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 (')240.14a-11(c) or (')240.14a-12
D & E COMMUNICATIONS, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (check the appropriate box):
[X] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of 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.
(6) Amount Previously Paid:
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(7) Form, Schedule or Registration Statement No.:
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(8) Filing Party:
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(9) Date Filed:
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Notes:
<PAGE>
D & E COMMUNICATIONS, INC.
Ephrata, Pennsylvania
------------------------
NOTICE OF 1999 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
Thursday, April 22, 1999, at 10:30 a.m. local time, at the Brossman Business
Complex, 124 East Main Street, Ephrata, Pennsylvania 17522. The purposes of the
meeting, which are more fully described in the accompanying Proxy Statement,
are:
1. To elect three (3) Class A Directors for a term to expire in the year
2002 (or until their successors are duly elected and qualified);
2. To approve the 1999 Long-Term Incentive Plan of D & E Communications,
Inc.;
3. To ratify the Board of Directors' selection of PricewaterhouseCoopers
LLP as the Company's independent accountants for 1999; and
4. 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 February 26, 1999, will be entitled to vote at the Annual
Meeting or any adjournment thereof. First Union 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 Sheet. A copy of the Proxy Statement, the 1998 Annual
Report of the Company, the Independent Accountants' Report, and a Participant's
Direction Sheet 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.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE TO
ASSURE REPRESENTATION OF YOUR SHARES AT THE MEETING. IT REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
March 25, 1999 By Order of the Board of Directors
W. Garth Sprecher
Secretary
Enclosures
<PAGE>
D & E COMMUNICATIONS, INC.
Ephrata, Pennsylvania
NOTICE OF 1999 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
Thursday, April 22, 1999, at 10:30 am. local time, at the Brossman Business
Complex, 124 East Main Street, Ephrata, Pennsylvania 17522. The purposes of the
meeting, which are more fully described in the accompanying Proxy Statement,
are:
1. To elect three (3) Class A Directors for a term to expire in the year
2002 (or until their successors are duly elected and qualified);
2. To approve the 1999 Long-Term Incentive Plan of D & E Communications,
Inc.;
3. To ratify the Board of Directors' selection of PricewaterhouseCoopers
LLP as the Company's independent accountants for 1999; and
4. 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 February 26, 1999, will be entitled to vote at the Annual
Meeting or any adjournment thereof.
For those shareholders who are also participants in the D & E
Communications, Inc. Dividend Reinvestment Plan (the "DRP"), for which the
Company serves as trustee and is the record owner of those shares, you are
entitled to direct the trustee on how to vote the shares allocated to your
account by returning the enclosed Participant's Direction Sheet. A copy of the
Proxy Statement, the 1998 Annual Report of the Company, the Independent
Accountants' Report, a Proxy Sheet, and a Participant's Direction Sheet 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.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE TO
ASSURE REPRESENTATION OF YOUR SHARES AT THE MEETING. IT REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
By Order of the Board of Directors
March 25, 1999 W. Garth Sprecher
Secretary
Enclosures
<PAGE>
[This Page Intentionally Left Blank]
<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 to be held at 10:30 a.m. on Thursday,
April 22, 1999 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 March 25, 1999.
Only holders of shares of common stock, par value $0.16 per share, of the
Company ("Common Stock") as shown on the books of the Company at the close of
business on February 26, 1999 (the "Record Date") will be entitled to vote at
the meeting. On the Record Date, there were 7,424,789 shares of Common Stock
outstanding. Holders of record of 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 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 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
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. The presence in
person or by proxy of the holders of a majority of the shares of Common Stock
outstanding and entitled to vote is required to constitute a quorum for
transaction of business at the Annual Meeting. The holders of Common Stock have
one vote for each share held by them as of the Record Date.
Under the Company's Articles of Incorporation and By-Laws, and applicable
law, the affirmative vote of shareholders entitled to cast at least a majority
of the votes which all shareholders present at the meeting are entitled to cast
generally is required for shareholder approval, including the approval of the
1999 Long-Term Incentive Plan and the ratification of the selection of
PricewaterhouseCoopers LLP as independent accountants of the Company for the
fiscal year ending December 31, 1999. As such, abstentions generally have the
effect of a negative vote. Any broker non-votes on a particular matter have no
effect since, by definition, they are not entitled to be cast on the matter.
With regard to the election of directors, votes may be cast in favor of a
candidate or may be withheld. As directors are elected by a plurality,
abstentions and broker non-votes have no effect on the election of directors.
PROPOSAL 1: ELECTION OF THREE (3) DIRECTORS
The Company's Articles of Incorporation provide for a maximum of twelve
(12) directors to be elected to the Company's Board. The Company has determined
that one or more vacancies in the Board may be appropriate and therefor proxies
may not be voted for a greater number of nominees than are named herein.
The Board currently consists of eleven (11) 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 (or
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 is
elected each year to succeed the directors whose terms are expiring. Currently,
the directors in Class A are serving terms expiring this year. The directors in
Classes B and C are serving terms expiring at the annual meeting of the
shareholders in 2000 and 2001, respectively. The Board has nominated for
re-election to Class A three (3) directors whose terms expire this year; namely
John Amos, G. William Ruhl and W. Garth Sprecher. If elected, their terms are to
expire in the year 2002 (or until their successors are duly elected
1
<PAGE>
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. Amos,
Ruhl and Sprecher (who are presently directors of the Company with regular terms
expiring this year) and to exercise cumulative voting, if necessary, to secure
their election. Each individual nominated for election as a 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 A and the other
directors serving in Classes B and C.
Nominees for Class A Directors For Terms To Expire In 2002
John Amos, age 67, has been in the commercial fruit and produce growing
business for more than 44 years in Grand Traverse County, Michigan serving as
President of Hi-Lo Farms, Inc. since 1979 and as Senior Partner of Amos Farms
since 1980. He became a member of the Board in 1990. Mr. Amos is a member of the
Compensation Committee.
G. William Ruhl, age 59, has been the Senior Vice President of the Company
and Chief Executive Officer of D & E Telephone Company since 1996. From 1991,
when he joined the Company, to 1996 he held the position of Senior Vice
President of D & E Telephone Company. He was previously employed by Bell of
Pennsylvania from 1961 to 1991, at which time he retired as Director of Network
Architecture and Deployment Planning. Mr. Ruhl is a registered Professional
Engineer and a member of the Institute of Electrical and Electronics Engineers,
Inc. He is Chairman of the Board of Directors of Monor Telephone Company and
serves on the Board of Alliance for Telecommunications Industry Solutions. Mr.
Ruhl is also on the Board of Directors of the Central Pennsylvania Symphony. He
became a director of the Company in 1993. Mr. Ruhl is a member of the Executive
Committee.
W. Garth Sprecher, age 47, is Vice President and Secretary of the Company.
He joined the Company in 1984 as a Communications Consultant for D & E Telephone
and Data 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. He is a member of the
Board of Directors of the Bank of Lancaster County, an immediate past director
of the Lancaster Chamber of Commerce and the Ephrata Area Chamber of Commerce.
He is also President of the Board of Directors of the Mid-Atlantic Chapter of
the American Society of Corporate Secretaries. Mr. Sprecher became a Director of
the Company in 1993. Mr. Sprecher is a member of the Executive Committee.
Class B Directors Whose Terms Expire In 2000
Thomas H. Bamford, age 59, 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 Healthy Communities. He became a Director of the Company in 1997.
Mr. Bamford is a member of the Compensation Committee.
2
<PAGE>
Ronald E. Frisbie, age 76, retired from the Company in 1992 where he served
as a Vice President of the Company from 1971 until 1992, and Secretary,
Treasurer and Assistant to the President from 1985 until 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 has been a Director since 1983. Mr. Frisbie is a member
of the Audit Committee.
Robert M. Lauman, age 73, 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 Vice President -- Engineering. 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. Mr. Lauman is a member of
the Executive Committee and the Compensation Committee.
D. Mark Thomas, age 51, 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. Mr. Thomas became a director of the Company in 1997. Mr. Thomas is
a member of the Audit Committee.
Class C Directors Whose Terms Expire In 2001
Paul W. Brubaker, age 55, 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 serves as a
director of Pleasant View Retirement Community, Manheim. Mr. Brubaker is a
member of the Executive Committee of the Pennsylvania Bankers Association. He
has been a director of the Company since 1990. Mr. Brubaker is Chairman of the
Audit Committee.
Steven B. Silverman, age 66, has been a senior partner in the law firm of
Rothenberg, Silverman and Furman PC, Elkins Park, Pennsylvania since 1995. Prior
to 1995 he was a senior partner in Rothenberg and Silverman. In addition to his
private practice, he serves as an adjunct professor of labor law at Dickinson
School of Law in Carlisle, Pennsylvania. He has been a director of the Company
since 1991. Mr. Silverman is Chairman of the Compensation Committee.
Anne B. Sweigart, age 84, has held the positions of Chief Executive
Officer, President and Chairman of the Board of the Company since July 1985. She
became a director in 1952. 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
community Boards and is currently a Trustee of Rider University, a Trustee of
Elizabethtown College, an Honorary Trustee of Lebanon Valley College and a
Trustee of Linden Hall School for Girls. Mrs. Swiegart is also a Director of the
Pennsylvania Telephone Association. Mrs. Sweigart is a member of the Audit
Committee and serves as Chairman of the Executive Committee.
Robert A. Kinsley, age 58, is Chairman and Chief Executive Officer of
Kinsley Construction, a company he founded in York, PA in 1963 that specializes
in heavy, general, and design build construction. Mr. Kinsley is also managing
partner of Kinsley Equities, which is a regional real estate developer of
industrial and commercial properties. He is also a director of Mercantile --
Safe Deposit & Trust Company, Baltimore, Maryland and Ruscilli Construction
Company of Columbus, Ohio. Mr. Kinsley is Chairman of the Board of I. B. Abel,
an electrical construction firm in south central Pennsylvania. He serves
numerous community and professional organizations and is currently President of
South George Street Community Partnership, Chairman of the York County Air
Transpiration Authority, member of the York Foundation Board of Directors and a
Trustee of York College Of Pennsylvania. He has been a director of the Company
since 1998. Mr. Kinsley is a member of the Compensation Committee.
3
<PAGE>
GENERAL INFORMATION REGARDING THE BOARD OF DIRECTORS
Director Attendance at Board Meetings
The Board held a total of ten (10) regularly scheduled meetings during the
year ended December 31, 1998. Each incumbent director attended in excess of 75%
of the aggregate meetings of the Board and the Board's committees on which he or
she served. The Board has the following three (3) standing committees: the Audit
Committee, the Compensation Committee, and the Executive Committee.
Compensation of Directors
The directors were paid a $4,000 retainer plus $800 per meeting which they
attended and $250 per any committee meeting of the Board, not held in
conjunction with a Board meeting. Committee chairs receive an additional annual
compensation of $500.
BOARD COMMITTEES
Audit Committee
The current Audit Committee, consisting of Paul W. Brubaker (Chairman),
Ronald E. Frisbie, Anne B. Sweigart, and D. Mark Thomas, 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 1998.
Compensation Committee
The current Compensation Committee, consisting of Steven B. Silverman
(Chairman), John Amos, Thomas H. Bamford, Robert A. Kinsley and Robert M.
Lauman, reviews and makes recommendations to the Board regarding the
compensation practices of the Company. The Compensation Committee held no
meetings during 1998.
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 five (5) meetings during 1998.
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
As of March 8, 1999 (the "Most Practicable Date"), there were 7,419,713
shares of the Company's Common Stock 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, (ii) the executive officers and (iii) all directors and
executive officers as a group.
<TABLE>
<CAPTION>
NATURE AND AMOUNT OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------------ ----------------------- --------
<S> <C> <C>
John Amos............................................... 63,150(4,7) *
Thomas H. Bamford....................................... 1,000 *
Paul W. Brubaker........................................ 3,375(1,9) *
Ronald E. Frisbie....................................... 49,730(1,3,4) *
Donald R. Kaufmann...................................... 1,295(1,2,6) *
Robert A. Kinsley....................................... 1,019(6) *
Robert M. Lauman........................................ 54,027(1,2,4,5,6) *
Thomas E. Morell........................................ 2,473(2,5) *
G. William Ruhl......................................... 5,515(1,2,5,6) *
Steven B. Silverman..................................... 1,074(6) *
W. Garth Sprecher....................................... 98,051(1,2,4,5,6) 1.32%
Anne B. Sweigart........................................ 386,938(1,2,4,5,6) 5.21%
D. Mark Thomas.......................................... 1,300(8) *
All Directors and Executive Officers as a group....... 668,947(1,2,3,4,5,6,7,8,9) 9.02%
</TABLE>
- ----------
* Less than 1 percent.
(1) Includes shares owned in their individual capacities but held by the D & E
Communications, Inc. Voting Trust (the "Voting Trust") as of the Most
Practicable Date as follows: 3,375 for Mr. Brubaker, 49,430 for Mr.
Frisbie, 500 for Mr. Kaufmann, 44,315 for Mr. Lauman, 1,372 for Mr. Ruhl,
96,170 for Mr. Sprecher, 382,223 for Mrs. Sweigart, and 577,385 for all
directors and officers as a group. Mrs. Sweigart and Messrs. Amos, Frisbie,
Lauman 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: 693 for Mr. Kaufmann, 1,237 for Mr.
Lauman, 1,581 for Mr. Morell, 1,751 for Mr. Ruhl, 1,392 for Mr. Sprecher,
326 for Mrs. Sweigart and 6,980 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) Excludes shares not owned in their individual capacities but held by the
Voting Trust for which Mrs. Sweigart and Messrs. Amos, Frisbie, Lauman and
Sprecher serve as Trustees, and to which 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: 1,720 for Mr. Lauman, 892 for Mr.
Morell, 2,007 for Mr. Ruhl, 468 for Mr. Sprecher, 1,332 for Mrs. Sweigart
and 6,419 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: 22 for Mr. Kaufmann, 19 for Mr. Kinsley,
4,455 for Mr. Lauman, 85 for Mr. Ruhl, 74 for Mr. Silverman, 21 for Mr.
Sprecher, 1,657 for Mrs. Sweigart and 6,333 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.
(9) Does not include 225 shares owned by Mr. Brubaker's wife, with respect to
which Mr. Brubaker disclaims beneficial ownership.
5
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than 10
percent of a registered class of the Company's equity securities, to file
reports of ownership and change in ownership with the Securities and Exchange
Commission and Nasdaq. Directors, executive officers, and other 10 percent
shareholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.
Solely on its review of the copies of such forms or written representations
from certain reporting persons that no Form 5s were required for those persons,
the Company believes that during 1998, all filing requirements under Section
16(a) applicable to its directors and executive officers were met.
IDENTIFICATION OF EXECUTIVE OFFICERS
The following table sets forth the names, ages, and positions of the
executive officers of the Company. All executive officers of the Company serve
for terms of one year and until re-appointed or until a successor is duly
appointed at the annual organizational meeting of directors, which follows the
annual shareholders' meeting. No executive officers have any arrangements or
understandings with any other person pursuant to which such executive officer
was or is to be appointed as an executive officer.
<TABLE>
<CAPTION>
POSITION
NAME AGE POSITION HELD SINCE
- ---- --- -------- ----------
<S> <C> <C> <C>
Anne B. Sweigart.................. 84 Chairman, President, and Chief Executive 1985
Officer
Robert M. Lauman.................. 73 Executive Vice President and Chief Operating 1990
Officer
G. William Ruhl................... 59 Senior Vice President 1991
Thomas E. Morell.................. 38 Vice President, Chief Financial Officer and 1995
Treasurer (1)
W. Garth Sprecher................. 47 Vice President and Secretary (1) 1993
Donald R. Kaufmann................ 56 Vice President 1996
</TABLE>
- ------------------
(1) Both Messrs. Morell and Sprecher were elected as a Vice President in 1996.
Mrs. Sweigart's and Messrs. Lauman, Ruhl and Sprecher's biographies are set
forth above in the section entitled "Directors"
Thomas E. Morell, age 38, is Vice President, Chief Financial Officer and
Treasurer of the Company. Mr. Morell was Assistant Controller of the Company
from 1984 to 1990, Controller from 1990 to 1995 and Chief Financial Officer and
Treasurer since August 22, 1995. From 1982 to 1984, he was employed by Coopers &
Lybrand LLP as an auditor. Mr. Morell is a Supervisory Board member of Pilicka
Telephone Company and serves as Treasurer on the Board of Directors of
Hands-on-House, Children's Museum of Lancaster. Mr. Morell is a Certified Public
Accountant and is a member of the Pennsylvania Institute of Certified Public
Accountants.
Donald R. Kaufmann, age 56, has been Vice President of the Company and
Chief Executive Officer of the Company's subsidiary, D & E Telephone and Data
Systems, Inc., since 1996. From 1995, when he joined the Company, until 1996, he
served as Managing Director of New Business Ventures. From 1965 to 1995, Mr.
Kaufmann was employed by Bell Atlantic. When Mr. Kaufmann left Bell Atlantic, he
was Director of Network Investment Management.
6
<PAGE>
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 individuals who during 1998 were the
four (4) most highly compensated executive officers 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 .............. 1998 $184,999 $64,750 $ 0 $185,218
Chairman, President & CEO 1997 171,154 $76,500 0 $180,144
1996 148,124 21,945 0 160,919
Robert M. Lauman .............. 1998 $156,499 $54,775 $ 0 $ 63,887
Executive Vice President 1997 147,270 65,925 0 60,672
& Chief Operating Officer 1996 137,730 20,550 0 53,708
G. William Ruhl ............... 1998 $100,000 $35,000 $ 0 $ 27,250
Senior Vice President 1997 88,000 39,150 0 26,483
1996 77,954 11,580 0 25,390
Thomas E. Morell .............. 1998 $100,000 $35,000 $ 0 $ 5,949
Vice President, Chief 1997 78,769 34,650 0 9,829
Financial Officer and 1996 68,415 10,155 0 9,621
Treasurer
W. Garth Sprecher ............. 1998 $ 80,001 $28,000 $ 0 $ 19,990
Vice President and Secretary 1997 74,001 33,075 0 19,483
1996 61,916 8,670 0 18,261
</TABLE>
- ----------
(A) Bonuses are established pursuant to the Company's Officer Incentive Plan
under performance targets for the year established by the Compensation
Committee. Due to a change in the time frame in which compensation is
reviewed, 1998 targets were set late in 1997 and 1999 targets were set
during the first quarter of 1999.
(B) The aggregate amounts of other annual compensation 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.
(C) The amounts shown in this column are for the following persons for the
following items in the years 1998, 1997, and 1996, respectively:
(i) Anne B. Sweigart: $19,297, $19,470, and $19,684 for Split Dollar Life
Insurance; $3,200, $3,374, and $2,926 for the 401(k) Company Match;
$150,471, $144,800, and $126,709 for Pension Benefits (over
age 70 1/2); $12,250, $12,500, and $11,600 for Director's fees;
(ii) Robert M. Lauman: $15,205, $15,432, and $15,606 for the Split Dollar
Life Insurance; $3,200, $2,938, and $2,714 for the 401(k) Company
Match; $33,232, $29,802, and $23,588 for Pension Benefits (over age
70 1/2); $12,250, $12,500, and $11,800 for Director's fees;
(iii) G. William Ruhl: $11,767, $11,773, and $11,781 for the Split Dollar
Life Insurance; $450, $450, and $450 for Term Life Insurance; $2,783,
$1,760, and $1,559 for the 401(k) Company Match; $12,250, $12,500, and
$11,600 for Director's fees;
7
<PAGE>
(iv) Thomas E. Morell: $3,190, $3,188, and $3,187 for the Split Dollar Life
Insurance; $66, $66, and $66 for Term Life Insurance; $2,693, $1,575,
and $1,368 for the 401(k) Company Match; $0, $5,000, and $5,000 for
Director's meeting attendance fees;
(v) W. Garth Sprecher: $5,310, $5,329, and $5,349 for the Split Dollar
Life Insurance; $174, $174, and $174 for Term Life Insurance; $2,256,
$1,480, and $1,238 for the 401(k) Company Match; $12,250, $12,500, and
$11,500 for Directors' fees.
Compensation Committee Report On Executive Compensation
The Company's executive compensation program is administered by the
Compensation Committee (the "Committee") comprised of Directors Steven B.
Silverman (Chairman), John Amos, Thomas H. Bamford, Robert A. Kinsley, and
Robert M. Lauman. Due to a change in the time frame in which compensation is
reviewed, it was not necessary for the Compensation Committee to meet in 1998.
Targets for 1998 were set late in 1997 and 1999 targets were set during the
first quarter of 1999.
In establishing the base salaries of the executive officers of the Company,
including the Chief Executive Officer, Mrs. Sweigart, the Committee considers a
number of factors including (i) salary ranges for comparable positions at other
companies; (ii) the historical financial performance of the Company (including
such indicators as gross revenues, operating income, net income, earnings per
share and earnings before interest, taxes, depreciation and amortization
(EBITDA); (iii) the level of responsibility of the employee; and (iv) the level
of inflation for the period. However, compensation decisions are not based upon
any precise formula and no factor is accorded any greater weight than other
factors. During 1997, 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 companies for positions with
equivalent levels of responsibility. (There is, however, no intentional relation
between the companies used for compensation purposes and the companies in the
NASDAQ Telecommunications Index (Nasdaq Telecom) used in the Stock Performance
Graph below.) Using the consultant's recommendations, and based on the
Committee's evaluation of the factors listed above, the base salary of the Chief
Executive Officer was increased by 8.8% for 1998 from 1997.
The Company also provides an annual incentive opportunity to the Company's
executive officers pursuant to the Company's Officer Incentive Plan, which has
been approved by the Board of Directors. Under the Plan, the Committee
establishes performance targets for EBITDA for the year on a tiered basis
providing for larger percentages of pay as bonus in relation to the level of
meeting or exceeding the target. In 1998, the minimum performance goals
established by the Committee at the beginning of the year were achieved, and
bonuses were paid accordingly.
Respectfully Submitted,
The Compensation Committee
Steven B. Silverman
John Amos
Thomas H. Bamford
Robert M. Kinsley
Robert M. Lauman
8
<PAGE>
Compensation Committee Interlocks and Insider Participation
During the year ended December 31, 1998, Messrs. Silverman (Chairman),
Amos, Bamford, Kinsley 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. The Internal Revenue Service annual plan
compensation limit is $160,000.
<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
120,000 28,800 38,400 48,000 57,600 67,200
140,000 33,600 44,800 56,000 67,200 78,400
160,000 38,400 51,200 64,000 76,800 89,600
180,000 38,400 51,200 64,000 76,800 89,600
200,000 38,400 51,200 64,000 76,800 89,600
220,000 38,400 51,200 64,000 76,800 89,600
240,000 38,400 51,200 64,000 76,800 89,600
260,000 38,400 51,200 64,000 76,800 89,600
280,000 38,400 51,200 64,000 76,800 89,600
300,000 38,400 51,200 64,000 76,800 89,600
</TABLE>
Compensation included in the pension plan base consists of the base salary
and bonus shown in the Salary and Bonus columns of the Summary Compensation
Table. The years of service for purposes of the pension plan, as of December 31,
1998, were for Mrs. Sweigart 62 years, Mr. Lauman 15 years, Mr. Ruhl 7 years,
Mr. Morell 14 years and Mr. Sprecher 14 years.
9
<PAGE>
STOCK PERFORMANCE GRAPH
The following is a graphical comparison of five-year cumulative total
return on shares of the Company's Common Shares. The comparison assumes $100
invested in each of the Nasdaq U.S. and Foreign Index (Nasdaq US & Foreign), the
Nasdaq Telecommunications Index (Nasdaq Telecom) and the Company's Common Stock,
on December 31, 1993 and that all dividends were reinvested.
[GRAPHIC]
The printed version contains a line graph
which depicts the following plot points:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Nasdaq U.S.
& Foreign $100.00 $ 83.46 $109.26 $111.72 $165.43 $270.15
Nasdaq
Telecom $100.00 $ 97.00 $136.23 $166.79 $203.97 $281.69
D & E $100.00 $201.02 $223.49 $221.28 $170.41 $135.72
</TABLE>
The Common Stock is currently traded on The Nasdaq Stock Market National
Market ("NASDAQ") under the Symbol DECC. Prior to being traded on the 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 closing 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.
10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following Common Stock ownership information is shown as of the Record
Date.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------------------------ ----------------------- --------
<S> <C> <C>
The Voting Trust D & E Communications, Inc. ............. 2,951,545(1) 39.75%
(the "Voting Trust")
P.O. Box 458
Ephrata, PA 17522
Southwestern Investments, Inc. .......................... 1,300,000 17.51%
High Ridge Park
Stamford, CT 06905
The Ephrata National Bank, Trustee of the William and 1,070,100(2) 14.41%
Jemima Brossman Charitable Foundation (the "Charitable
Foundation") ..........................................
P.O. Box 457
Ephrata, PA 17522
Anne B. Sweigart ........................................ 386,938(3) 5.21%
P.O. Box 458
Ephrata, PA 17522
</TABLE>
- ----------
(1) Certain shareholders are parties to the 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,
John Amos, Ronald E. Frisbie, Robert M. Lauman and W. Garth Sprecher, each
of whom 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 by each individual Trustee as a participant in 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. The
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 these shares (except in her
capacity as a 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.
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 and Furman PC which is currently retained
as counsel to the Company.
Mr. D. Mark Thomas, a director of the Company, is a partner in the law firm
of Thomas, Thomas, Armstrong & Niesen, which is currently retained as counsel to
the Company.
Mrs. Anne B. Sweigart, Chairman of the Board, President and Chief Executive
Officer, is the aunt of W. Garth Sprecher, Vice President and Secretary of the
Company.
THE BOARD RECOMMENDS THE ELECTION OF ITS THREE (3) NOMINEES AS CLASS A
DIRECTORS.
11
<PAGE>
PROPOSAL 2:
PROPOSAL TO APPROVE THE 1999 LONG-TERM INCENTIVE PLAN
On March 25, 1999, the Board of Directors of the Company adopted (and
recommended for submission to the shareholders for their approval) the 1999
Long-Term Incentive Plan (the "1999 Incentive Plan" or "Plan"). The 1999
Incentive Plan provides for the granting of incentive stock options,
nonqualified stock options, stock appreciation rights ("SARs"), performance
restricted shares and restricted stock awards. The Plan also incorporates
features providing for stock awards and cash incentive awards.
The purposes of the 1999 Incentive Plan are to: (i) better align the
interests of shareholders with the interest of officers, directors and key
employees by creating a direct linkage between participants' rewards and the
performance of the Company and its subsidiaries; (ii) encourage stock ownership
and proprietary interests in the Company stock; and (iii) assist the Company in
attracting and retaining highly competent directors and key employees vital to
its success.
Executive officers and directors are eligible to receive awards under the
Plan and therefore have a personal interest in the adoption of the Plan.
SUMMARY OF THE 1999 INCENTIVE PLAN
The following general description is a summary of the 1999 Incentive Plan.
The complete text appears as Exhibit A to the Proxy Statement and the following
description is qualified in its entirety by reference to Exhibit A.
Term
The Plan will become effective once it is approved by the shareholders.
Although the Plan has no fixed expiration date, new awards will not be granted
after April 22, 2009.
Administration
The Plan is to be administered by the full Board of Directors or by the
Compensation Committee of the Board (the Board of Directors or the Compensation
Committee shall hereinafter be referred to as the "Committee"). That Committee
has the exclusive authority to make awards under the Plan and to make
interpretations and determinations involving the Plan.
Participation and Award Estimates
Officers, directors and other key employees of the Company and its
subsidiaries who are selected by the Committee are eligible for participation in
the Plan. Participants in the Plan are also eligible to participate in other
incentive plans of the Company. Awards under the Plan are made at the discretion
of the Committee or, in the case of nonemployee directors, at the discretion of
the full Board. As a result, it is not possible to identify who will receive
awards or the amount of those awards.
Types of Awards
Awards under the Plan may be in the form of stock options (including
incentive stock options that meet the requirements of Section 422 of the
Internal Revenue Code ("ISOs")), stock appreciation rights, performance
restricted shares, restricted stock awards, stock awards and cash incentive
awards.
Shares Available for Awards and Closing Quotation
525,000 shares of common stock may be issued under the Plan (subject to
adjustment for a stock split, stock dividend, recapitalization, merger and the
like, as described below), all of which may be awarded in the form of stock
options, performance restricted shares, restricted stock and stock awards. In
addition, the following shares are available for issuance under the Plan: (i)
any shares of common stock that are forfeited or otherwise not payable under the
Plan; (ii) any shares of common stock
12
<PAGE>
tendered in satisfaction of tax withholding or other obligations relating to
proposed awards under the Plan; and (iii) shares of common stock repurchased by
the Company that have been designated for allocation to the Plan.
As of March 8, 1999, the last reported sales price of the Company's common
stock, as reported on the NASDAQ, was $18.50.
Stock Options
The term of options granted under the Plan is determined by the Committee,
but the term of an option may not exceed ten years. The per share option price
for any shares which may be purchased under any option will be determined by the
Committee, but it will not be less than 100% of the fair market value of the
shares on the date the option is granted. Each option will become exercisable at
the time determined by the Committee. Each option will be exercisable, in full
or in part, by payment of the option price in cash, shares of common stock,
third-party cash-less exercise transactions or any combination of these methods.
Shares of common stock delivered in payment of the exercise price must have been
owned by the participant for at least six months.
Stock Appreciation Rights
SARs may be granted by the Committee to a participant in tandem with stock
options. When a SAR is exercised, the participant is entitled to receive payment
in cash or stock equal to the excess of the fair market value of a specified
number of shares of Company common stock. The value of that stock equals the
difference between the SAR exercise price and the fair market value of a share
of common stock on the exercise date, multiplied by the number of shares of
common stock involved. The number of shares of common stock covered by the SAR's
related stock option are correspondingly reduced. In other words, a participant
may exercise either a stock option or a SAR, but not both, with respect to a
share of common stock covered by both the stock option and SAR.
SARs are generally governed by the same terms and conditions that govern
the related stock option and may only be exercised to the extent that the
related stock option may be exercised.
Performance Restricted Shares
The Committee may make performance restricted share grants on any terms and
conditions it may determine. A performance restricted share entitles a
participant to receive a target number of shares of common stock based upon the
Company's attainment of predetermined performance goals over a specified
performance period. At the time that a performance restricted share grant is
made, the Committee may, in its discretion, establish a vesting period for those
shares that will begin at the end of the performance period. During the vesting
period, the performance restricted shares, or a portion of those shares, may be
subject to forfeiture.
The number of performance restricted shares actually payable to a
participant at the end of a performance period will be determined by the
Committee based upon the Company's attaining the predetermined performance
goals. If the minimum performance goals established by the Committee are not
met, no performance restricted shares will be earned by the participant. If the
performance goals are fully achieved, 100% of the performance restricted shares
will be earned by the participant. The Committee may also provide for payment of
up to 300% of the performance restricted shares for Company performance that
exceeds the performance goals. During the performance period, each performance
restricted share will be considered equal to one share of common stock for
dividend (but not voting) purposes and the participant shall be entitled to
dividend equivalents.
At the end of the performance period, any performance restricted shares
that have been earned will be converted to shares of common stock. The
participant will generally have the rights and privileges of a shareholder as to
the shares of common stock earned under a performance restricted share grant,
including the right to vote. However, the shares will remain in the custody of
the Company and may be subject to forfeiture until the applicable vesting period
expires, at which time the
13
<PAGE>
participant will have the right to receive a distribution of such shares. None
of the shares subject to a vesting restriction may be assigned, transferred,
pledged or sold until they are delivered to the participant.
If, during a performance period, a participant terminates employment for
any reason other than death, disability or retirement, the participant will
forfeit all rights to the payment of any performance restricted shares, unless
otherwise provided by the Committee. If, during a performance period, a
participant's termination is due to death, disability or retirement, the
participant or beneficiary will be entitled to receive a payment of a pro-rata
portion of the performance restricted shares (based on the portion of the
performance period that the participant was employed) after the end of the
performance period, provided that the participant had completed a minimum of one
year of employment during the performance period.
If, following a performance period, a participant terminates employment for
any reason other than death, disability or retirement, the participant will
forfeit all unvested performance restricted shares, unless otherwise provided by
the Committee. If, following a performance period, a participant terminates
employment by reason of death, disability or retirement, all performance
restricted shares earned will be payable to the participant or beneficiary and
any restrictions applicable to such shares shall lapse.
Stock Awards and Restricted Stock Awards
The Committee may make stock awards and restricted stock awards on the
terms and conditions it determines. A stock award entitles a participant to
shares of common stock without a restriction or vesting period.
A restricted stock award entitles a participant to shares of common stock
subject to a restriction period. In determining whether to make stock awards and
restricted stock awards, the Committee may consider circumstances such as a
participant's termination of employment, or the failure of the Company or a
participant to attain specified performance goals. None of the shares subject to
a restricted stock award or stock award may be assigned, transferred, pledged or
sold until they are delivered to the holder of the restricted stock award or
stock award.
When a participant is granted a restricted stock award, the Company shall
register a stock certificate in the participant's name representing the number
of shares of common stock designated by the Committee. This certificate shall be
held in custody by the Company for the participant's account. The participant
shall generally have the rights and privileges of a stockholder as to the shares
awarded pursuant to a restricted stock award, including the right to vote,
except that the shares will remain in the custody of the Company until all
restrictions have lapsed.
If, during a restriction period, a participant terminates employment for
any reason other than death, disability or retirement, the participant will
forfeit all rights to the payment of any restricted stock award, unless
otherwise provided by the Committee. If, during a restriction period, a
participant's termination is due to death, disability or retirement, the
participant or beneficiary will be entitled to receive a pro-rata portion of the
restricted stock award, such portion based on the portion of the restriction
period that the participant was employed, provided that the participant had
completed a minimum of one year of employment during the restriction period.
Stock Adjustments
In the event of any stock dividend or split, recapitalization,
reorganization, merger, or other change in the capitalization of the Company, or
similar event affecting the Company's common stock, the Committee will, as it
deems equitable, adjust the number of shares that may be available under the
1999 Incentive Plan or the terms or number of shares pertaining to any
outstanding award.
14
<PAGE>
Cash Incentive Awards
The Committee may grant cash incentive awards to participants. Each cash
incentive award will be conditioned upon the Company's achievement of one or
more performance goals with respect to the performance measure(s) covering the
applicable performance period and set forth in the award agreement evidencing
the cash incentive award. A cash incentive award may be governed by the same
terms and conditions that govern stock options, performance restricted shares,
restricted stock awards or stock awards. In making a cash incentive award, the
Committee will establish a performance level below which the cash incentive
award will not be payable. The Committee may also establish additional
performance conditions that must be satisfied by the Company, a business unit or
the participant as a condition precedent to the payment of all or a portion of
any cash incentive awards.
The maximum amount payable to any one participant pursuant to a cash
incentive award with respect to any one year shall be $125,000.
Change in Control
In the event of a change in control: (i) all outstanding options and SARs
become immediately exercisable; (ii) all restrictions imposed on restricted
shares will immediately lapse; (iii) all outstanding performance restricted
shares will immediately be deemed to have been earned to the maximum extent
permitted; and (iv) all performance restricted shares earned will immediately
vest. A change in control is defined to have occurred if: (a) any person
acquires beneficial ownership of 20 percent or more of the then outstanding
voting stock of the Company, and within five years of that event, the existing
directors and their approved successors no longer constitute at least a majority
of the Board; or (b) a merger or consolidation involving the Company occurs that
results in the holders of the Company's voting securities immediately prior to
such merger or consolidation holding less than 66 2/3% of the voting securities
of the resulting entity; or (c) a liquidation or dissolution of the Company or
sale of all or substantially all of the Company's assets occurs which, in either
case, is approved by the shareholders.
Amendment and Termination
The Board of Directors may modify, amend, or terminate the Plan at any time
except that, to the extent then required by law, approval of the holders of a
majority of shares of common stock represented in person or by proxy at a
meeting of the shareholders will be required to increase the maximum number of
shares of common stock available for distribution under the Plan (other than
increases due to adjustments in accordance with the Plan). No modification,
amendment, or termination of the Plan can adversely affect the rights of a
participant under a grant previously made without the participant's consent.
Other Provisions
The Committee may also offer participants the right to defer the receipt of
all or any portion of their performance restricted shares, restricted stock or
stock award. However, awards may be forfeited if a participant is terminated for
deliberate or gross misconduct. Awards may also be forfeited within three years
following a participant's termination of employment, the participant engages in
conduct that, in the Committee's discretion, is directly or indirectly
competitive with the Company.
Federal Income Tax Consequences -- Nonqualified Options
Under the current applicable provisions of the Internal Revenue Code, the
recipient of an option will not pay any tax at the time of grant. When a
nonqualified option is exercised, any excess of the fair market value of the
affected shares over the total option price of those shares will be treated for
federal tax purposes as ordinary income. Any profit or loss realized on the sale
or exchange of any share actually received will be treated as a capital gain or
loss. If the fair market value on the date of exercise of the shares with
respect to which the option was exercised exceeds the exercise price, the
Company is entitled to deduct that amount.
15
<PAGE>
Incentive Stock Options
With respect to an ISO, no taxable gain or loss generally will be
recognized when the option is granted or exercised. ISOs exercised more than
three months after termination of employment will be taxed in the same manner as
nonqualified options described above. Generally, when an ISO is exercised, the
spread between the fair market value and the exercise price will be an item of
tax preference for purposes of the alternative minimum tax.
If the shares acquired when an ISO is exercised are held for at least two
years from the grant of the options and one year from the exercise of the
options, any gain or loss realized upon their sale will be treated as long-term
capital gain or loss. In such a case, the Company will not be entitled to a
deduction. If the shares are not held for the two-year and one-year periods,
ordinary income will be recognized in an amount equal to the difference between
the exercise price and the fair market value of the common stock on the date the
option was exercised. The Company will be entitled to a deduction equal to the
amount of any ordinary income recognized in this manner. If the shares are not
held for the one-year period and the amount realized upon sale is less than the
grant price, the difference will be a capital loss.
Stock Appreciation Rights
If there is a grant of an option with a tandem stock appreciation right, no
taxable income is realized by the holder and no deduction is available to the
Company at the time of grant. If a participant exercises an option through a
stock appreciation rights election, the tax consequences to the holder and the
Company are the same as for exercise of a nonqualified stock option.
Performance Restricted Shares, Stock Awards and Restricted Stock Awards
With respect to performance restricted shares, stock awards and restricted
stock awards granted under the Plan, the participant will generally recognize
ordinary income equal to the excess of the fair market value of the shares
received (determined as of the date on which the shares become transferable or
not subject to a substantial risk of forfeiture, whichever occurs first) over
the amount, if any, paid for the shares. The Company will be entitled to a tax
deduction in the same amount. A participant may elect to accelerate the
recognition of ordinary income with respect to restricted stock awards to when
the shares are granted. A participant may also elect to accelerate the
recognition of ordinary income with respect to performance restricted shares to
when the shares are earned at the end of the performance period. If an election
is made to accelerate the recognition of ordinary income, the amount of ordinary
income will be determined as of the accelerated tax date rather than as of the
date when the applicable restriction expires. In such a case, the Company's tax
deduction will be determined at the same time. Any subsequent gain or loss
resulting from the sale or other disposition of such shares will be capital gain
or loss.
Cash Incentive Awards
A participant will recognize ordinary income in an amount equal to the
amount of a cash incentive award as of the date of grant of the award.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 1999 LONG-TERM
INCENTIVE PLAN.
The affirmative vote of a majority of the shares voting at the meeting is
required for approval of this item.
16
<PAGE>
PROPOSAL 3:
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board, upon recommendation of its Audit Committee, appointed
PricewaterhouseCoopers LLP, as accountants of the Company's Financial Statements
for 1999. 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
PricewaterhouseCoopers LLP, is expected to be present at the Annual Meeting and
will be available to respond to appropriate questions and have the opportunity
to make a statement if they desire to do so.
THE BOARD RECOMMENDS THE SHAREHOLDERS VOTE IN FAVOR OF RATIFYING
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS FOR 1999.
2000 SHAREHOLDER PROPOSALS
Proposals of shareholders intended for inclusion in the Company's proxy
statement relating to the 2000 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 26, 1999. Any such proposal must comply with Rule
14a-8 of Regulation 14A of the proxy rules of the Securities and Exchange
Commission. Written notice of shareholder proposals relating to the 2000 Annual
Meeting other than those intended for inclusion in the company's proxy statement
must be received at the Company's principal executive offices no later than
February 9, 2000.
OTHER MATTERS
The Board is not aware that any matter other than those listed in the
Notice of 1999 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 1999 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, 1998, 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 1998 ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1998 WILL BE PROVIDED WITHOUT CHARGE.
March 25, 1999
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EXHIBIT A
1999 LONG-TERM INCENTIVE PLAN
OF
D&E COMMUNICATIONS, INC.
ARTICLE I -- GENERAL PROVISIONS
1.1 PURPOSES
The purposes of the 1999 Long-Term Incentive Plan (the "Plan") are to
advance the long-term success of D&E Communications, Inc. (the "Company" or
"D&E"), and to increase shareholder value by providing the incentive of
long-term stock-based rewards to officers, directors and key employees. The Plan
is designed to: (1) encourage stock ownership by Participants to further align
their interest in increasing the value of the Company, (2) ensure that
compensation practices are competitive in the industry and (3) to assist in the
attraction and retention of key employees vital to the Company's success.
1.2 DEFINITIONS
For the purpose of the Plan, the following terms shall have the meanings
indicated:
(a) "Board" means the Board of Directors of the Company.
(b) "Cash Incentive Awards" means a right to receive a cash payment
pursuant to any award made pursuant to Article VII hereof.
(c) "Change in Control" means a situation where: (1) any person
acquires beneficial ownership of 20 percent or more of the then outstanding
voting stock of the Company and within five years thereafter a change in
the composition of the Board occurs such that the existing members and
their approved successors do not constitute a majority of the Board; (2) a
merger or consolidation involving the Company occurs that results in the
holders of the Company's voting securities immediately prior to such merger
or consolidation holding less than 66 2/3% of the voting securities of the
resulting entity; or (3) a liquidation or dissolution of the Company or
sale of all or substantially all of the Company's assets occurs which, in
either case, is approved by the shareholders.
(d) "Code" means the Internal Revenue Code of 1986, as amended,
including any successor law thereto.
(e) "Committee" means the Compensation Committee of the Board or the
full Board, as the case may be.
(f) "Common Stock" means the Common Stock of the Company, par value
$.16 per share.
(g) "Company," means D&E Communications, Inc. and solely for purposes
of determining (i) eligibility for participation in the Plan, (ii)
employment, and (iii) the establishment of performance goals, shall include
any corporation, partnership, or other organization of which D&E owns or
controls, directly or indirectly, not less than 50 percent of the total
combined voting power of all classes of stock or other equity interests.
For purposes of this Plan, the terms "D&E" and "Company" shall include any
successor to D&E Communications, Inc.
(h) "Disability" means total and permanent disability within the
meaning of Section 22(e)(3) of the Code.
(i) "Dividend Equivalent" means an amount equal to the cash dividend
paid on one share of Common Stock for each Performance Restricted Share
granted during the Performance Period. All Dividend Equivalents will be
reinvested in Performance Restricted Shares at a purchase price equal to
the Fair Market Value on the dividend date.
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(j) "Employee or employment" means with respect to any Non-Employee
Director (as defined herein), service on the Board.
(k) "Fair Market Value" means as of any date: (i) the average of the
closing bid and asked prices on such date of the Common Stock as quoted by
NASDAQ; or (ii), as the case may be, the last reported sales price of the
Common Stock on such date as reported by the NASDAQ National Market or the
principal national securities exchange on which such stock is listed and
traded, or in each such case where there is no trading on such date, on the
first previous date on which there is such trading.
(l) "Incentive Stock Option" means a Stock Option which meets the
definition under Section 422 of the Code.
(m) "Non-Employee Director" means a member of the Board who is not an
employee of the Company.
(n) "Nonstatutory Stock Option" means a Stock Option which does not
meet the definition of an Incentive Stock Option.
(o) "Participant" means any officer, director or key employee who has
met the eligibility requirements set forth in Section 1.6 hereof and to
whom a grant has been made and is outstanding under the Plan.
(p) "Performance Measures" shall mean the Performance Measures
described in Section 4.4 of the Plan.
(q) "Performance Period" means, in relation to Performance Restricted
Shares or Cash Incentive Awards, any period for which performance goals
have been established.
(r) "Performance Restricted Share" means a right granted to a
Participant pursuant to Article IV.
(s) "Restricted Stock Award" means an award of Common Stock granted to
a Participant pursuant to Article V which is subject to a Restriction
Period.
(t) "Restriction Period" means in relation to Restricted Stock Awards,
the period of time (if any) during which (i) such shares are subject to
forfeiture pursuant to the Plan and (ii) such shares may not be sold,
assigned, transferred, pledged or otherwise disposed of by the Participant.
(u) "Retirement" means termination from employment with the Company
after the Participant has attained age 55 and has completed a minimum of
five years of service with the Company or termination of employment under
circumstances which the Committee deems equivalent to retirement.
(v) "Stock Appreciation Right" means a right granted to a Participant
pursuant to Article III to surrender to the Company all or any portion of
the related Stock Option and to receive in cash or in shares of Common
Stock an amount equal to the excess of the Fair Market Value over the
option price on the date of such exercise.
(w) "Stock Award" means an award of Common Stock granted to a
Participant pursuant to Article V which is not subject to a Restriction
Period.
(x) "Stock Option" means a right granted to a Participant pursuant to
Article II, to purchase, before a specified date and at a specified price,
a specified number of shares of Common Stock.
1.3 ADMINISTRATION
The Plan shall be administered by the Compensation Committee of the Board
which shall consist of not fewer than three directors of the Company or the full
Board; provided, however, that the Board shall administer the Plan as it relates
to the terms, conditions and grant of awards to Non-Employee Directors. For
purposes of the Plan, the term Committee shall refer to the Compensation
Committee of
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the Board or the full Board, as the case may be. A majority of the Committee
shall constitute a quorum, and the acts of a majority of the members present at
any meeting at which a quorum is present, or acts approved in writing by a
majority of the Committee, shall be deemed the acts of the Committee. Subject to
the provisions of the Plan and to directions by the Board, the Committee is
authorized to interpret the Plan, to adopt administrative rules, regulations,
and guidelines for the Plan, and to impose such terms, conditions, and
restrictions on grants as it deems appropriate. The Committee, in its
discretion, may allow certain optionees holding unexercised Incentive Stock
Options to convert such options to Nonstatutory Stock Options. The Committee
may, with respect to Participants who are not subject to Section 16(b) of the
Exchange Act or "covered employees" within the meaning of Section 162(m) of the
Code ("Section 162(m)"), delegate such of its powers and authority under the
Plan as it deems appropriate to designated officers or employees of the Company.
1.4 TYPES OF GRANTS UNDER THE PLAN
Grants under the Plan may be in the form of any one or more of the
following:
(a) Nonstatutory Stock Options;
(b) Incentive Stock Options;
(c) Stock Appreciation Rights;
(d) Performance Restricted Shares;
(e) Restricted Stock Awards;
(f) Stock Awards;
(g) Cash Incentive Awards.
1.5 SHARES SUBJECT TO THE PLAN AND INDIVIDUAL AWARD LIMITATION
(a) A maximum of 525,000 shares of Common Stock may be issued under the
Plan. All such shares may be granted in the form of Incentive Stock Options,
Nonstatutory Stock Options, Stock Appreciation Rights, Performance Restricted
Shares, Restricted Stock Awards and Stock Awards. The total number of shares
authorized is subject to adjustment as provided in Section 8.1 hereof. Shares of
Common Stock issued under the Plan may be treasury shares or authorized but
unissued shares. No fractional shares shall be issued under the Plan.
(b) If any Stock Option granted under the Plan expires or terminates, the
underlying shares of Common Stock may again be made available for the purposes
of the Plan. Any shares of Common Stock that have been granted as Restricted
Stock Awards, or that have been reserved for distribution in payment for
Performance Restricted Shares but are later forfeited or for any other reason
are not payable under the Plan, may again be made available for the purposes of
the Plan. Furthermore, shares of Common Stock that are: (i) tendered or withheld
in payment of the exercise price of any Stock Option or in satisfaction of
withholding tax obligations arising from any Award; and (ii) shares of Common
Stock repurchased by the Company that have been designated for allocation to the
Plan, shall be available for issuance under the Plan.
(c) The aggregate maximum number of shares of Common Stock that may be
granted to any Participant in the form of Stock Options, Stock Appreciation
Rights, Performance Restricted Shares and Restricted Stock Awards in any one
calendar year is 25,000.
1.6 ELIGIBILITY AND PARTICIPATION
Participation in the Plan shall be limited to officers, who may also be
members of the Board, other key employees of the Company who are so designated
by the Committee in its discretion and Non-Employee Directors.
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ARTICLE II -- STOCK OPTIONS
2.1 GRANT OF STOCK OPTIONS
The Committee may from time to time, subject to the provisions of the Plan,
grant Stock Options to Participants. The Committee shall determine the number of
shares of Common Stock to be covered by each Stock Option and shall have the
authority to grant Incentive Stock Options, Nonstatutory Stock Options or a
combination thereof; provided, however, that Incentive Stock Options may be
granted only to Participants who are employees of the Company and may not be
granted to Non-Employee Directors. Furthermore, the Committee may grant a Stock
Appreciation Right in connection with a Stock Option, as provided in Article
III.
2.2 INCENTIVE STOCK OPTION EXERCISE LIMITATIONS
The aggregate Fair Market Value (determined at the time an Incentive Stock
Option is granted) of the shares of Common Stock with respect to which an
Incentive Stock Option is exercisable for the first time by a Participant during
any calendar year (under all plans of the Company) shall not exceed $100,000 or
such other limit as may be established from time to time under the Code.
2.3 OPTION DOCUMENTATION
Each Stock Option shall be evidenced by a written Stock Option agreement
between the Company and the Participant to whom such option is granted,
specifying the number of shares of Common Stock that may be acquired by its
exercise and containing such terms and conditions consistent with the Plan as
the Committee shall determine.
2.4 EXERCISE PRICE
The price at which each share covered by a Stock Option may be acquired
shall be determined by the Committee at the time the option is granted and shall
not be less than the Fair Market Value of the underlying shares of Common Stock
on the day the Stock Option is granted. If an Incentive Stock Option is granted
to an employee who, at the time such Option is granted, owns shares of the
Company possessing more than 10 percent of the total combined voting power of
all classes of shares of the Company or its subsidiaries ("10% Shareholder"),
the exercise price of such Option shall not be less than 110% of the Fair Market
Value of the underlying shares of Common Stock on the day such Option is
granted. The exercise price will be subject to adjustment in accordance with the
provisions of Section 8.1 of the Plan.
2.5 EXERCISE OF STOCK OPTIONS
(a) Exercisability. Stock Options shall become exercisable at such times
and upon the satisfaction of such conditions and in such installments as the
Committee may provide at the time of grant.
(b) Option Period. For each Stock Option granted the Committee shall
specify the period during which the Stock Option may be exercised, provided that
(i) no Stock Option shall be exercisable after the expiration of ten years from
the date the option was granted and (ii) in the case of a 10% Shareholder, no
Stock Option shall be exercisable after the expiration of five years from the
date the option was granted.
(c) Exercise in the Event of Termination of Employment.
(i) Death: Unless otherwise provided by the Committee at the time of
grant, in the event of the death of the Participant, the option must be
exercised by the Participant's estate or beneficiaries within one year
following the death of the Participant and prior to its expiration. Each
option may be exercised as to all or any portion thereof regardless of
whether or not fully exercisable under the terms of the grant.
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(ii) Disability: Unless otherwise provided by the Committee at the
time of grant, in the event of the Disability of the Participant, the
option must be exercised within one year following the Participant's
termination of employment and prior to its expiration. Each option may be
exercised as to all or any portion thereof regardless of whether or not
fully exercisable under the terms of the grant.
(iii) Retirement: Unless otherwise provided by the Committee at the
time of grant, in the event of the Retirement of the Participant the option
must be exercised within one year following the Participant's termination
of employment and prior to its expiration. An unexercised Incentive Stock
Option will cease to be treated as such and will become a Nonstatutory
Stock Option three months following the date of Retirement. Each option may
be exercised as to all or any portion thereof regardless of whether or not
fully exercisable under the terms of the grant.
(iv) Other Terminations: Unless otherwise provided by the Committee at
the time of grant, in the event a Participant ceases to be an employee of
the Company for any reason other than death, Disability, or Retirement,
options which are exercisable on the date of termination must be exercised
within three months after termination and prior to the expiration date of
any such option. All options which are not exercisable on the date of
termination shall be canceled.
(v) Extension of Exercise Period: Notwithstanding all other provisions
under Section 2.5(c) in the event a Participant's employment is terminated,
the Committee may, in its sole discretion, extend the post-termination
period during which the option may be exercised, provided however that such
period may not extend beyond the original option period.
(d) Exercise In the Event of Change in Control. In the event of any Change
in Control, all Stock Options shall immediately become exercisable without
regard to the exercise period set forth in 2.5(a).
2.6 METHOD OF EXERCISE
The option may be exercised in whole or in part from time to time by
written request received by the Treasurer of the Company. The option price of
each share acquired pursuant to an option shall be paid in full at the time of
each exercise of the option either (i) in cash, (ii) by delivering to the
Company previously-owned shares of Common Stock or (iii) in the discretion of
the Committee, by delivering to the Treasurer of the Company a notice of
exercise with an irrevocable direction to a broker-dealer registered under the
Securities Exchange Act of 1934, as amended, to sell a sufficient portion of the
shares and deliver the sale proceeds directly to the Company to pay the exercise
price; (iv) in the discretion of the Committee, through an election to have
shares of Common Stock otherwise issuable to the Participant withheld to pay the
exercise price of such option; or (v) in the discretion of the Committee,
through any combination of the payment procedures set forth in (i) through (iv)
above. However, shares of Common Stock previously acquired by the Participant
under the Plan or any other incentive plan of the Company shall not be utilized
for purposes of payment upon the exercise of an option unless those shares have
been owned by the Participant for a six-month period or such longer period as
the Committee may determine.
2.7 STOCK RETENTION OPTIONS
The Committee, in its discretion, may authorize "stock retention Stock
Options" which provide, upon the exercise of a Stock Option previously granted
under this Plan (a "prior Option") using previously owned shares, for the
automatic issuance of a new Stock Option under this Plan with an exercise price
equal to the current Fair Market Value and for up to the number of shares equal
to the number of previously-owned shares delivered in payment of the exercise
price and any related withholding taxes of the prior Stock Option. Such stock
retention Stock Option shall have the same Option Period as the prior Stock
Option.
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ARTICLE III -- STOCK APPRECIATION RIGHTS
3.1 GRANT OF STOCK APPRECIATION RIGHTS
The Committee may, in its discretion, grant Stock Appreciation Rights in
connection with all or any part of an option granted under the Plan. Any Stock
Appreciation Right granted in connection with an option shall be governed by the
terms of the Stock Option agreement and the Plan.
3.2 EXERCISE OF STOCK APPRECIATION RIGHTS
Stock Appreciation Rights shall become exercisable under the Stock Option
terms set forth in Section 2.5 but shall be exercisable only when the Fair
Market Value of the shares subject thereto exceeds the option price of the
related option.
3.3 METHOD OF EXERCISE
(a) Stock Appreciation Rights shall permit the Participant, upon exercise
of such rights, to surrender the related option, or any portion thereof, and to
receive, without payment to the Company (except for applicable withholding
taxes), an amount equal to the excess of the Fair Market Value over the option
price. Such amount shall be paid in shares of Common Stock valued at Fair Market
Value on the date of exercise or in cash, or any combination of shares and cash,
as determined by the Committee in its discretion.
(b) Upon the exercise of a Stock Appreciation Right and surrender of the
related option, or portion thereof, such option, to the extent surrendered,
shall be terminated, and the shares covered by the option so surrendered shall
no longer be available for purposes of the Plan.
ARTICLE IV -- PERFORMANCE RESTRICTED SHARES
4.1 GRANT OF PERFORMANCE RESTRICTED SHARES
The Committee may from time to time grant Performance Restricted Shares to
Participants under which payment may be made in shares of Common Stock if the
performance of the Company meets certain goals established by the Committee.
Such Performance Restricted Shares shall be subject to the provisions of the
Plan terms and conditions, and, if earned, a vesting period as the Committee
shall determine.
4.2 PERFORMANCE RESTRICTED SHARE AGREEMENT
Each grant of Performance Restricted Shares shall be evidenced by a written
agreement between the Company and Participant to whom such shares are granted.
The agreement shall specify the number of Performance Restricted Shares granted,
the terms and conditions of the grant, the duration of the Performance Period,
the performance goals to be achieved, and the vesting period applicable to
shares of Common Stock earned.
4.3 COMMON STOCK EQUIVALENT
Each Performance Restricted Share shall be credited to an account to be
maintained for each such Participant during the Performance Period and shall be
deemed to be the equivalent of one share of Common Stock. At the conclusion of
the Performance Period, Performance Restricted Shares earned, if any, shall be
converted to shares of Common Stock subject to a vesting period.
4.4 PERFORMANCE GOALS
Performance Restricted Share awards shall be conditioned upon the Company's
attainment of a specified goal with respect to one or more of the following
performance measures: (i) total shareholder return; (ii) return on shareholders'
equity; (iii) return on capital; (iv) earnings per share; (v) sales; (vi)
earnings; (vii) cash flow; (viii) operating income; (ix) earnings before
interest, taxes, depreciation and
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amortization; and (x) Fair Market Value of Common Stock. The Committee shall
determine a minimum performance level below which no Performance Restricted
Shares shall be payable and a performance schedule under which the number of
shares earned may be less than, equal to, or greater than the number of
Performance Restricted Shares granted based upon the Company's performance. The
Committee may adjust the performance goals and measurements to reflect
significant unforeseen events; provided, however, that the Committee may not
make any such adjustment with respect to any award of Performance Restricted
Shares to an individual who is then a "covered employee" as such term is defined
in Regulation 1.162-27(c)(2) promulgated under Section 162(m), if such
adjustment would cause compensation pursuant to such Performance Restricted
Share award to cease to be performance-based compensation under Section 162(m).
4.5 PERFORMANCE PERIOD
The Committee shall establish a Performance Period applicable to each grant
of Performance Restricted Shares. Each such Performance Period shall commence on
January 1 of the calendar year in which grants are made. There shall be no
limitation on the number of Performance Periods established by the Committee,
and more than one Performance Period may encompass the same calendar year. The
Committee may shorten any Performance Period if it determines that unusual or
unforeseen events so warrant.
4.6 DIVIDEND EQUIVALENTS DURING PERFORMANCE PERIOD
During the Performance Period, a Participant shall be entitled to receive
Dividend Equivalents which shall be deemed to have been reinvested in additional
Performance Restricted Shares at the same time as such underlying Common Stock
cash dividend is paid. Performance Restricted Shares granted through such
reinvestment shall be credited to the Participant's account and shall be payable
to the Participant in the same manner and at the same time as the Performance
Restricted Shares with respect to which such Dividend Equivalents were issued.
4.7 CONVERSION OF PERFORMANCE RESTRICTED SHARES
(a) At the conclusion of the Performance Period, the Committee shall
determine the number of Performance Restricted Shares, if any, which have been
earned on the basis of Company performance in relation to the established
performance goals. In no event shall such number exceed 300% of the shares
contingently granted.
(b) Performance Restricted Shares earned shall be converted to shares of
Common Stock and shall be represented by a stock certificate registered in the
name of the Participant. Certificates evidencing such shares shall be held in
custody by the Company until the restrictions thereon are no longer in effect.
4.8 VESTING PERIOD
At the time a Performance Restricted Share grant is made, the Committee
shall establish a vesting period applicable to such shares earned, if any, which
shall begin at the end of the Performance Period. After the lapse or waiver of
the restrictions imposed, the Company shall deliver in the Participant's name
one or more stock certificates, evidencing the shares of Common Stock earned
through the end of the Performance Period. The Committee may accelerate or waive
the performance goals attached to a particular grant, in whole or in part, based
on service and such other factors as the Committee may determine.
4.9 OTHER TERMS AND CONDITIONS
Performance Restricted Shares shall be subject to the following terms and
conditions:
(a) Except as otherwise provided in the Plan or in the Performance
Restricted Share agreement, the Participant shall not have the rights of a
shareholder of the Company, including the right to vote the shares.
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(b) Cash dividends paid with respect to Performance Restricted Shares
shall be reinvested to purchase additional shares of Common Stock that
shall be subject to the same terms, conditions, and restrictions that apply
to the Performance Restricted Shares with respect to which such dividends
were issued.
4.10 TERMINATION OF EMPLOYMENT PROVISIONS DURING A PERFORMANCE PERIOD
(a) In the event a Participant terminates employment during a Performance
Period by reason of death, Disability, or Retirement, and the Participant had
completed a minimum of one year of employment during the Performance Period, the
Participant shall be entitled to that number of shares earned (if any)
determined by multiplying the full number of shares earned (if any) by a
fraction, the numerator of which is the number of full months of employment the
Participant had completed in such Performance Period and the denominator of
which are the total number of full months in such Performance Period. All
applicable restrictions shall lapse with respect to such shares and such shares
of Common Stock shall be issued to the Participant or the Participant's
designated beneficiary following the Performance Period. In the event the
Participant had not completed one year of employment during the Performance
Period, the Participant shall forfeit all rights to earn such Performance
Restricted Shares.
(b) If a Participant terminates employment during a Performance Period for
any reason other than death, Disability, or Retirement, the Participant shall
forfeit all rights to earn such Performance Restricted Shares.
(c) Notwithstanding Sections 4.10(a) and 4.10(b), in the event a
Participant's employment is terminated during a Performance Period under special
circumstances, the Committee may, in its sole discretion, continue a
Participant's rights to earn any or all Performance Restricted Shares and waive
in whole or in part any or all remaining restrictions.
4.11 TERMINATION OF EMPLOYMENT PROVISIONS FOLLOWING A PERFORMANCE PERIOD
(a) In the event a Participant terminates employment following a
Performance Period by reason of death, Disability, or Retirement, all shares of
Common Stock (formerly Performance Restricted Shares) shall immediately vest and
shares of Common Stock shall be issued to the Participant or the Participant's
designated beneficiary.
(b) If a Participant terminates employment following a Performance Period
for any reason other than death, Disability, or Retirement, the Participant
shall forfeit all shares of Common Stock (formerly Performance Restricted
Shares) which have not yet vested. Shares of Common Stock which have vested
shall be issued to the Participant.
(c) Notwithstanding Sections 4.11(a) and 4.11(b), in the event a
Participant's employment is terminated following a Performance Period under
special circumstances, the Committee may, in its sole discretion, accelerate the
remaining vesting period (if any) associated with that grant.
4.12 CHANGE IN CONTROL PROVISIONS
In the event of any Change in Control, (i) all Performance Restricted
Shares granted, including those granted pursuant to Dividend Equivalents, shall
be deemed to have been earned to the maximum extent permitted pursuant to
Section 4.4 for any Performance Period not yet completed as of the effective
date of such Change in Control and (ii) all shares of Common Stock (which have
been converted from Performance Restricted Shares earned) not otherwise vested
shall immediately vest as of the date of such Change in Control.
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ARTICLE V -- RESTRICTED STOCK AWARDS AND STOCK AWARDS
5.1 AWARD OF RESTRICTED STOCK AND STOCK AWARDS
The Committee may grant Restricted Stock Awards and unrestricted Stock
Awards to officers and key employees of the Company subject to such terms and
conditions as the Committee shall determine, provided that each Restricted Stock
Award shall be subject to a Restriction Period. Restricted Stock Awards and
Stock Awards shall be used for the purposes of recruitment, recognition, and
retention of key employees vital to the Company's success. The Committee may, in
its sole discretion, require a Participant to deliver consideration in form of
services or cash as a condition to the grant of a Restricted Stock Award or
Stock Award.
5.2 STOCK AWARD AND RESTRICTED STOCK AWARD AGREEMENTS
Each Restricted Stock Award and Stock Award shall be evidenced by a written
agreement between the Company and the Participant to whom such award is granted.
The agreement shall specify the number of shares awarded, the terms and
conditions of the award and, in the case of a Restricted Stock Award, the
Restriction Period, and the consequences of forfeiture.
5.3 AWARDS AND CERTIFICATES
Shares of Common Stock awarded pursuant to a Restricted Stock Award or a
Stock Award shall be registered in the name of the Participant. Certificates
evidencing Restricted Stock Awards shall be held in custody by the Company until
the restrictions thereon are no longer in effect. After the lapse or waiver of
the restrictions imposed upon the Restricted Stock Award, the Company shall
deliver in the Participant's name one or more stock certificates, free of
restrictions, evidencing the shares of Common Stock subject to the Restricted
Stock Award to which the restrictions have lapsed or been waived.
5.4 RESTRICTION PERIOD
At the time a Restricted Stock Award is made, the Committee shall establish
a Restriction Period applicable to such award. The Committee may provide for the
lapse of such restrictions in installments and may accelerate or waive such
restrictions, in whole or in part, based on service and such other factors as
the Committee may determine.
5.5 OTHER TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS
Shares of Common Stock subject to Restricted Stock Awards shall be subject
to the following terms and conditions:
(a) Except as otherwise provided in the Plan or in the Restricted
Stock Award agreement, the Participant shall have all the rights of a
shareholder of the Company, including the right to vote the shares.
(b) Cash dividends paid with respect to Common Stock subject to a
Restricted Stock Award shall be reinvested to purchase additional shares of
Common Stock that shall be subject to the same terms, conditions, and
restrictions that apply to the Restricted Stock Award with respect to which
such dividends were issued.
5.6 TERMINATION OF EMPLOYMENT
(a) In the event a Participant terminates employment during the Restriction
Period by reason of death, Disability or Retirement, and the Participant had
completed a minimum of one year of employment during the Restriction Period,
restrictions shall lapse on that number of shares (if any) determined by
multiplying the full number of shares subject to restriction by a fraction, the
numerator of which is the number of full months of employment the Participant
had completed in such Restriction Period and the denominator of which is the
total number of full months in such Restriction Period.
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(b) If a Participant terminates employment for any reason other than death,
Disability, or Retirement, the Participant shall forfeit all shares subject to
restriction.
(c) Notwithstanding Sections 5.6(a) and 5.6(b), in the event a
Participant's employment is terminated under special circumstances, the
Committee may, in its sole discretion, waive in whole or in part any or all
remaining restrictions.
5.7 CHANGE IN CONTROL PROVISIONS
In the event of any Change in Control, all restrictions applicable to any
outstanding Restricted Stock Award shall lapse as of the date of such Change in
Control.
ARTICLE VI -- TAX WITHHOLDING AND DEFERRAL OF PAYMENT
6.1 TAX WITHHOLDING
(a) The Company may withhold from any payment of cash or Stock to a
Participant or other person pursuant to the Plan an amount sufficient to satisfy
any required withholding taxes, including the Participant's social security and
Medicare taxes and federal, state and local income tax with respect to income
arising from the payment of the Award. The Company shall have the right to
require the payment of any such taxes before delivering payment or issuing Stock
pursuant to the Award.
(b) At the discretion of the Committee, share tax withholding may be
included as a term of any grant of Stock Options, Stock Appreciation Rights,
Performance Restricted Shares, and Restricted Stock Award.
(c) Share tax withholding shall entitle the Participant to elect to
satisfy, in whole or in part, any tax withholding obligations in connection with
the issuance of shares of Common Stock earned under the Plan by requesting that
the Company either:
(i) withhold shares of Common Stock otherwise issuable to the
Participant, or
(ii) by accepting delivery of shares of Common Stock previously owned
by the Participant.
In either case, the Fair Market Value of such shares of Common Stock
will generally be determined on the date the Participant elects to satisfy
such withholding tax obligations in such manner.
(d) Notwithstanding any other provision hereof to the contrary, the
Committee, in its sole discretion may at any time suspend, terminate, or
disallow any or all entitlements to share tax withholding previously granted or
extended to any Participant.
6.2 DEFERRAL OF PAYMENT
At the discretion of the Committee, a Participant may be offered the right
to defer the receipt of all or any portion of Performance Restricted Shares or
Restricted Stock Awards otherwise distributable to such Participant. Such right
shall be exercised by execution of a written agreement by the Participant (i)
with respect to Restricted Stock Awards, prior to the expiration of the
applicable Restriction Period and (ii) with respect to Performance Restricted
Shares, prior to the expiration of the applicable vesting period. Upon any such
deferral, the number of shares of Common Stock subject to the deferral shall be
converted to stock units and a stock unit account shall be maintained by the
Company on behalf of the Participant. Such stock units shall represent only a
contractual right and shall not represent any interest in or title to Common
Stock. Such units shall be entitled to earn dividend equivalents. All other
terms and conditions of deferred payments shall be as contained in said written
agreement.
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ARTICLE VII -- CASH INCENTIVE AWARDS
7.1 GRANTING OF AWARDS
The Committee, in its discretion, may grant Cash Incentive Awards to
Participants. Each Cash Incentive Award shall be conditioned upon the Company's
achievement of one or more Performance Goals with respect to the Performance
Measure(s) beginning with the applicable Performance Period and set forth in the
Award agreement evidencing such Cash Incentive Award. An award may be made in
conjunction with the grant hereunder of Stock Options, Stock Appreciation
Rights, Performance Restricted Shares, Restricted Stock Awards or Stock Awards.
In making a Cash Incentive Award, the Committee shall establish a performance
level below which the Cash Incentive Award shall not be payable. The Committee
may adjust the performance goals and measurements to reflect significant
unforeseen events; provided, however, that the Committee may not make any such
adjustment with respect to any award to an individual who is then a "covered
employee" as such term is defined under Section 162(m), if such adjustment would
cause compensation pursuant to such award to cease to be performance-based
compensation under Section 162(m).
7.2 OTHER AWARD TERMS
The Committee may, in its sole discretion, establish certain additional
performance based conditions that must be satisfied by the Company, a business
unit or the Participant as a condition precedent to the payment of all or a
portion of any Cash Incentive Awards. Such conditions precedent may include,
among other things, the receipt by a Participant of a specified annual
performance rating and the achievement of specified performance goals by the
Company, business unit or Participant.
7.3 MAXIMUM AMOUNT AVAILABLE FOR AWARDS
The aggregate maximum amount payable to any one Participant pursuant to a
Cash Incentive Award shall be $125,000.
ARTICLE VIII -- OTHER PROVISIONS
8.1 ADJUSTMENT IN NUMBER OF SHARES AND OPTION PRICES
Grants of Stock Options, Stock Appreciation Rights, Performance Restricted
Shares, and Restricted Stock Awards and Stock Awards shall be subject to
adjustment by the Committee as to the number and price of shares of Common Stock
or other considerations subject to such grants in the event of changes in the
outstanding shares by reason of stock dividends, stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges, or other relevant changes in capitalization occurring after the date
of grant. In the event of any such change in the outstanding shares, the
aggregate number of shares available under the Plan may be appropriately
adjusted by the Committee.
8.2 NO RIGHT TO EMPLOYMENT
Nothing contained in the Plan, nor in any grant pursuant to the Plan, shall
confer upon any Participant any right with respect to continuance of employment
by the Company or its subsidiaries, nor interfere in any way with the right of
the Company or its subsidiaries to terminate the employment or change the
compensation of any employee at any time.
8.3 NONTRANSFERABILITY
A Participant's rights under the Plan, including the right to any shares or
amounts payable may not be assigned, pledged, or otherwise transferred except,
in the event of a Participant's death, to the Participant's designated
beneficiary or, in the absence of such a designation, by will or by the laws of
descent and distribution; provided, however, that the Committee may, in its
discretion, at the time of grant of a Nonstatutory Stock Option or by amendment
of an option agreement for an Incentive Stock
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Option or a Nonstatutory Stock Option, provide that Stock Options granted to or
held by a Participant may be transferred, in whole or in part, to one or more
transferees and exercised by any such transferee, provided further that (i) any
such transfer must be without consideration, (ii) each transferee must be a
member of such Participant's "immediate family" or a trust, family limited
partnership or other estate planning vehicle established for the exclusive
benefit of one or more members of the Participant's immediate family; and (iii)
such transfer is specifically approved by the Committee following the receipt of
a written request for approval of the transfer; and provided further that any
Incentive Stock Option which is amended to permit transfers during the lifetime
of the Participant shall, upon the effectiveness of such amendment, be treated
thereafter as a Nonstatutory Stock Option. In the event a Stock Option is
transferred as contemplated in this Section, such transfer shall become
effective when approved by the Committee and such Stock Option may not be
subsequently transferred by the transferee other than by will or the laws of
descent and distribution. Any transferred Stock Option shall continue to be
governed by and subject to the terms and conditions of this Plan and the
relevant option agreement, and the transferee shall be entitled to the same
rights as the Participant as if no transfer had taken place. As used in this
Section, "immediate family" shall mean, with respect to any person, any spouse,
child, stepchild or grandchild, and shall include relationships arising from
legal adoption.
8.4 COMPLIANCE WITH GOVERNMENT REGULATIONS
(a) The Company shall not be required to issue or deliver shares or make
payment upon any right granted under the Plan prior to complying with the
requirements of any governmental authority in connection with the authorization,
issuance, or sale of such shares.
(b) The Plan shall be construed and its provisions enforced and
administered in accordance with the laws of the Commonwealth of Pennsylvania
applicable to contracts entered into and performed entirely in such State.
8.5 RIGHTS AS A SHAREHOLDER
The recipient of any grant under the Plan shall have no rights as a
shareholder with respect thereto unless and until certificates for shares of
Common Stock are issued in the name of such recipient.
8.6 UNFUNDED PLAN
Unless otherwise determined by the Committee, the Plan shall be unfunded
and shall not create (or be construed to create) a trust or separate funds. With
respect to any payment not yet made to a Participant, nothing contained herein
shall give any Participant any rights that are greater than those of a general
creditor of the Company.
8.7 FOREIGN JURISDICTION
The Committee shall have the authority to adopt, amend, or terminate such
arrangements, not inconsistent with the intent of the Plan, as it may deem
necessary or desirable to make available tax or other benefits of the laws of
foreign countries in order to promote achievement of the purposes of the Plan.
8.8 OTHER COMPENSATION PLANS
Nothing contained in this Plan shall prevent the Company from adopting
other or additional compensation arrangements, subject to shareholder approval
if such approval is required.
8.9 TERMINATION OF EMPLOYMENT -- CERTAIN FORFEITURES
Notwithstanding any other provision of the Plan (other than provisions
regarding Change in Control, including without limitation Sections 2.5(d), 4.12
and 5.7 which shall apply in all events) and except for Performance Restricted
Shares or Restricted Stock Awards which would otherwise be free
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of restrictions and the receipt of which has been deferred pursuant to Section
6.2, a Participant shall have no right to exercise any Stock Option or Stock
Appreciation Right or receive payment of any Performance Restricted Share or
Restricted Stock Award if the Participant is discharged for willful, deliberate,
or gross misconduct as determined by the Committee in its sole discretion.
Furthermore, notwithstanding any other provision of the Plan to the contrary, in
the event that a Participant receives or is entitled to cash or the delivery or
vesting of Stock pursuant to an Award during the 12 month period prior to the
Participant's termination of employment with the Company, then the Committee, in
its sole discretion, may require the Participant to return or forfeit the cash
and/or Stock received with respect to an Award (or its economic value as of (i)
the date of the exercise of Stock Options or Stock Appreciation Rights; (ii) the
date immediately following the end of the Restricted Period for Restricted Stock
Awards or the end of the vesting period for Performance Restricted Shares, (iii)
the date of grant or payment with respect to Stock Awards or Cash Awards, as the
case may be) in the event that the Participant: (y) is discharged for willful,
deliberate or gross misconduct, as determined by the Committee in its sole
discretion, or (z) engages in any business or enters into any employment which
the Committee in its sole discretion determines to be (1) directly or indirectly
competitive with the business of the Company or (2) substantially injurious to
the Company's financial interest. A Participant may request the Committee in
writing to determine whether any proposed business or employment activity would
justify such a forfeiture. Such a request shall fully describe the proposed
activity and the Committee's determination shall be limited to the specific
activity so described. The Committee's right to require forfeiture under this
Section 8.9 must be exercised within 90 days after the discovery of an
occurrence triggering the Committee's right to require forfeiture but in no
event later than 24 months after the Participant's termination of employment
with the Company.
ARTICLE IX -- AMENDMENT AND TERMINATION
9.1 AMENDMENT AND TERMINATION
The Board of Directors may modify, amend, or terminate the Plan at any time
except that, to the extent then required by applicable law, rule, or regulation,
approval of the holders of a majority of shares of Common Stock represented in
person or by proxy at a meeting of the shareholders will be required to increase
the maximum number of shares of Common Stock available for distribution under
the Plan (other than increases due to adjustments in accordance with the Plan).
No modification, amendment, or termination of the Plan shall adversely affect
the rights of a Participant under a grant previously made to him without the
consent of such Participant.
ARTICLE X -- EFFECTIVE DATE AND DURATION OF PLAN
10.1 EFFECTIVE DATE AND DURATION OF PLAN
The Plan shall become effective as of January 1, 1999, subject to its
approval and adoption at the Annual Meeting of the shareholders on April 22,
1999. All rights granted under the Plan must be granted within ten years from
its adoption date by the shareholders of the Company. Any rights outstanding ten
years after the adoption of the Plan may be exercised within the periods
prescribed under or pursuant to the Plan.
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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 here-by authorized to
represent the undersigned at the 1999 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 22, 1999 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 BELOW)
1. ELECTION OF THREE (3) DIRECTORS
NOMINEES: For the Class A Directors Whose Terms Expire in 2002: John Amos,
G. William Ruhl and W. Garth Sprecher
| | 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.)
------------------------------------------
2. APPROVAL OF THE 1999 LONG-TERM INCENTIVE PLAN
| | For | | Against | | Abstain
3. RATIFICATION OF INDEPENDENT ACCOUNTANTS
| | 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 APPROVAL OF THE 1999 LONG-TERM INCENTIVE PLAN AND FOR THE RATIFICATION
OF INDEPENDENT ACCOUNTANTS, 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: , 1999
__________________________________
__________________________________
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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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
1999 Annual Meeting of Shareholders of D & E Communications, Inc. to be
held on April 22, 1999, 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 BELOW)
1. ELECTION OF THREE (3) DIRECTORS
NOMINEES: For the Class A Directors Whose Terms Expire in 2002: John Amos,
G. William Ruhl and W. Garth Sprecher
| | 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.)
------------------------------------------
2. APPROVAL OF THE 1999 LONG-TERM INCENTIVE PLAN
| | For | | Against | | Abstain
3. RATIFICATION OF INDEPENDENT ACCOUNTANTS
| | 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 APPROVAL OF THE 1999 LONG-TERM
INCENTIVE PLAN AND FOR THE RATIFICATION OF INDEPENDENT ACCOUNTANTS, 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: , 1999
__________________________________
__________________________________
Participant(s) sign above exactly
as name is printed on label.
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PARTICIPANT'S DIRECTION
Employee Stock Ownership Plan
To: First Union Bank, as Trustee of the Employee Stock Ownership Plan
Pursuant to your notice accompanied by the proxy material in connection with the
1999 Annual Meeting of Shareholders of D & E Communications, Inc. to be held on
April 22, 1999, 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 BELOW)
1. ELECTION OF THREE (3) DIRECTORS
NOMINEES: For the Class A Directors Whose Terms Expire in 2002: John Amos,
G. William Ruhl and W. Garth Sprecher
| | 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.)
------------------------------------------
2. APPROVAL OF THE 1999 LONG-TERM INCENTIVE PLAN
| | For | | Against | | Abstain
3. RATIFICATION OF INDEPENDENT ACCOUNTANTS
| | 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 APPROVAL OF THE 1999 LONG-TERM
INCENTIVE PLAN AND FOR THE RATIFICATION OF INDEPENDENT ACCOUNTANTS, 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: , 1999
__________________________________
__________________________________
Participant(s) sign above exactly
as name is printed on label.
<PAGE>
