "person" shall mean any individual, firm, corporation,
partnership, joint venture, trust or other entity and shall include any
group comprised of any person and any other person with whom such person or
any Affiliate or Associate of such person has any agreement, arrangement or
understanding, directly or indirectly, for the purpose of acquiring,
holding, voting or disposing of Voting Stock. As used herein, the pronouns
"which", "that" and "it" in relation to persons that are individuals shall
be construed to mean "who" or "whom", "he" or "she" and "him" or "her", as
appropriate.
9.1.12 "Subsidiary" shall mean any corporation of which a majority of
any class of equity security is owned, directly or indirectly, by the
Corporation, as well as any Affiliate of the corporation which is
controlled by the Corporation.
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9.1.13 "Total Assets" shall mean the consolidated total assets of the
Corporation and its consolidated subsidiaries as of the close of the most
recent fiscal quarter ended on or prior to the Announcement Date of the
Business Combination in question, as shown on the consolidated balance
sheet published by the Corporation for such quarter.
9.1.14 "Voting Stock" shall mean capital stock of the Corporation
entitled to vote generally in an annual election of directors of the
Corporation.
9.2 Powers of the Disinterested Directors. The Disinterested Directors,
by a majority vote, are authorized to interpret all the terms and provisions of
these Articles and to determine, on the basis of information known to them after
reasonable inquiry, any fact necessary to determine compliance with any term or
provision of these Articles, including, without limitation, the following, and
any such interpretation or determination made in good faith shall be binding and
conclusive for all purposes of these Articles:
A. Whether a person is an Interested Shareholder;
B. The number of shares of Voting Stock beneficially owned by any
person;
C. Whether a person is an Affiliate or Associate of another person;
D. Whether any articles of incorporation provision required by
Section 8.1.1(A) hereof complies with such section and is valid and
enforceable;
E. Whether the requirements of Section 8.2.2 hereof have been met
with respect to any Business Combination; and
F. Whether the assets which are the subject of any Business
Combination have, or the consideration to be received for the issuance
or transfer of securities by the Corporation or any Subsidiary in any
Business Combination has, an aggregate Fair Market Value equal to 5% or
more of Total Assets.
9.3 Amendment, Repeal, Etc.
9.3.1 The Corporation reserves the right to amend, alter, change or
repeal any provision contained in these Articles in the manner now or
hereafter prescribed by law, and all rights conferred upon shareholders
herein are granted subject to this reservation.
9.3.2 In addition to any affirmative vote required by law, these
Articles or otherwise, any amendment, alteration, change or repeal of any
provision of Article 7, Article 8, Article 9, Article 10 or Article 11
hereof, or the adoption of any provision inconsistent therewith, shall
require the affirmative votes of:
A. The holders of at least 90% of the voting power of all then
outstanding shares of Voting Stock, voting together as a single class;
and
B. The holders of at least a majority of the voting power of the
then outstanding shares of Voting Stock which are not beneficially owned
by any Interested Shareholder, voting together as a single class.
9.3.3 The additional affirmative votes required by Section 9.3.2
hereof shall not apply to any amendment, alteration, change or repeal of
any provision of Article 7, Article 8, Article 9, Article 10 or Article 11
of these Articles if:
A. It is recommended and submitted to the shareholders for their
consideration by the affirmative vote of a majority of the Disinterested
Directors; and
B. At the time of such recommendation the Disinterested Directors
constitute at least a majority of the full Board of Directors, excluding
any directors elected by the holders of any class or series of stock
having a preference over the Common Stock as to dividends or assets.
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10. Statutory Antitakeover Provisions.
Subchapters E and G of Chapter 25 of the Pennsylvania Business
Corporation Law of 1988, as amended, shall not be applicable to the Corporation.
11. Indemnification and Personal Liability.
11.1 Indemnification. The Corporation shall indemnify and hold harmless
to the full extent not prohibited by law, as the same exists or may hereinafter
be amended, interpreted or implemented (but, in the case of any amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than are permitted the Corporation to provide prior to
such amendment), each person who was or is made a party or is threatened to be
made a party to or is otherwise involved in (as a witness or otherwise) any
threatened, pending or completed claim, action, suit, or proceeding, whether
civil, criminal, administrative, investigative or other and whether or not by or
in the right of the Corporation or otherwise (hereinafter, a "proceeding"), by
reason of the fact that he or she, or a person of whom he or she is the heir,
executor, or administrator, is or was a director or officer of the Corporation
or is or was serving at the request of the Corporation as a director, officer,
employee, fiduciary, trustee or other representative of another corporation or
of a partnership, joint venture, trust or other enterprise (including without
limitation service with respect to employee benefit plans), or where the basis
of such proceeding is any alleged action or failure to take any action by any
such of the foregoing persons while acting in an official capacity as a director
or officer of the Corporation or in any other capacity on behalf of the
Corporation while such person is or was serving as a director or officer of the
Corporation, against all expenses, liability and loss, including but not limited
to attorneys' fees, judgments, fines, ERISA excise taxes or penalties and
amounts paid or to be paid in settlement whether with or without court approval,
actually incurred or paid by such person in connection therewith. Other persons
who are not directors or officers of the Corporation, or their heirs, executors,
or administrators, may be similarly indemnified in respect of service to the
Corporation or to another such entity at the request of the Corporation to the
extent the Board of Directors at any time designates such person as entitled to
the benefits of this [Section] Article 11.
11.2 Initiation of Proceedings. Notwithstanding the foregoing, and
except as provided in Section 11.5 hereof, the Corporation shall indemnify any
such person seeking indemnification in connection with a proceeding (or part
thereof) initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation.
11.3 Contract Right; Advancement of Expenses. Subject to the limitation
set forth above concerning proceedings initiated by the person seeking
indemnification, the right to indemnification conferred in this Article 11 shall
be a contract right and shall include the right to be paid by the Corporation
the expenses incurred in defending any such proceeding (or part thereof) or in
enforcing his or her rights under this Article 11 in advance of the final
disposition thereof promptly after receipt by the Corporation of a request
therefor stating in reasonable detail the expenses incurred; provided, however,
that to the extent required by law, the payment of such expenses incurred by a
director or officer of the Corporation in advance of the final disposition of a
proceeding shall be made only upon receipt of an undertaking, by or on behalf of
such person, to repay all amounts so advanced if and to the extent it shall
ultimately be determined by a court that he or she is not entitled to be
indemnified by the Corporation under this Article 11, or in the case of a
criminal action, the majority of the Board of Directors so determines that he or
she is not entitled to be indemnified by the Corporation or otherwise.
11.4 Former Officials. The right to indemnification and advancement of
expenses provided herein shall continue as to a person who has ceased to be a
director or officer of the Corporation or to serve in any of the other
capacities described herein and shall inure to the benefit of the heirs,
executors and administrators of such person.
11.5 Authority to File Suit. If a claim for indemnification under this
Article 11 hereof is not paid in full by the Corporation within thirty days
after a written claim therefor has been received by the Corporation, the
claimant may, at any time thereafter, bring suit against the Corporation to
recover the unpaid amount of the claim, and if successful in whole or in part on
the merits or otherwise in
A-12
<PAGE>
establishing his or her right to indemnification or to the advancement of
expenses, the claimant shall be entitled to be paid also the expense of
prosecuting such claim.
11.6 Exclusivity. The right to indemnification and the payment of
expenses incurred in defending a proceeding in advance of a final disposition
conferred in this Article 11 and the right to payment of expenses conferred in
Section 11.5 hereof shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses hereunder may be
entitled under any By-Law, agreement, vote of shareholders, vote of directors or
otherwise, both as to actions in his or her official capacity and as to actions
in any other capacity while holding that office, the Corporation having the
express authority to enter into such agreements or arrangements as the board of
directors deems appropriate for the indemnification of and advancement of
expenses to present or future directors and officers as well as employees,
representatives or agents of the Corporation in connection with their status
with or services to or on behalf of the Corporation or any other corporation,
partnership, joint venture, trust or other enterprise, including any employee
benefit plan, for which such person is serving at the request of the
Corporation.
11.7 Reserves. The Corporation may create a fund of any nature, which
may, but need not be, under the control of a trustee, or otherwise secure or
insure in any manner its indemnification obligations, including its obligation
to advance expenses, whether arising under or pursuant to this Article 11 or
otherwise.
11.8 Insurance. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director or officer or representative of
the Corporation, or is or was serving at the request of the Corporation as a
representative of another corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against such person and
incurred by such person in any such capacity, or arising out of his or her
status as such, whether or not the Corporation has the power to indemnify such
person against such liability under the laws of this or any other state.
11.9 Amendment. Neither the modification, amendment, alteration or
repeal of this Article 11 or any of its provisions nor the adoption of any
provision inconsistent with this Article 11 or any of its provisions shall
adversely affect the rights of any person to indemnification and advancement of
expenses existing at the time of such modification, amendment, alteration or
repeal or the adoption of such inconsistent provision.
11.10 Liability Limitation. To the fullest extent that the laws of the
Commonwealth of Pennsylvania, as now in effect or as hereafter amended, permit
elimination or limitation of the liability of directors, no Director of the
Company shall be personally liable for monetary damages as such for any action
taken, or any failure to take any action, as a Director. Any amendment or repeal
of this Section 11.10 which has the effect of increasing Director liability
shall operate prospectively only, and shall not affect any action taken, or any
failure to act, prior to its adoption.
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<PAGE>
PARTICIPANT'S DIRECTION
Employee Stock Ownership Plan
To: CoreStates Bank, as Trustee of the Employee Stock Ownership Plan
Pursuant to your notice accompanied by the proxy material in connection with
the 1997 Annual Meeting of Shareholders of D & E Communications, Inc. to be
held on April 29, 1997 at 10:30 a.m., I direct you to execute a proxy in the
form solicited by the Board of Directors of D & E Communications, Inc. with
respect to all shares of Common Stock, par value $0.16, to which I have the
right to give voting directions under the Denver and Ephrata Telephone and
Telegraph Company Employee Stock Ownership Plan as follows:
(IMPORTANT -- TO BE SIGNED AND DATED ON REVERSE SIDE)
1. ELECTION OF THREE (3) DIRECTORS
NOMINEES: For the Class B Directors Whose Terms Expire in 2000: Robert M.
Lauman, Ronald E. Frisbie and Thomas H. Bamford
| | FOR all nominees listed (except as marked to the contrary below
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
the nominee's name on the line below.)
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<PAGE>
- --------------------------------------------------------------------------------
2. AMENDING AND RESTATING THE ARTICLES OF INCORPORATION OF D & E
COMMUNICATIONS, INC. IN THEIR ENTIRETY
| | For | | Against | | Abstain
3. SUBJECT TO THE APPROVAL OF PROPOSAL 2, ELECTION OF ONE (1) ADDITIONAL
DIRECTOR NOMINEE: For the Class B Director Whose Term Expires in
2000: D. Mark Thomas
| | For | | Against | | Abstain
4. RATIFICATION OF INDEPENDENT AUDITORS
| | For | | Against | | Abstain
THIS PARTICIPANT'S DIRECTION, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED PARTICIPANT. IF NO DIRECTION IS
MADE, THIS PARTICIPANT'S DIRECTION WILL BE VOTED FOR THE LISTED NOMINEES IN
THE ELECTION OF THE THREE (3) DIRECTORS, FOR THE APPROVAL OF AMENDING AND
RESTATING THE ARTICLES OF INCORPORATION OF THE COMPANY IN THEIR ENTIRETY,
FOR THE LISTED NOMINEE IN THE ELECTION OF ONE (1) ADDITIONAL DIRECTOR, FOR
RATIFICATION OF INDEPENDENT AUDITORS AND IN ITS DISCRETION, THE TRUSTEE IS
AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
ANNUAL MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF. IF NECESSARY,
CUMULATIVE VOTING RIGHTS WILL BE EXERCISED TO SECURE THE ELECTION OF AS
MANY AS POSSIBLE OF THE BOARD OF DIRECTORS' NOMINEES.
DATE: _____________________________, 1997 ____________________________________
____________________________________
Participant sign above exactly as
name is printed on label.
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<PAGE>
- --------------------------------------------------------------------------------
PARTICIPANT'S DIRECTION
D & E Communications, Inc.
Dividend Reinvestment Plan
To: D & E Communications, Inc., as Trustee of the D & E Communications, Inc.
Dividend Reinvestment Plan
Pursuant to your notice accompanied by the proxy material in connection with
the 1997 Annual Meeting of Shareholders of D & E Communications, Inc. to be
held on April 29, 1997, at 10:30 a.m., I direct you to execute a proxy in the
form solicited by the Board of Directors of D & E Communications, Inc. with
respect to all shares of Common Stock, par value $0.16, to which I have the
right to give voting directions under the D & E Communications, Inc. Dividend
Reinvestment Plan as follows:
(IMPORTANT -- TO BE SIGNED AND DATED ON REVERSE SIDE)
1. ELECTION OF THREE (3) DIRECTORS
NOMINEES: For the Class B Directors Whose Terms Expire in 2000: Robert M.
Lauman, Ronald E. Frisbie and Thomas H. Bamford
| | FOR all nominees listed (except as marked to the contrary below)
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
the nominee's name on the line below.)
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
2. AMENDING AND RESTATING THE ARTICLES OF INCORPORATION OF D & E
COMMUNICATIONS, INC. IN THEIR ENTIRETY
| | For | | Against | | Abstain
3. SUBJECT TO THE APPROVAL OF PROPOSAL 2, ELECTION OF ONE (1) ADDITIONAL
DIRECTOR NOMINEE: For the Class B Director Whose Term Expires in
2000: D. Mark Thomas
| | For | | Against | | Abstain
4. RATIFICATION OF INDEPENDENT AUDITORS
| | For | | Against | | Abstain
THIS PARTICIPANT'S DIRECTION, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED PARTICIPANT. IF NO DIRECTION IS MADE,
THIS PARTICIPANT'S DIRECTION WILL BE VOTED FOR THE LISTED NOMINEES IN THE
ELECTION OF THE THREE (3) DIRECTORS, FOR THE APPROVAL OF AMENDING AND RESTATING
THE ARTICLES OF INCORPORATION OF THE COMPANY IN THEIR ENTIRETY, FOR THE LISTED
NOMINEE IN THE ELECTION OF ONE (1) ADDITIONAL DIRECTOR, FOR RATIFICATION OF
INDEPENDENT AUDITORS AND IN ITS DISCRETION, THE TRUSTEE IS AUTHORIZED TO VOTE
UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY
POSTPONEMENT OR ADJOURNMENT THEREOF. IF NECESSARY, CUMULATIVE VOTING RIGHTS WILL
BE EXERCISED TO SECURE THE ELECTION OF AS MANY AS POSSIBLE OF THE BOARD OF
DIRECTORS' NOMINEES.
DATE: _____________________________, 1997 ____________________________________
____________________________________
Participant sign above exactly as
name is printed on label.
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<PAGE>
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PROXY
D & E Communications, Inc.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
Anne B. Sweigart, Robert M. Lauman and W. Garth Sprecher, or any one or more of
them with power of substitution in each, are hereby authorized to represent the
undersigned at the 1997 Annual Meeting of Shareholders of D & E Communications,
Inc. to be held at the Brossman Business Complex, 124 East Main Street, Ephrata,
Pennsylvania, on April 29, 1997 at 10:30 a.m., and at any adjournment thereof,
and thereat to vote the same number of shares as the undersigned would be
entitled to vote if then personally present.
(IMPORTANT -- TO BE SIGNED AND DATED ON REVERSE SIDE)
1. ELECTION OF THREE (3) DIRECTORS
NOMINEES: For the Class B Directors Whose Terms Expire in 2000: Robert M.
Lauman, Ronald E. Frisbie and Thomas H. Bamford
| | FOR all nominees listed (except as marked to the contrary below
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
the nominee's name on the line below.)
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
2. AMENDING AND RESTATING THE ARTICLES OF INCORPORATION OF D & E
COMMUNICATIONS, INC. IN THEIR ENTIRETY
| | For | | Against | | Abstain
3. SUBJECT TO THE APPROVAL OF PROPOSAL 2, ELECTION OF ONE (1) ADDITIONAL
DIRECTOR NOMINEE: For the Class B Director Whose Term Expires in
2000: D. Mark Thomas
| | For | | Against | | Abstain
4. RATIFICATION OF INDEPENDENT AUDITORS
| | For | | Against | | Abstain
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE LISTED NOMINEES IN THE ELECTION OF THE THREE (3) DIRECTORS, FOR
THE APPROVAL OF AMENDING AND RESTATING THE ARTICLES OF INCORPORATION OF THE
COMPANY IN THEIR ENTIRETY, FOR THE LISTED NOMINEE IN THE ELECTION OF ONE (1)
ADDITIONAL DIRECTOR, FOR THE RATIFICATION OF INDEPENDENT AUDITORS, AND IN THEIR
DISCRETION, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF. IF NECESSARY, CUMULATIVE
VOTING RIGHTS WILL BE EXERCISED TO SECURE THE ELECTION OF AS MANY AS POSSIBLE OF
THE BOARD OF DIRECTORS' NOMINEES.
DATE: _____________________________, 1997 ____________________________________
____________________________________
Shareholder(s) sign above exactly
as name is printed on label. If
signing as representative, so
indicate. For joint accounts, all
owners should sign.
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