NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------------------------------
To Shareholders:
The 1997 Annual Meeting of Shareholders of Delaware Otsego Corporation,
a New York corporation (the "Company"), will be held on Saturday, June 7,
1997 at 11:00 AM at the Cooperstown High School, Linden Avenue,
Cooperstown, New York, for the following purposes:
1. To elect three Class B Directors to serve a term of four years
or until their successors are duly elected and qualified, and
one Class A Director to serve a term of three years or until
his successor is duly elected and qualified;
2. To consider and act upon a proposal to ratify the selection of
Ernst & Young LLP as the Company's auditors; and
3. To transact such other business as may properly come before
the meeting or any and all adjournments thereof.
Holders of record of the Company's common stock, par value $.125 per share,
at the close of business on April 20, 1997 will be entitled to vote at the
meeting.
By Order of the Board of Directors,
NATHAN R. FENNO
--------------------------
Nathan R. Fenno, Secretary
Dated: April 28, 1997
You are requested to fill in, sign, date and return the Proxy submitted
herewith in the return envelope provided for your use. The return of such
Proxy will not affect your right to revoke such Proxy or to vote in person
should you later decide to attend the meeting.
The Board of Directors has adopted certain changes to ARTICLE II and
ARTICLE IV of the Company's By-Laws relating to conduct of shareholder
meetings and nomination of directors which are set forth in Exhibit A to
the Proxy Statement.
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DELAWARE OTSEGO CORPORATION
1 Railroad Avenue
Cooperstown, New York 13326
(607) 547-2555
-----------------------------------
PROXY STATEMENT
-----------------------------------
1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 7, 1997
This Proxy Statement and accompanying form of proxy are being
distributed to shareholders on or about April 28, 1997, in connection with
the solicitation by the Board of Directors of Delaware Otsego Corporation,
a New York corporation (the "Company"), of proxies for use at the Annual
Meeting of Shareholders of the Company to be held on June 7, 1997 at 11:00
AM at the Cooperstown High School, Linden Avenue, Cooperstown, New
York, and at any and all adjournments thereof (the "meeting").
VOTING
- ------
On April 20, 1997, the record date for the determination of
shareholders entitled to notice of, and to vote at, the meeting (the
"Record Date"), 1,839,407 shares were issued and outstanding of the
Company's Common Stock, par value $.125 per share (the "Common Stock").
Each share is entitled to one vote.
Shareholders may vote their shares in person at the meeting.
Shareholders who do not plan to be present at the meeting are requested to
date and sign the enclosed form of proxy and return it in the postage-paid
return envelope provided. Properly executed and returned proxies will be
voted in accordance with the instructions contained therein. To the extent
that instructions are not set forth in any such proxy, it will be voted in
favor of the election of each person nominated herein to the Board of
Directors and in favor of the ratification of Ernst & Young LLP as the
Company's auditors.
Directors will be elected by a plurality of the votes cast at the
meeting, and a vote of a majority of the votes cast at the meeting will be
required to approve the ratification of Ernst & Young LLP as auditors.
Therefore, shareholders present in person or by proxy at the meeting who do
not vote, who withhold their vote from one or more nominees or who abstain
from voting will not affect the outcome of the election or the ratification
of proposals, provided that a quorum is present at the meeting. Brokers who
hold shares of Common Stock as nominees will have discretionary authority
to vote such shares if they have not received voting instructions from the
beneficial owners by the tenth day before the meeting.
Shareholders have the right to revoke their proxies by notifying
the Secretary of the Company in writing at the above address at any time
prior to the time the shares are actually voted, by executing and returning
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a proxy bearing a later date, or by attending the meeting and voting in
person.
On March 22, 1997, the Board of Directors amended the Company's
By-Laws by adding a new Section 9 to ARTICLE II to provide that (i) the
Chairman of the Board shall preside at shareholder meetings, or in the
absence of the Chairman, another director designated by the Board of
Directors; (ii) the Board of Directors shall be entitled to set rules for
conduct of shareholder meetings; and (iii) subject to such rules, the
conduct of shareholder meetings shall be governed by the chairman of the
meeting. The full text of this new By-Law section is set forth in Exhibit A.
All costs incurred in preparing and mailing this Proxy Statement
and form of proxy, and the return mailing of proxies, will be borne by the
Company.
BENEFICIAL OWNERSHIP OF COMMON STOCK
- ------------------------------------
The following table sets forth information as of the Record Date
concerning the number of shares of Common Stock beneficially owned by
those persons known by the Company to be the beneficial owners of more
than five percent of the outstanding shares of Common Stock, by those
executive officers named in the Summary Compensation Table below, and by
all directors and executive officers of the Company as a group. See the
table below under the caption Election of Directors for information
concerning the beneficial ownership of Common Stock by each director.
Amount and Nature of Percent
Name Beneficial Ownership of Class
- ----------------------------- -------------------- --------
Walter G. Rich 274,431 (1) 15.0%
1 Railroad Avenue
Cooperstown, NY 13326
C. David Soule 11,808 (2) 0.6%
Gordon R. Fuller 25,059 1.4%
Paul Garber 6,979 (3) 0.4%
Richard J. Hensel 8,930 (4) 0.5%
CSX Transportation, Inc., 110,250 (5) 6.0%
500 Water Street
Jacksonville, FL 32202
All directors and executive officers 633,771 (6) 34.5%
as a group (23 persons)
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(1) Includes 8,698 shares issuable upon exercise of stock options and
9,920 shares issuable upon conversion of Convertible Notes dated
9-22-93.
(2) Includes 11,506 shares issuable upon exercise of stock options.
(3) Includes 6,979 shares issuable upon exercise of stock options.
(4) Includes 6,830 shares issuable upon exercise of stock options.
(5) The information with respect to the beneficial ownership of Common
Stock by CSX Transportation, Inc. is derived from its statement
on Schedule 13D dated February 12, 1996, filed with the Securities
and Exchange Commission.
(6) Includes 85,066 shares issuable upon exercise of stock options and
97,219 shares issuable upon conversion of holdings of the Company's
Convertible Notes dated 9-22-93.
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EXECUTIVE COMPENSATION
- ----------------------
The following tables set forth information concerning total
compensation paid or accrued by the Company for the last three fiscal years
to the Company's Chief Executive Officer and its four other most highly
compensated executive officers employed at December 31, 1996 who had
aggregate salary and bonus in excess of $100,000 in fiscal year 1996, and
information regarding stock options for the same executive officers during
the 1996 fiscal year:
Summary Compensation Table
Annual Compensation 1/
-----------------------
All Other
Name and Compensation
Principal Position Year Salary ($) Bonus ($) ($) 2/
- ------------------------ ---- ---------- --------- -------------
Walter G. Rich 1996 176,906 0 5,380
President and Chief 1995 187,735 70,000 4,792
Executive Officer 1994 203,827 0 5,917
C. David Soule 1996 129,809 0 2,372
Executive Vice 1995 131,060 70,000 1,642
President 1994 139,905 0 4,339
Gordon R. Fuller 1996 124,927 0 0
Executive Vice 1995 N/A - -
President (since 1994 N/A - -
February, 1996)
Paul Garber 1996 115,930 0 2,066
Vice President- 1995 116,368 1,000 3,984
Marketing & Sales 1994 106,805 0 4,120
Richard J. Hensel 1996 105,528 0 3,607
Vice President- 1995 95,575 10,703 3,652
Engineering 1994 93,422 0 5,394
- ----------------------------------------------------------------------------
1/ Annual compensation deferred at election of an executive is included
in the salary or bonus column, as appropriate, for the fiscal year
in which earned.
2/ Consists of the Company's matching contribution to the Company's 401(k)
Savings Plan and insurance premiums paid by Company on life insurance
owned by such officers. In 1996, these were as follows:
401(k) Insurance Premiums
---------------- ------------------
Mr. Rich 3,588 1,792
Mr. Soule 876 1,496
Mr. Garber 608 1,458
Mr. Hensel 2,140 1,467
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Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
Number of
Securities
Underlying
Unexercised Value of Unexercised
Options at Fiscal In-the-Money Options
Year-End (#) at Fiscal Year-End ($)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Unexercisable Unexercisable 1/
- ------------------ --------------- ----------------- ----------------------
Walter G. Rich 0 8,285/0 $ 1,942/0
C. David Soule 0 10,959/0 $ 10,590/0
Gordon R. Fuller 0 0/0 0/0
Paul Garber 0 6,647/0 $ 6,407/0
Richard J. Hensel 0 6,506/0 $ 6,287/0
- ---------------------------------------------------------------------------
1/ No options were granted in 1996.
Employment Agreements
- ---------------------
The Company has an Employment Agreement with Mr. Rich pursuant to
which he is employed as President and Chief Executive Officer for a 5-year
term ending June 3, 2000, renewable at the option of the Company for an
additional five-year term. Mr. Rich's minimum salary under this Agreement
is $187,000 per year (which was voluntarily reduced by Mr. Rich in 1996),
subject to review for increase by the Board of Directors from time to time.
Mr. Rich is entitled to coverage at current levels under the Company's group
life and health insurance plans. If Mr. Rich is not elected as director or
President and Chief Executive Officer at any time during the term of the
Agreement and any renewal thereof, he shall continue to be entitled to full
salary and other benefits of the Agreement until it expires and shall be
obligated to perform consulting services for a maximum of four days per
month. Mr. Rich is also entitled under the Agreement to full compensation
during any period of long-term disability for the duration of the Agreement.
The Company has Employment Agreements with each of Messrs. Soule,
Fuller and Garber pursuant to which they are employed as Executive Vice
President, Executive Vice President and Vice President Marketing & Sales,
respectively, for five year terms ending June 3, 2000, February 1, 2001, and
June 4, 1999 respectively, at a minimum annual salary of $125,000, $145,000,
and $100,000, respectively. The agreements allow for increases in
compensation by the Board of Directors from time to time, coverage under
the Company's group life and health insurance plans, and full compensation
during any period of long-term disability for the duration of such
agreement. They further allow the Company or the employee to terminate the
agreement in the event of a "change in control" of the Company, in which
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event the Company is required to pay the employee a sum equal to the
employee's then current annual salary multiplied by the remaining term of the
Employment Agreement. For purposes of the Employment Agreement, a change
of control of the Company is defined as (i) any change of control required
to be reported to the Securities and Exchange Commission under Item 1 in a
Current Report on Form 8-K (or a successor provision thereof); provided
that no change in control shall be deemed to have occurred which involves
the acquisition, holding, voting or disposing of less than 40% of the
Company's outstanding voting securities, or (ii) the sale of all or a
substantial portion of the productive assets of the Company. For purposes
of this provision, the Company includes both jointly and severally, the
Company and The New York, Susquehanna and Western Railway Corporation, a
wholly-owned subsidiary of the Company.
Committee Report on Executive Compensation
- ------------------------------------------
The Executive Committee of the Board of Directors has been
designated to act as a Compensation Committee for determining compensation
of the Company's executive officers. The following is a general discussion
of the Committee's policies in recommending levels of executive compensation
for approval by the Board of Directors. During 1996, the Committee took no
action in regard to executive officers compensation.
For all executive officers, salary levels are based on a
combination of factors, including but not limited to relative position
within the Company, the officer's training and expertise, the Committee's
view of the level of compensation available to the officer from other
potential employers, and the financial condition of the Company. For
officers other than the Chief Executive Officer, the Committee considers
the recommendations of the Chief Executive Officer. For all officers, the
Committee considers, from time to time, the recommendations of compensation
consultants employed by the Committee.
Mr. Rich, a member of the Committee who is also the Chief
Executive Officer of the Company, abstains from any discussion or
determination of his compensation.
There currently is no direct quantitative relationship between
the Company's performance and compensation of the Chief Executive Officer
or other executives. However, the Company's weak financial performance is
the major reason that no action in regard to executive compensation was
taken in 1996.
The Company may grant stock options to its executive officers and
other employees pursuant to the terms of its 1987 and 1993 Stock Option
Plans. No such grants were made in 1996.
Robert L. Marcalus, Chairman
Charles S. Brenner
Everett A. Gilmour
Walter G. Rich
Niles F. Curtis
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Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
The directors of the Company who served as members of the Board's
Executive Committee (which acts as its Compensation Committee) with respect
to 1996 executive compensation are named above. Mr. Rich, a member of the
Executive Committee, is the Company's President and Chief Executive Officer.
Also, as noted below under the caption "Certain Transactions, Robert L.
Marcalus, the Chairman of the Executive Committee, is Chairman of the Board
of Marcal Paper Mills, Inc., which in 1996 generated freight revenue to the
Company of approximately $135,700.
PERFORMANCE GRAPH
- -----------------
The following graph compares the annual change in the cumulative
total return on the Company's Common Stock with the annual change in the
cumulative total return of the NASDAQ Total Return Index for the NASDAQ
Stock Market (U.S. Companies) ("NASDAQ U.S. Companies Index") and the
NASDAQ Total Return Industry Index for NASDAQ Trucking and Transportation
Stocks ("NASDAQ Transportation Index"). The returns are calculated
assuming that $100 was invested in the Company's Common Stock, the NASDAQ
U. S. Companies Index and the NASDAQ Transportation Index on December 31,
1991, and that all dividends were reinvested during the relevant periods.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG DELAWARE OTSEGO CORPORATION
NASDAQ US COMPANIES INDEX AND NASDAQ TRANSPORTATION INDEX
- ---------------------------------------------------------------------------
12/90 12/91 12/92 12/93 12/94 12/95
------- ------- ------- ------- ------- -------
DOC $100.00 $104.19 $125.03 $134.56 $129.23 $144.73
NASDAQ - (TRANS) $100.00 $122.38 $148.68 $134.82 $157.21 $173.50
NASDAQ - (US CO'S) $100.00 $117.45 $133.59 $130.67 $184.67 $227.16
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
-------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 and the
rules thereunder of the Securities and Exchange Commission (the "Commission")
require the Company's directors and executive officers, and persons who
beneficially own more than 10% of the Company's outstanding Common Stock,
to file with the Commission reports of ownership and changes in ownership
of Common Stock and other equity securities of the Company. Persons who
file such reports are required by the Commission's regulations to furnish
the Company with copies of all such Section 16(a) reports.
Based solely on a review of such reports furnished to the Company
and written representations that no other reports were required, the Company
believes that during the 1996 fiscal year all filing requirements applicable
to its officers, directors and persons who own more than 10% of the
Company's outstanding Common Stock were timely complied with, except that a
Form 3 Report was filed late by Gordon Fuller to report ownership of 19,444
shares; a Form 4 Report was filed late by Walter Rich to report a sale of
500 shares; and a Form 4 Report was filed late by Walter Rich to report a
sale of 3,300 shares.
ELECTION OF DIRECTORS (PROPOSAL 1)
----------------------------------
The Board of Directors is divided into four classes with terms
expiring on four successive Annual Meeting dates. At the meeting, the
following four persons are the nominees of the Board for election as
directors:
C. David Soule - Class B to serve a four year term expiring in 2001
Niles F. Curtis - Class B to serve a four year term expiring in 2001
Malcolm C. Hughes - Class B to serve a four year term expiring in 2001
Gordon R. Fuller - Class A to serve a three year term expiring in 2000
Messrs. Soule, Curtis and Hughes were elected to their present
terms of office at the Annual Meeting of Shareholders held June 5, 1993.
Mr. Fuller was appointed to his present term of office by the Board of
Directors on June 1, 1996.
The other directors of the Company, who are not up for election
at the meeting, are as follows:
Class C, to serve until the 1998 Annual Meeting of Shareholders
and until their successors are elected and qualified:
Richard A. White
Gerald D. Groff, M.D.
David B. Common
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Class D, to serve until the 1999 Annual Meeting of Shareholders
and until their successors are elected and qualified:
Robert L. Marcalus
Everett A. Gilmour
Albert B. Aftoora
Class A, to serve until the 2000 Annual Meeting of Shareholders
and until their successors are elected and qualified:
Walter G. Rich
Charles S. Brenner
Harvey Polly
No family relationships exist among the executive officers and
directors of the Company.
The directors receive $600 per Board or Committee meeting attended.
The name and age of each director are set forth on the following
pages with a brief statement of the present principal occupation of each
director, the year in which the Director was first elected a director of
the Company, and pertinent biographical information for at least the past
five years. Also stated is the amount of Common Stock beneficially owned
as of the Record Date by each director. Unless otherwise indicated, each
director has sole voting and dispositive power with respect to such Common
Stock. The information set forth on the following pages with respect to
each director has been furnished by such director.
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Common Stock
------------
No. of
Shares Year
Benefi- Became a
cially Percentage Company
Name Age Principal Occupation Owned (1) of Class Director
--------- --- ------------------------ --------- ----------- ---------
Albert B. 57 Vice President-Corridor 1,846 * 1995
Aftoora Development, CSX
Transportation, Inc.
Charles S. 41 President, 78,486 (2) 4.3% 1993
Brenner J.L. Schiffman &
Co., Inc.
David B. 36 Vice President, 50,702 2.8% 1993
Common JP Morgan & Co., Inc.
Niles F. 56 President and Owner, 5,741 (3) * 1971
Curtis Cooperstown Agway
Gordon R. 56 Executive Vice President 25,059 (4) 1.4% 1996
Fuller of the NYS&W
Everett A. 75 Chairman of the Board, 26,865 1.5% 1980
Gilmour The National Bank &
Trust Co., Norwich, NY
and NBT Bancorp, Inc.
Gerald D. 46 Senior Attending 3,932 * 1993
Groff Physician, Dept. of
Medicine, M. I. Bassett
Hospital
Malcolm C. 60 Attorney 33,458 1.8% 1970
Hughes
Robert L. 76 Chairman , Marcal Paper 34,312 1.9% 1980
Marcalus Mills, Inc.
Harvey J. 68 President & C.E.O., 6,511 * 1988
Polly H/R Industries, Inc.
Walter G. 51 President & C.E.O. of 274,431 15.0% 1968
Rich the Company and all
wholly-owned
subsidiaries
C. David 46 Executive Vice President 11,808 * 1984
Soule of the Company and all
wholly-owned
subsidiaries
Richard A. 77 Retired Business 27,274 1.5% 1970
White Executive
- -----------------
* Less than 1.0%
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(1) Includes 1,914 shares issuable upon exercise of stock options
granted under the Company's stock option plans to Messrs. Curtis,
Gilmour, Hughes, Marcalus, Polly and White; 1,736 shares to Messrs.
Aftoora, Brenner, Common and Groff; 8,698 shares to Mr. Rich; and
11,506 shares to Mr. Soule. Also includes shares issuable upon
conversion of Subordinated Notes held by Messrs. Brenner (54,562
shares), Common (19,841 shares), Gilmour (2,976 shares), Groff
(992 shares), Hughes (2,976 shares), Marcalus (4,960 shares), Rich
(9,920 shares), and White (992 shares).
(2) Includes 10,387 shares held by Mr. Brenner as custodian of minor
children, and 1,274 shares held by Mr. Brenner's wife.
(3) Excludes 132 shares held by Mr. Curtis' son, as to which shares
Mr. Curtis disclaims beneficial ownership.
(4) Excludes 1,071 shares held by Mr. Hughes' daughter, as to which
shares Mr. Hughes disclaims beneficial ownership.
Mr. Aftoora has been employed for over five years by CSX
Transportation, Inc., a Class I railroad, as Vice President-Corridor
Development since 1995 and prior thereto as Assistant Vice President and
Treasurer. Mr. Aftoora also serves on the Board of Directors of First
American Railways, Inc. and The Toledo, Peoria and Western Railroad
Corporation, a railroad which is operated and 40% owned by the Company.
Mr. Brenner has been President of J. L. Schiffman & Co., Inc., a
stock brokerage firm, since 1981. Mr. Brenner is also Chairman of the Board
of RWC Inc., a Michigan metal forming machine manufacturer, and a director
of The Toledo, Peoria and Western Railroad Corporation.
Mr. Common has been employed since May 1993 as Vice President-
Corporate Finance of J. P. Morgan & Co., Inc. Prior thereto, he was employed
by The Toronto-Dominion Bank, most recently as Director-Corporate Accounts.
Mr. Curtis has been the President and owner for over five years of
Cooperstown Agway, a distributor of hardware and related products in
Cooperstown, New York.
Mr. Fuller has been principally employed since January 1996 as
Executive Vice President of The New York, Susquehanna and Western Railway
Corporation, a wholly-owned subsidiary of the Company. Prior thereto, he
was President of Toledo, Peoria & Western Railway Corporation for over five
years.
Mr. Gilmour is Chairman of the Board of the National Bank & Trust
Company of Norwich, New York and its holding company, NBT Bancorp, Inc. Mr.
Gilmour also serves on the Boards of Directors of New York State Electric &
Gas, Inc., Preferred Mutual Insurance Co., and Norwich Aero Products Inc.
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Dr. Groff has been a senior attending physician at the Mary
Imogene Bassett Hospital in Cooperstown since 1987. Dr. Groff is also
Assistant Professor of Clinical Medicine at Columbia Presbyterian Medical
School, and Medical Director of the Community Health Plan of Bassett
Hospital.
Mr. Hughes served as the Company's Secretary from 1970 until 1984
and General Counsel from 1970 until 1981. He is currently an attorney in
private practice in Margaretville, New York.
Mr. Marcalus has been Chairman of the Board of Marcal Paper
Mills, Inc. for over five years.
Mr. Polly has been President and Chief Executive Officer of H/R
Industries, Inc. for over five years. Prior thereto, he was Chairman of
Hanover Bank of Florida and President and Chief Executive Officer of
Railway Freight Car Services. Mr. Polly is also President and Chief
Executive Officer and a director of Banyan Hotel Investment Trust.
Mr. Rich has been President and Chief Executive Officer of the
Company since 1971. He joined the Company in 1966 as General Manager.
Mr. Rich is also a director of Norwich Aero Products, Inc., New York State
Business Development Corp., Security Mutual Life Insurance Company of New
York, New York State Electric and Gas Company, and The Toledo, Peoria and
Western Railroad Corporation. Mr. Rich was appointed in 1993 to the New
York State Public Transportation Safety Board.
Mr. Soule has been Executive Vice President and Chief Operating
Officer of the Company since 1983.
Before retiring in 1989, Mr. White was President of Bruce Hall
Corp., Cooperstown, New York, and Bruce Hall-Richfield, Inc., Richfield,
New York, companies which sell building supplies. Mr. White is also a
director of Northeast Treaters, Inc.
Certain Transactions
- --------------------
During 1996, Marcal Paper Mills, Inc., of which Mr. Marcalus is
Chairman of the Board and Chief Executive Officer, generated freight revenue
to the Company of approximately $135,700. Management of the Company
believes that the terms of the foregoing were no less favorable to the
Company than if Mr. Marcalus had not been affiliated with the Company.
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Directors and Officers Liability Insurance
- ------------------------------------------
Pursuant to Section 726 of the New York Business Corporation Law,
the Company hereby reports that on February 12, 1997, a policy of directors
and officers liability insurance in the aggregate amount of $5,000,000 was
obtained for a one-year term with Continental Casualty Company at a cost of
$63,500 covering all directors and officers of the Company and affiliated
companies serving at any time during the term of the policy.
Board Meetings and Attendance of Directors
- ------------------------------------------
The Company's Board of Directors held four (4) meetings during 1996.
The Company's Board of Directors has two Committees, whose members are
selected in June of each year immediately after the Annual Meeting of
Shareholders. The Committees and their functions are as follows:
The Audit Committee is responsible for supervising the audit of
Company financial statements and related material and internal accounting
controls, for reviewing any potential conflict of interest situations, and
providing guidance on ethical and environmental matters. The current
members of the Audit Committee are Malcolm C. Hughes, Chairman, Gerald D.
Groff, Albert B. Aftoora and C. David Soule. The Audit Committee met four
(4) times during 1996.
The Executive Committee generally performs the functions of the
Board of Directors between meetings of the Board of Directors, to the
extent permitted by law, and acts as a Compensation Committee for
determining compensation of the Company's executive officers. The current
members of the Executive Committee are Robert L. Marcalus, Chairman,
Charles S. Brenner, Everett A. Gilmour, Walter G. Rich and Niles F. Curtis.
The Executive Committee met twelve (12) times in 1996.
The Board of Directors has designated the Executive Committee to
consider possible candidates for membership on the Board of Directors. The
Executive Committee will consider recommendations from shareholders for
nominees for election to the Board of Directors, provided such
recommendations, together with the following:
(i) the name and address of the shareholder who intends to make the
nomination and of the person or persons to be nominated;
(ii) a representation that such shareholder is a holder of record of
stock of the Company entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice;
(iii) a description of all arrangements or understandings between such
shareholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination
or nominations are to be made by such shareholder;
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(iv) such other information regarding each nominee proposed by such
shareholder as would have been required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and
Exchange Commission had each nominee been nominated, or intended
to be nominated by the Board of Directors; and
(v) the consent of each nominee to serve as a director of the Company
if elected. The chairman of a shareholder meeting may refuse to
acknowledge the nomination of any person not made in compliance
with the foregoing procedure.
are received by the Secretary of the Company, (a) in the case of an annual
meeting of shareholders, not later than the date specified in the most
recent proxy statement of the Company as the date by which shareholder
proposals for consideration at the next annual meeting of shareholders must
be received (see "Other Business" below), and (b) in the case of a special
meeting of shareholders at which directors are to be elected, not later
than the tenth day after the giving of notice of such meeting. These
procedures were formally added to ARTICLE IV of the Company's By-Laws by
the Board of Directors on March 22, 1997. The full text of this By-Law is
set forth in Exhibit A.
Each Director attended 75% or more of the aggregate of all
meetings of the Board of Directors and Committees on which he served (held
during the period for which he served) during 1996, except for Harvey
Polly, who attended less than 75% of such meetings.
PROPOSAL TO APPROVE APPOINTMENT OF
AUDITORS OF THE COMPANY (PROPOSAL 2)
- ---------------------------------------------------------------------------
At its meeting on March 22, 1997, the Board of Directors of the
Company, upon the recommendation of its Audit Committee, engaged the
accounting firm of Ernst & Young LLP as independent accountants for the
Company for 1997, subject to ratification by shareholders. Ernst & Young
LLP has acted as the Company's independent auditors since 1987. Management
intends to introduce a resolution at the Annual Meeting that its
designation of Ernst & Young LLP be ratified and approved by the
shareholders. If such designation is not ratified and approved by the
shareholders, the Board of Directors, with the advice of the Audit
Committee, will consider the appointment of other independent accountants.
Representatives of Ernst & Young LLP are expected to be present
at the meeting, will be given opportunities to make statements if they
desire to do so, and will be available to respond to appropriate questions
from shareholders.
The Board of Directors recommends a vote FOR ratification of
Ernst & Young LLP as the Company's independent accountants.
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<PAGE>
OTHER BUSINESS
- --------------
The Board of Directors knows of no other matters which may
properly be, or are likely to be, brought before the meeting. If other
proper matters are introduced, the persons named in the enclosed proxy will
vote the shares represented by such proxy as the Board recommends.
If a proposal of a shareholder for the 1998 Annual Meeting of
Shareholders is to be considered for inclusion in the Company's Proxy
Statement for that meeting, such proposal must be received by the Company
no later than December 29, 1997.
A copy of the Company's 1996 Annual Report on Form 10-K (except
exhibits) filed with the Securities and Exchange Commission will be
furnished to any shareholder on written request addressed to Nathan R.
Fenno, Corporate Secretary, Delaware Otsego Corporation, 1 Railroad Avenue,
Cooperstown, New York 13326.
Date: April 28, 1997 By Order of the Board of Directors,
NATHAN R. FENNO
-----------------------------------
Nathan R. Fenno, Secretary
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<PAGE>
EXHIBIT A
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ARTICLE II, Section 9: Conduct of Meetings:
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The Chairman of the Board of Directors shall preside at each
meeting of shareholders. In the absence of the Chairman, the meeting shall
be chaired by a director designated by the Board of Directors. The Board of
Directors shall be entitled to make such rules or regulations for the
conduct of meetings of shareholders as it shall deem necessary, appropriate
or convenient. Subject to such rules and regulations of the Board of
Directors, if any, the chairman of the meeting shall have the right and
authority to prescribe such rules, regulations and procedures and to do all
such acts as, in the judgment of the chairman, are necessary, appropriate
or convenient for the proper conduct of the meeting, including without
limitation establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to shareholders
of record of the Company and their duly authorized and constituted proxies,
and such other person as the chairman shall permit, restrictions on entry
to the meeting after the time fixed for the commencement thereof,
limitations on the time allotted to questions or comment by participants
and regulation of the opening and closing of the polls for balloting on
matters which are to be voted on by ballot, unless, and to the extent,
determined by the Board of Directors or the chairman of the meeting,
meetings of shareholders shall not be required to be held in accordance
with rules of parliamentary procedure.
ARTICLE IV, Section 6: Notification for Nominations:
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Nominations for the election of directors may be made by the
Board of Directors or by any shareholder entitled to vote for the election
of directors. Any shareholder entitled to vote for the election of
directors at a meeting may nominate persons for election as directors only
if written notice of such shareholder's intent to make such nomination is
given, either by personal delivery or by United States mail, postage
prepaid, to the Secretary of the Company not later than (i) with respect to
an election to be held at an annual meeting of shareholders, not later than
the date specified in the most recent proxy statement of the Company as the
date by which shareholder proposals for consideration at the next annual
meeting of shareholders must be received, and (ii) with respect to an
election to be held at a special meeting of shareholders for the election
of directors, the close of business on the tenth day following the date on
which notice of such meeting is first given to shareholders. Each such
notice shall set forth: (a) the name and address of the shareholder who
intends to make the nomination and of the person or persons to be nominated,
(b) a representation that such shareholder is a holder of record of stock
of the Company entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to nominate the person or persons
specified in the notice, (c) a description of all arrangements or
understandings between such shareholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by such shareholder, (d) such
other information regarding each nominee proposed by such shareholder as
would have been required to be included in a proxy statement filed pursuant
to the proxy rules of the Securities and Exchange Commission had each
nominee been nominated, or intended to be nominated by the Board of
Directors, and (e) the consent of each nominee to serve as a director of
the Company if elected. The chairman of a shareholder meeting may refuse
to acknowledge the nomination of any person not made in compliance with
the foregoing procedure.
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PROXY
-----
DELAWARE
OTSEGO PROXY OF DELAWARE OTSEGO CORPORATION
CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE
1 Railroad Avenue BOARD OF DIRECTORS FOR THE ANNUAL MEETING
Cooperstown, NY 13326 OF SHAREHOLDERS TO BE HELD ON JUNE 7, 1997.
The undersigned hereby appoints Nadine Steckler and Kathy Perry,
jointly and individually with full power of substitution, as proxies to
vote all shares of common stock which the undersigned may be entitled to
vote at the Annual Meeting of Shareholders of DELAWARE OTSEGO CORPORATION
(the "Company") to be held on June 7, 1997 or adjournments thereof, on Items
1 and 2 as specified on the reverse side hereof (with discretionary
authority under Item 1 to vote for a new nominee if any nominee has become
available) and on such other matters as may properly come before the meeting.
You are encouraged to specify your choices by marking the
appropriate boxes, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. The persons
appointed above cannot vote your shares unless you sign and return this
card.
This Proxy, when properly executed, will be voted as you specify
below. If you do not specify otherwise, the Proxy will be voted FOR Items
1 and 2.
SHAREHOLDERS ARE URGED TO VOTE AND TO SIGN, DATE AND RETURN
THIS PROXY PROMPTLY IN THE ENVELOPE PROVIDED.
(Continued on Other Side)
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<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 and 2.
ITEM 1. ELECTION OF DIRECTORS. Nominees for Director:
C. David Soule, Niles F. Curtis, Malcolm C. Hughes, Gordon R. Fuller
FOR all nominees listed WITHHOLD AUTHORITY to vote
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FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEES:
------------------------------------------------------
ITEM 2. PROPOSAL TO APPROVE THE APPOINTMENT OF Ernst & Young LLP as
the independent public accountants of the Company.
FOR AGAINST ABSTAIN
------- ------- -------
DATED:
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(Please sign exactly as your name or names appear
hereon. If signing as an attorney, executor,
administrator, trustee or guardian, or on behalf of
a corporation, give your full title as such.
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