WARWICK VALLEY TELEPHONE COMPANY
47 Main Street
Warwick, New York 10990
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual Meeting of Shareholders of
Warwick Valley Telephone Company will be held at 2:00 p.m. on Friday,
April 24, 19987, at the Company's office at 47 Main Street, Warwick, New
York, for the following purposes:
I. To fix the number of Directors at nine until the next Annual Meeting,
to elect three Directors in Class II;
II. To approve the selection of Auditors for the year ending December 31,
1998; and
III. To transact such other business as may properly be brought before the
Meeting or any adjournment thereof.
The holders of the Common Stock of the Company of record at the close of
business on March 31, 1998 will be entitled to vote on each of the above
matters.
By the order of the Board of Directors
P.S. Demarest, Secretary
April 10, 1998
IMPORTANT
You are cordially invited to attend the meeting in person.
Even if you plan to be present, you are urged to SIGN, DATE, AND
MAIL the enclosed proxy promptly.
If you attend the meeting, you can vote either in person or by your
proxy. All shares represented by valid proxies received prior to the meeting,
pursuant to this solicitation, and not revoked before they are exercised,
will be voted.
PROXY STATEMENT
Annual Meeting of Shareholders
Warwick Valley Telephone Company
April 10, 1998
This statement is furnished in connection with a solicitation of
proxies by the Board of Directors of Warwick Valley Telephone Company
(the "Company"), 47 Main Street, Warwick, New York 10990, to be used at
the Annual Meeting of Shareholders of the Company to be held at 2:00 p.m.
on Friday, April 24, 1998, at its offices at 47 Main Street, Warwick, New
York, and at any adjournment thereof, for the purposes set forth in the
foregoing notice of meeting. Properly executed proxies received in time
for the meeting will be voted in the manner set forth herein unless
specifically otherwise directed by the shareholder, in which case they
will be voted as directed. If the enclosed form of proxy is executed and
returned, it may nevertheless be revoked at any time by delivering notice of
revocation or a duly executed proxy bearing a later date to the Secretary of
the Company before the proxy is voted.
At the close of business on March 31, 1998, the Company had outstanding
1,800,816 shares of Common Stock, without par value (the Common Stock'), and
the then holders of record thereof will be entitled to one vote for each
share so held by them on each of the matters to be considered at the meeting
or any adjournment thereof.
Pursuant to the Company's By-Laws, the election of any director
requires an affirmative vote of a plurality and all other matters submitted
require a majority of the votes of the Common Stock represented at the
Annual Meeting in person or by proxy and entitled to vote and voting on that
proposal. Votes cast by proxy or in person at the Annual Meeting will be
counted by the persons appointed by the Company to act as tellers for the
meeting. The tellers will treat shares represented by proxies that reflect
abstentions as shares that are present and entitled to vote for purposes of
determining the presence of quorum. The tellers will treat broker
non-voters' (i.e., shares held by brokers or nominees as to which
instructions have not been received from the beneficial owners or persons
entitled to vote and with respect to which broker or nominee does not have
discretionary power to vote on a particular matter) as if the broker never
voted.
The Annual Report to Shareholders for the fiscal year ended December
31, 1997, including financial statements, was mailed together with this Proxy
Statement to all shareholders. Such report is not a part of the proxy
soliciting material. The Company will furnish without charge to any of its
shareholders upon such shareholder's written request, a copy of the Company's
Annual Report to the Securities and Exchange Commission on Form 10-K,
including the financial statements and financial statement schedules, but
without the other exhibits attached thereto. Requests for such copies should
be directed to: Philip S. Demarest, Warwick Valley Telephone Company, 47 Main
Street, Warwick, New York 10990.
The Company will bear the cost of solicitation of proxies. In addition
to the use of the mails, proxies may be solicited by officers, directors and
regular employees of the Company personally, by telephone or telegraph.
I. ELECTION OF DIRECTORS
The Company's By-Laws provide that the Board shall be divided into
three classes of at least three Directors each. Such classes are designated
Class I', Class II' and Class III'. The Directors in each Class are
elected in alternating years for three-year terms. At this Annual Meeting,
the number of Directors will be fixed at nine until the next Annual Meeting,
and three Directors will be elected to Class II for terms which will last
until the 2001 Annual Meeting of Shareholders (and until their respective
successors shall have been elected and qualified).
It is the intention of the persons named in the enclosed form of proxy
to vote each proxy for the election of each of the nominees named below
unless such authority is withheld:
CLASS II
Wisner H. Buckbee
Joeseph E. DeLuca, M.D.
Fred M. Knipp
All of the foregoing nominees are presently serving as Directors of the
Company, and their terms as such expire upon the election of Directors at
this Annual Meeting.
If any of the nominees shall be unable to serve, the proxy may be voted
with the discretionary authority for a substitute chosen by the Board of
Directors. The Company has no reason to believe that any nominee will be
unable to serve.
<PAGE>
INFORMATION ABOUT DIRECTORS AND NOMINEES FOR ELECTION AS DIRECTOR
Name, Age and Other Position, Period Served as Director and
if any, with the Company Past Business Experience
NOMINEES FOR CLASS II
(Term will expire in 2001)
Wisner H. Buckbee, 61........................Director since 1991; President of
Wisner Farms, Inc., an operating
dairy farm, since before 1993.
Joseph E. DeLuca, M.D., 47...................Director since 1993; Physician
with private practice since
before 1993; Physician Vernon
Urgent Care Center, Vernon,
N.J., since 1994.
Fred M. Knipp, 67............................Director since 1989; President
President since 1988; President and
Director of the Warwick Valley
Mobile Telephone Company, Inc.,
Warwick Valley Long Distance
Company, Inc., Warwick Valley
Networks, Inc., and Hometown
Online, Inc. (the Company's
subsidiaries').
DIRECTORS WHOSE TERMS HAVE NOT EXPIRED
(Elected in 1996 and 1997)
Earl V. Barry, 88............................Director since 1973 (Class III:
current term expires in
1999); retired since 1977; Vice
President of the Company prior
to 1977.
Howard Conklin, Jr., 70......................Director since 1965 (Class I:
Chairman of the Board current term expires in 2000);
Chairman of the Board since
1988; Chairman of the Board of
Conklin & Strong Inc., a retail
lumber and building materials
company located in Warwick,
N.Y., since before 1993.
Philip S. Demarest, 61.......................Director since 1964 (Class III:
Vice President, Secretary current term expires in
and Treasurer 1999); Vice President since
1977; Secretary since 1972;
Treasurer since 1989; Secretary
and Director Warwick Valley
Mobile Telephone Company, Inc.;
Warwick Valley Long Distance
Company, Inc.; Warwick Valley
Networks Inc.; Hometown Online,
Inc.(the Company's
subsidiaries').
Victor J. Marotta, 49........................Director since 1990 (Class
I: current term expires in
2000); Owner of Airport
Diner located in Sussex,
N.J., since 1997. Director
of Tri-States Tankers of
New York, Inc., a construction
material trucking company
located in Andover, N.J.,
since 1994. President and
principal shareholder of
Tri-States Transit Mix, Inc, a
construction materials
company located in Port Jervis,
N.Y. from before 1992 to 1994.
Henry L. Nielsen, Jr., 71....................Director since 1984 (Class I:
Vice Chairman of the Board current term expires in 2000);
Vice Chairman of the Board
since 1992; President of Nielsen
Construction Company, Inc.,
a heavy construction and earth-
moving company located in
Warwick, N.Y., since before
1993.
Corinna S. Lewis, 59.........................Director since 1994 (Class III:
current term expires in 1999);
retired public relations
consultant.
<PAGE>
THE BOARD OF DIRECTORS AND BOARD COMMITTEES
The Board of Directors held twelve regular meetings in 1997. The
Company has standing Audit, Officers' Compensation, and Nominating
Committees of the Board of Directors. Each Director attended 75% or more
of the combined total of meetings of the Board of Directors and the
Committees on which he served in 1997.
The Audit Committee held one meeting in 1997. Director Lewis is Chair-
man of the Committee, and Directors Barry, Buckbee, Conklin, DeLuca, Marotta
and Nielsen are members. The Audit Committee's duties and responsibilities
include recommending to the Board the engagement of the independent auditors,
approving the plan and scope of the audit and the fee before the audit begins
and, following the audit, reviewing the results and the independent auditors'
comments on the Company's system of internal accounting controls with the
independent auditors. The Committee also advises the Board as to the
implementation of recommendations which have been made pursuant to
suggestions of the independent auditors.
In carrying out these functions, the Audit Committee represents the
Board in discharging its responsibility of oversight, but the existence of the
Committee does not alter the traditional roles and responsibilities of the
Company's management and the independent auditors with respect to the
accounting and control functions and financial statement presentation.
The Officers' Compensation Committee held one meeting in 1997.
Director DeLuca is Chairman of the Committee and Directors Barry, Buckbee,
Conklin, Lewis, Marotta and Nielsen are members. The Committee makes
specific salary recommendations to the Board concerning officers of the
Company and reviews salaries of other management personnel.
The Nominating Committee held one meeting in 1997. Director
Demarest is Chairman and Directors Barry and Lewis are members. The
Nominating Committee recommends to the Board the names of Directors to
be recommended for election or re-election by the shareholders at the Annual
Meeting. The Nominating Committee is not precluded from considering
written recommendations for nominees from shareholders. For the 1999
Annual Meeting, such recommendations, together with a description of the
proposed nominee's qualifications and other relevant biographical information,
are to be sent to the Secretary of the Company not later than December 11,
1998.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership information as
of March 31,1998 regarding each Director, nominee for Director and Officer
and all Directors, nominees and officers as a group, with respect to each
class of the Company's outstanding equity securities. Holders of shares of
the Company's 5% Series Preferred Shares, $100 par value (5% Preferred), are
not entitled to vote those shares at the Annual Meeting for which this Proxy
Statement has been prepared.
<TABLE>
Amount and Nature
Name of of Beneficial Percent
Title of Class Beneficial Ownership (Shares) of Class
<CAPTION>
<S> <S> <C> <C>
Common Stock Barbara Barber 5,181 0.29%
Common Stock Earl V. Barry 122,040 (1) 6.78%
5% Preferred Earl V. Barry 142 2.84%
Common Stock Wisner H. Buckbee 4,914 0.27%
5% Preferred Wisner H. Buckbee 20 0.40%
Common Stock Howard Conklin, Jr. 9,720 (1) 0.54%
Common Stock Joseph E. DeLuca 900 (1) 0.05%
Common Stock Philip S. Demarest 7,974 0.44%
5% Preferred Philip S. Demarest 10 0.20%
Common Stock Herbert Gareiss, Jr. 14,720 (2),(3) 0.82%
Common Stock Fred M. Knipp 14,307 (1) 0.79%
5% Preferred Fred M. Knipp 85 1.70%
Common Stock Corinna S. Lewis 1,908 0.11%
5% Preferred Corinna S. Lewis 15 0.30%
Common Stock Henry L. Nielsen, Jr. 1,800 0.10%
Common Stock Robert A. Sieczek 3,216 (3) 0.18%
<FN>
All Directors, nominees for Director and officers as a group:
</FN>
</TABLE>
Common Stock.....186,680 10.37% of the class
5% Preferred.........272 5.54% of the class
(1) Includes shares held by wife.
(2) Includes shares held in trust for children.
(3) Includes shares which may be voted pursuant to power of attorney.
<PAGE>
As of March 31, 1998, the only holder of more than 5% of the
Company's Common Stock known to the Company (other than Earl V. Barry,
47 Main Street, Warwick, New York 10990, who is shown in the preceding
table) was Orange County Trust Company, 75 North Street, Middletown, New
York 10940, which held 140,460 shares (7.80%) as trustee or custodian. The
Trust Company has sole power to vote and dispose of 140,460 shares.
Form 4, required to be filed following the sale of company stock by
the wife of Dr. Joesph E. DeLuca, director, was filed, but late.
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by the Company
during the last three fiscal years to each executive officer.
<TABLE>
<CAPTION>
Name and Other Annual
Principal Position Year Salary($)* Compensation**
<S> <C> <C> <C>
Fred M. Knipp 1997 $182,653.67 $19,932.55
President and Director 1996 $164,069.03 $17,670.65
1995 $151,575.65 $15,127.74
Philip S. Demarest
Vice President, Secretary 1997 $128,019.19 $13,322.38
Treasurer and Director 1996 $118,622.84 $11,971.60
1995 $112,964.74 $10,115.87
Herbert Gareiss, Jr.
Vice President, Assistant 1997 $115,115.38 $ 6,093.63
Treasurer 1996 $106,530.57 $ 5,032.02
1995 $101,495.28 $ 3,940.14
*Inclues one week's salary as annual bonus for the years 1997, 1996 and 2/3
week's salary as annual bonus for the year 1995.
** Directors' fees, Company match of 401K contributions and Company-paid
life insurance premiums.
No other officers or employees received compensation during 1997 which
exceeded $100,000.
Directors of the Company receive $350, and the Chairman receives
$525, for each regular or special meeting of the Board which they attend.
Directors who are not employees of the Company also receive $175 for each
committee meeting.
</TABLE>
<PAGE>
REPORT OF OFFICERS COMPENSATION COMMITTEE
April 2, 1997
COMPENSATION PHILOSOPHY AND POLICY
We believe that a compensation program should offer performance-based
compensation to the Company's employees and reward employees whose results
enable the Company to achieve its vision. The executive compensation program
is designed to measure and enhance executive performance.
The Company 's executive compensation program has two components:
- Base Salary
- Annual Bonus
These components are designed to provide incentives and motivate key
executives whose efforts and job performance will enhance the strategic
well-being of the Company and maximize value to its shareholders. The program
is also structured to attract and retain the highest caliber executives.
The executive compensation program compensates the individual executive
officers based on the company's consolidated performance and the individual's
contribution. The program is designed to be competitive with compensation
programs offered by comparable employers.
Public information concerning salaries paid by companies in the
telecommunications and related industries is used to determine what a
comparable firm would consider an appropriate performance-based compensation
package for its executives.
Base Salary
The salaries of the executive officers, including Mr. Knipp, were
determined based on the executive's performance and an analysis of base
salaries paid executive officers having similar responsibilities in other
companies. The level of Mr. Knipp's base salary was also based upon a
subjective assessment of his individual performance and responsibilities as
well as overall corporate performance as measured by actual earnings per
share, cash flow and growth of the business. The other executive officers
have similar measurements, but the criteria used to determine their
compensation is based more on their individual responsibilities. No relative
weights are attributed to any specific measurement factors.
Annual Bonus
The Company's annual bonus plan is designed to reward all Company
employees on the basis of consolidated corporate results during the past year.
Employees including officers may be entitled to a cash bonus of up to one
week's salary based on the change in consolidated corporate earnings for the
current year as compared to the immediate previous year.
Victor J. Marotta, Chairman Dr. Joseph E. DeLuca
Earl V. Barry Corinna S. Lewis
Wisner H. Buckbee Henry L. Nielsen, Jr.
Howard Conklin, Jr.
<PAGE>
PERFORMANCE GRAPH
This graph shows, as a
percentage, the Company's cumulative
total shareholder return, assuming
reinvestment of dividends, against the
Russell 2000, a widely regarded stock GRAPH GOES
market index representing 2000 small
companies whose average market capitalzation HERE
is $255 million. A variety of factors may
be used in order to assess a corporation's
performance. This Performance Graph,
which reflects the Company's total return
against the Russell 2000, reflects
one such method. The shareholder return
values included in the graph for the Company
are based on a valuation prepared annually
for the Company by an independent appraisal
firm in connection with the Company's 401K
Plans including the Savings Plan for Management
Employees discussed later in this proxy statement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The members of the Officers Compensation Committee at the end of the
last completed fiscal year were Mr. Barry, Mr. Buckbee, Mr. Conklin, Dr.
DeLuca, Mrs. Lewis, Mr. Marotta and Mr. Nielsen. None of these persons were,
during 1997, an officer or employee of the Company or any of its subsidiaries.
Mr. Barry is a former officer and employee of the Company, having retired in
1977.
The full Board of Directors accepted the recommendation of the Officers
Compensation Committee concerning all Officers' compensation. Mr. Knipp and
Mr. Demarest are directors of the Company and, during 1997 participated in
those deliberations of the Company's Board of Directors in which the Board
accepted the Officers Compensation Committee's recommendations concerning
executive officer compensation. Neither Mr. Knipp or Mr. Demarest are members
of the Officers Compensation Committee. No executive officer of the Company
has, during 1997 or previously, served as a director or member of the
compensation committee of any other entity that has an executive officer who
serves or has served either as a member of the Officers Compensation Committee
or as a member of the Board of Directors of Warwick Valley Telephone Company.
The Company's management retirement plan (the "Plan") covers all
management employees over the age of 21 who have completed one year of
eligible service. The Plan benefits are fully vested after five years of
service. Normal retirement under the plan is at age 60. An employee's
accumulated monthly retirement benefit equals either: (1) 2-1/2% times years
of service times average monthly earnings (maximum benefit not to exceed the
lesser of 25% of average monthly earnings on a monthly basis or $10,800
annually); or (2) 1% times years of service times average monthly earnings.
Retirement benefits for employees hired prior to December 1, 1985
are determined by using the calculation that results in the highest amount.
Retirement benefits for employees hired on or after December 1, 1985 are
calculated by using the second method. Fred M. Knipp has been credited with
15 years of benefit service, (15%), in addition to the 1% per year of
employment (currently 9 1/2 years) provided by the Plan. Thirty-nine years
of benefit service are currently credited to Philip S. Demarest, and seventeen
years of benefit service are currently credited to Herbert Gareiss, Jr.
Average monthly earnings equal the highest average earnings per month during
any three consecutive twelve-month periods within the last ten twelve-month
periods immediately preceding retirement. The Plan does not provide for any
deductions for social security benefits received.
Annual benefits payable at age 60 to Plan participants are illustrated
in the following Table:
<TABLE>
Average Annual Salary
During Highest Paid
Period of Three Annual Retirement Benefits
Consecutive Years Years of Benefit Service
<CAPTION>
<C> <C> <C> <C> <C> <C>
5 10 15 20 30
$ 90,000 4,500 10,800 13,500 18,000 27,000
$ 110,000 5,500 11,000 16,500 22,000 33,000
$ 130,000 6,500 13,000 19,500 26,000 39,000
$ 150,000 7,500 15,000 22,500 30,000 45,000
$ 170,000 8,500 17,000 25,500 34,000 51,000
$ 190,000 9,500 19,000 28,500 38,000 57,000
$ 210,000 10,500 21,000 31,500 42,000 63,000
</TABLE>
The additional 15% credited to Mr. Knipp, as reported above in this section,
would result in a benefit of $40,695 per year, based on an average
compensation of $166,100, rather than the amount determined from the above
table ($15,780).
The Company's Savings Plan for Management Employees (the "Savings Plan")
covers all active management employees of the Company. Eligible employees are
permitted to make contributions of up to 15% of their total compensation
before taxes up to a statutory maximum ($10,000 in 1998) to a choice of
predefined funds maintained by the trustees of the Savings Plan. Each April
1, eligible employees may apply accumulated contributions on that date towards
the purchase of shares of the Company's common stock. The common stock will
be purchased from the Company at a price per share equal to a value
established by an independent appraisal firm, less a discount of 15%. The
appraised value for 1998 is $27.41. The Company has agreed to make matching
contributions of one dollar for every dollar contributed by a management
employee, up to a maximum employee contribution of 6% of total compensation.
Participants are fully vested in the Company's contributions to their Savings
Plan accounts immediately. The trustees are Messrs. Knipp, Demarest and
Conklin.
CERTAIN TRANSACTIONS WITH DIRECTORS
During 1996 and 1997, the Company paid a total of $193,976.00 and
$170,731.00, respectively, to John W. Sanford & Son, Inc., of which Corinna
S. Lewis, a Director of the Company is a director and shareholder. These
amounts were paid as premiums on property, liability and worker compensation
insurance policies maintained by the Company. The management of the Company
believes that the transactions with John W. Sanford & Son, Inc. are on terms
as favorable as those available from unaffiliated third parties.
II. APPROVAL OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of its Audit Committee,
has appointed the firm of Bush & Germain independent public accountants for
the Company for the year 1998. Shareholder approval of this appointment is
requested. In the event a majority of the votes cast are against approval,
the Board of Directors will reconsider the appointment. A representative of
Bush & Germain is not expected to attend the Annual Meeting.
III. OTHER MATTERS WHICH MAY COME BEFORE THE MEETING
The Board of Directors knows of no other matters which are likely to
be brought before the Annual Meeting. However, if any other matter should
properly come before this Annual Meeting it is the intention of the persons
named in the enclosed proxy to vote in accordance with their judgment on
such matter.
SHAREHOLDER PROPOSALS
Shareholders are entitled to submit proposals on matters appropriate
for shareholder action consistent with the regulations of the Securities and
Exchange Commission. If a shareholder intends to present a proposal at next
year's Annual Meeting of Shareholders, the proposal must be received by the
Secretary of the Company (at 47 Main Street, Warwick, New York 10990) not
later than December 11, 1998 in order to be included in the Company's proxy
statement and form of proxy relating to that Meeting. Under the rules of the
Securities and Exchange Commission, shareholders submitting such proposals
are required to have held shares of the Company's Common Stock amounting to at
least $1,000 in market value or one percent of the Common Stock outstanding
for at least one year prior to the date on which such proposals are submitted.
Futhermore, such shareholders must continue to own at least that amount of
the Company's Common Stock through the date on which the Annual Meeting
is held.
WARWICK VALLEY TELEPHONE COMPANY PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Barbara Barber and Colleen Shannon, with
full power of substitution, attorneys, agents and proxies to vote on behalf of
the undersigned at the Annual Meeting of Shareholders of Warwick Valley
Telephone Company to be held on Friday, April 24, 1998 at 2:00 p.m. or at any
adjournment thereof:
I. FIXING NUMBER OF DIRECTORS AT NINE until next Annual Meeting.
FOR [] AGAINST [] ABSTAIN []
The Board of Directors recommends a vote FOR this resolution.
II. ELECTION OF DIRECTORS
FOR [] all nominees listed below WITHHOLD AUTHORITY [] to vote for
(except as marked to the all nominees
contrary below) listed below
Wisner H. Buckbee Joseph E. DeLuca Fred M. Knipp
The Board of Directors recommends a vote FOR this resolution.
INSTRUCTIONS: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name in the list
above.
III. PROPOSAL TO APPROVE THE APPOINTMENT
OF BUSH AND GERMAIN as the FOR [ ] AGAINST [ ] ABSTAIN [ ]
independent public accountants of
the Company.
The Board of Directors recommends a vote FOR this resolution.
IV. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
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 as respects all items.
WITNESS my hand this.................................day of
......................................................,1998
(please date)
...........................................................
Please sign exactly as name appears hereon. When shares are held by
joint tenants, both should sign.
When signing as an attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE
