1999
CONESTOGA ENTERPRISES, INC.
P R O X Y
THIS PROXY IS SOLICITED ON
BEHALF OF THE MANAGEMENT OF
NUMBER OF SHARES CONESTOGA ENTERPRISES, INC.
Please sign and return
promptly in the enclosed
envelope which requires no
postage if mailed in the U.S.A.
The undersigned hereby appoint(s) Richard G. Weidner and John M. Sausen, or
in the absence of either of them, the one which may be present, or
, as Proxies, each with the power to
appoint his or her substitute, and hereby authorizes them to represent and to
vote, as designated below, all the shares of common stock of Conestoga
Enterprises, Inc. held of record by the undersigned on April 1, 1999, at the
annual meeting of shareholders to be held on May 1, 1999, or any adjournment
thereof.
1. ELECTION OF DIRECTORS WITHHOLD AUTHORITY TO VOTE
FOR all nominees listed FOR all nominees listed
below below
(except as marked to the
contrary below)
John R. Bentz, James H. Murray and Robert M. Myers
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below.)
2. Proposal to approve an amendment of the Company's Articles of Incorporation
increasing the number, and decreasing the par value, of the Company's
authorized common shares from ten million shares, $5.00 par value to twenty
million shares, $1.00 par value.
FOR AGAINST ABSTAIN
3. Proposal to approve the 1999 Stock Option Plan.
FOR AGAINST ABSTAIN
4. Proposal to ratify the appointment of Beard & Company, Inc., as independent
accountants of the Company for 1999.
FOR AGAINST ABSTAIN
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
and the shares represented hereby will be voted as specified. IF NO
SPECIFICATION IS MADE, SUCH SHARES WILL BE VOTED FOR PROPOSALS 1, 2, 3 and 4.
If any of such nominees for director is unavailable to serve as director, the
proxy or proxies will vote for another person or persons designated by the
Board of Directors of the Company. This proxy may be revoked at any time
prior to its exercise.
DATED: Sign Here (SEAL)
Sign Here (SEAL)
When signing as attorney in fact, administrator,
executor, trustee, guardian or custodian, please
give full title as such. If the stock is
registered in more than one name, each joint
owner should sign. If the signer is a
corporation, sign in the full corporate name by
a duly authorized officer.
CONESTOGA ENTERPRISES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 1, 1999
TO THE SHAREHOLDERS OF THE COMPANY:
The annual meeting of the Shareholders of CONESTOGA ENTERPRISES, INC. (the
"Company") will be held at the Office of the Company, 202 East First Street,
Birdsboro, Pennsylvania, 19508, on Saturday, May 1, 1999, at 10:00 A.M., for
the following purposes:
1. To elect 3 Class I Directors for a term of 3 years.
2. To approve an amendment of the Company's Articles of Incorporation
increasing the number, and decreasing the par value, of the Company's
authorized common shares from ten million shares, $5.00 par value, to twenty
million shares, $1.00 par value.
3. To approve the 1999 Stock Option Plan.
4. To ratify the appointment of Beard and Company, Inc., as independent
accountants of the Company for 1999.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
You are requested to vote, date and sign the enclosed proxy and return it
in the enclosed envelope at your earliest convenience. If you attend the
meeting and decide you want to vote in person, the proxy will not be used.
By order of the Board of Directors
Date: April 9, 1999 Kenneth A. Benner, Secretary
PROXY STATEMENT
1999 ANNUAL MEETING OF SHAREHOLDERS
SOLICITATION OF PROXY, REVOCABILITY AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board") of Conestoga Enterprises, Inc., a Pennsylvania corporation (the
"Company"), for use at the 1999 annual meeting of shareholders to be held on
May 1, 1999 (the "Annual Meeting"). Only shareholders of record on April 1,
1999 will be entitled to vote at that meeting. On March 1, 1999, the Company
had 4,687,929 shares of Common Stock issued and outstanding.
The Company's principal executive offices are located at 202 East First
Street, Birdsboro, Pennsylvania 19508. The approximate date on which the
Proxy Statement and the accompanying proxy are first being sent to
shareholders is April 9, 1999.
Proxies which are validly executed by shareholders and received by the
Company prior to the meeting will be voted in accordance with the instructions
on the proxy. A shareholder may substitute the name of another person on the
accompanying proxy in place of those persons presently named as proxies. In
order to vote, a substitute must present adequate identification to the
Secretary before the voting occurs.
Voting
In all matters other than the election of directors, each share of Common
Stock outstanding on the record date is entitled to one vote. The holders of
a majority of the outstanding shares must be present in person or represented
by proxy at the Annual Meeting in order to constitute a quorum for the
transaction of business.
Each Shareholder has cumulative voting rights for the election of
Directors. This is the right to cast as many votes in the aggregate as
shall equal the number of shares held by him or her multiplied by the
number of directors to be elected. Each Shareholder may cast the whole
number of his or her votes for 1 candidate or distribute such votes among
2 or more candidates.
The affirmative vote of the holders of a plurality of votes cast will
be required to elect directors. Therefore, the nominees receiving the
highest number of votes cast for the number of positions to be filled
shall be elected. The affirmative vote of the holders of the majority
of the votes cast will be required to act on all other matters to come
before the Annual Meeting.
Votes cast by proxy or in person at the Annual Meeting will be tabulated
by the inspectors of election appointed for the meeting, who will also
determine whether or not a quorum is present. Shares represented by each
duly signed proxy will be voted as directed by the shareholder on the proxy.
If no direction is given on a duly signed proxy, the shares subject to that
proxy will be voted in favor of the proposals described in this Proxy
Statement. The shares will be voted in the judgment of the persons named in
the proxy upon such other business as may properly come before the meeting.
Shares represented by proxies submitted by brokers who indicate that they do
not have authority to vote on a particular matter will be counted as shares
that are present for purposes of determining the presence of a
quorum, but as unvoted (i.e., not cast) for purposes of determining the
approval of the particular matter in question.
Revocability of Proxy
Any person giving a proxy in the form accompanying this Proxy Statement
has the power to revoke it at any time before its exercise. It may be revoked
by filing with the Secretary of the Company an instrument of revocation or by
the presentation at the meeting of a duly executed proxy bearing a later date.
It also may be revoked by attendance at the meeting and election to vote in
person. Attendance at the Annual Meeting, in and of itself, will not
constitute revocation of a proxy.
Solicitation
The Company will bear the entire cost of the solicitation of proxies,
including the costs of preparing, assembling, printing and mailing this Proxy
Statement, the accompanying proxy and any additional material which may be
furnished to shareholders. Copies of solicitation material will be furnished
to brokerage houses, fiduciaries and custodians to forward to beneficial
owners of stock held in the names of such nominees. In addition to use of
the mail, proxies may be solicited by directors, officers and regular
employees of the Company, without additional compensation, in person or by
telephone.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of 9 directors, serving in
three classes of 3 directors each, the respective terms of which expire
alternately over a three-year period. One of the three classes is elected
each year to succeed the directors whose terms are expiring. One of the
purposes of the meeting is to elect 3 Class I Directors to the Board. The
nominees for Class I directors are John R. Bentz, James H. Murray and
Robert M. Myers.
Unless otherwise specified by the stockholders, the shares represented by
the proxies will be voted, either cumulatively or noncumulatively, in the
discretion of the proxy holders, for the nominees for Class I directors. If
any nominee should become unable to serve, an event not anticipated, the
proxies will be voted for another person designated by the present Board. The
3 nominees with the highest number of votes will be elected to the Board.
Vacancies in the Board may be filled by the Board, and any director chosen to
fill a vacancy would hold office until the next election of the class for
which such director had been chosen.
Information with respect to each nominee and each director whose term will
continue after the Annual Meeting is set forth in the following sections. Such
information includes summaries of their background, business experience and
principal occupations with the Company, its subsidiaries, and otherwise. The
Company's two telephone utility subsidiaries are Conestoga Telephone and
Telegraph Company and Buffalo Valley Telephone Company, referred to herein as
"CT&T" and "BVT", respectively.
Information Concerning Nominees For Election as Directors
Class I (Term Expires in 2002)
John R. Bentz; Age 63; Chairman of the Board
Mr. Bentz has been a member of the Board since 1989, and has been Chairman
of the Board since May, 1998. He retired as President in May, 1998, a
position he had held since May, 1996. He was employed by CT&T continuously
from 1958 until his retirement on June 1, 1998. He is now serving as a
consultant to the Company. He has been a member of CT&T's board of directors
since October, 1986.
James H. Murray; Age 70; Vice President; "Of Counsel" to Barley, Snyder, Senft
& Cohen, LLC, Attorneys-at-Law, Reading, PA
Mr. Murray has been a member of the Board and a Vice President of the
Company since June, 1989. He has been a member of the board of directors of
CT&T since 1957 and has been a Vice President of CT&T since June, 1988. He
retired as a partner of the law firm of Miller and Murray, LLP, Reading,
Pennsylvania, on December 31, 1998, and is now "Of Counsel" to the law firm of
Barley, Snyder, Senft & Cohen, LLC, legal counsel to the Company.
Robert M. Myers; Age 51; Director of Personnel, Reading Hospital and Medical
Center, Reading, PA
Mr. Myers has been a member of the Board since 1996. He is the Director
of Personnel of the Reading Hospital and Medical Center where he has been
employed since 1982.
Information Concerning Directors Who Are Not Standing for Election at the 1999
Annual Meeting
Class II (Term Expires in 2001)
Kenneth A. Benner; Age 51; Secretary/Treasurer
Mr. Benner has been a member of the Board and the Company's
Secretary/Treasurer since June, 1989. He has been a member of the board of
directors of CT&T since 1972, and its Secretary/Treasurer since 1982. He has
been employed by CT&T since 1974. In June, 1996, Mr. Benner was appointed
Vice President and General Manager of BVT.
F. M. Brown; Age 74; President of F. M. Brown's Sons, Inc., Feed and Flour
Manufacturers, Sinking Spring, PA
Mr. Brown has been a member of the Board since June, 1989. He served as
the Company's President from June, 1989, until May, 1996, when he relinquished
his position as President and was elected Chairman of the Board. He served
as Chairman of the Board until May, 1998. Mr. Brown has been a member of the
board of directors of CT&T since 1972, and served as its President from 1979
until May, 1996. He is President of F.M. Brown's Sons, Inc., feed and flour
manufacturers, Sinking Spring, Pennsylvania.
Donald R. Breitenstein; Age 58; Controller
Mr. Breitenstein has been a member of the Board and the Company's
Controller since June, 1989. He has been employed by CT&T since 1962. He was
appointed CT&T's Controller in 1986, and to its board of directors in 1987.
Class III (Term Expires in 2000)
Richard G. Weidner; Age 72; Retired
Mr. Weidner has been a member of the Board since June, 1989. He was
appointed to the board of directors of CT&T in June 1988. He retired as
President of Beard and Company, Inc., Certified Public Accountants, in 1986.
Jean M. Ruhl; Age 57; Retired
Ms. Ruhl has been a member of the Board since November, 1996. She served
as a member of the board of directors of BVT from 1990 until its acquisition
by the Company in 1996. She is retired, having served as Chief Financial
Officer and Manager of Solar Master Film Corporation from 1974 until 1990.
John M. Sausen; Age 65; Self-Employed Accountant, Oley, PA
Mr. Sausen has been a member of the Board since June, 1989. He has been a
member of the board of directors of CT&T since 1974. He is an accountant with
an office in Oley, PA.
BOARD MEETINGS AND COMMITTEES
The Board during the last fiscal year had 12 regularly scheduled meetings
and 2 special meetings. Each incumbent director attended 75% or more of the
total number of meetings of the Board and the Committees of which he was a
member.
The Board has a standing audit committee of which Mr. Sausen, Mr. Weidner
and Ms. Ruhl are members. This committee reviews with the independent
auditors the plan and results of the auditing engagement. The audit committee
held 4 meetings during the last fiscal year.
The Board has an executive committee of which Mr. Sausen, Mr. Murray and
Mr. Brown are members. This committee reviews and makes recommendations to
the Board of Directors on matters of major policy. The executive committee
held 7 meetings during the last fiscal year.
The Board has a compensation committee of which Mr. Sausen, Mr. Murray and
Mr. Brown are members. This committee reviews at least annually the salaries
of the executive management and makes appropriate recommendations to the Board
of Directors. The compensation committee held one meeting during the last
fiscal year.
The Board does not have a nominating committee.
Director Compensation
During 1998, the Company paid each non-employee member of the Board an
annual director's salary of $6,000. In addition, the Company paid them a fee
of $750 for each meeting of the Board he or she attended and a fee of $400 for
each committee meeting he or she attended. The directors were not paid
additional compensation for attending board or committee meetings of the
Company's subsidiaries.
Messrs. Benner and Breitenstein are employees of the Company or one of its
subsidiaries and, as such, do not receive additional compensation for serving
on the Board and the boards of its subsidiaries or for attending directors'
and committee meetings. Mr. Bentz did not receive compensation as a Board
member prior to his retirement on June 1, 1998.
Through May, 1998, the Company paid $2,631 to Mr. Brown for his services
as Chairman of The Board.
Certain Business Relationships
Mr. Murray was a partner of the law firm of Miller and Murray, LLP. The
Company retained Miller and Murray, LLP, in 1998, and paid it $201,335 in
legal fees. Mr. Murray retired from the practice of law on December 31, 1998.
Miller and Murray, LLP, merged with the law firm of Barley, Snyder, Senft &
Cohen, LLC, effective January 1, 1999, which firm the Company expects to
retain in 1999. Mr. Murray is now "Of Counsel" to the firm of Barley,
Snyder, Senft & Cohen, LLC.
SECURITY OWNERSHIP OF MANAGEMENT
The following table reflects, as of March 1, 1999, the total Common Stock
ownership of the Company by each director and reporting officer, and by all
directors and executive officers as a group. The Company's voting Common
Stock is its only class of voting equity securities. Each named individual
and all members of the group exercise sole voting and investment power.
Amount
Name and Nature of
of Beneficial Percent
Beneficial Ownership of
Owner (See 1 and 2 Below) Class
Kenneth A. Benner 25,200 .54
John R. Bentz 20,079 .43
Donald R. Breitenstein 6,817 .15
F. M. Brown 99,220 2.12
James H. Murray 37,049 .79
Robert M. Myers 3,732 .08
Jean M. Ruhl 50,000 1.07
John M. Sausen 89,989 1.92
Richard G. Weidner 2,889 .06
Thomas C. Keim 33,937 .72
Albert H. Kramer 714 .02
Joseph J. Laffey 239 .01
Harrison H. Clement, Jr. 15,249 .33
All Directors and Officers 389,557 8.22
as a Group (15 persons)
1. Under the proxy rules of the Securities and Exchange Commission, a person
who directly or indirectly has or shares voting power and/or investment power
with respect to a security is considered a beneficial owner of the security.
Shares as to which voting power and/or investment power may be acquired
within 60 days are also considered as beneficially owned under these proxy
rules.
2. Included in the shares set forth in the table above are (a) shares
beneficially owned by the director, or officer, his wife, minor children and
relatives living in his house and includable in such table under rules of the
Securities and Exchange Commission, and (b) shares which are deemed to be
beneficially owned because the director or officer has voting power or power
of disposition with respect to the shares. Share amounts are reported as of
March 1, 1999 and percentages of share ownership are calculated based upon
4,687,929 shares of Common Stock of the Company outstanding as of that date.
The information in the table is based upon data furnished to the Company by,
or on behalf of, the persons referred to in the table.
EXECUTIVE COMPENSATION
Report of the Compensation Committee
Executive Compensation Program
The Company's executive compensation program is administered by the Board's
Compensation Committee, composed of Mr. Brown, Mr. Murray and Mr. Sausen.
The executive compensation administered by the Committee is primarily that
of John R. Bentz, President and Chief Executive Officer (January, 1998 until
May, 1998); Albert H. Kramer, Executive Vice President (January, 1998 until
May, 1998) and President and Chief Executive Officer (May 1998 until the
present); Thomas C. Keim, Vice President Telecom Group;; Joseph J. Laffey,
Vice President of Regulatory and External Affairs; Donald R. Breitenstein,
Controller; and Harrison H. Clement, Jr., President, Infocore, Inc.
The Company's executive compensation program consists of a base salary and
a potential annual cash incentive award, which is designed to achieve the
following objectives:
(1) to attract and retain key executives with outstanding abilities and
to motivate them to perform to the full extent of those abilities;
(2) to support the Company's business mission of providing superior
telecommunications services to its customers, continually increasing
shareholder value and treating its employees fairly in the process; and
(3) linking executive compensation to increased corporate financial
performance and profitability.
Base Compensation
Base salaries of executive officers are determined by evaluating the
responsibilities of their positions and by comparing salaries paid in the
competitive marketplace to executives with similar experience and
responsibilities. The Company employs an outside compensation consulting firm
to review annually these comparisons and update the salary ranges for all
salary grades. The Compensation Committee considers both financial and non-
financial performance measures in making salary adjustments.
In March 1998, the Committee reviewed Mr. Bentz's performance during 1997
and made a favorable assessment based upon strong financial growth at both
local exchange carriers, progress towards bringing the PCS system online, and
successfully merging Infocore as a wholly owned subsidiary of the Company.
However, due to Mr. Bentz's stated intention to retire in June, 1998, no
compensation adjustment was made at that time. Mr. Kramer also received a
favorable review and was awarded a 4.2% merit increase, resulting in an annual
base salary of $140,500.
Incentive Compensation
The Compensation Committee believes that executives should have a greater
portion of their compensation at risk than other employees. In 1996, the
Company instituted an annual executive incentive plan. This plan allows the
participants to earn an annual bonus of 10-30% of base salary if certain
corporate financial goals are met. The goals are set annually by the Board of
Directors. In 1998, the goals focused on increasing overall corporate
operating income and cash flow. If these goals are not met, there is
no payment for that year. Based upon the Company's financial performance in
1998, plan participants (including Mr. Kramer) received incentive bonuses
equal to 10% of base pay.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE COMPANY'S BOARD OF DIRECTORS:
John M. Sausen
James H. Murray
F. M. Brown
Compensation Committee Interlocks and Insider Participation
Messrs. Brown, Murray and Sausen are the members of the Company's
Executive Committee.
From January until May, 1998, Mr. Brown served as Chairman of the Board.
He was President of the Company from June, 1989, until May, 1996, and
President of CT&T from 1979 until May, 1996. Mr. Brown has participated in
all discussions and decisions concerning executive compensation.
Mr. Murray is a Vice President of the Company. During 1998, Mr. Murray
was a partner of the law firm of Miller and Murray, LLP, 542 Court Street,
Reading, Pennsylvania, which firm performed legal services for the Company and
its subsidiaries. Mr. Murray is not a full time employee of the Company and is
not compensated as such. Mr. Murray participates in all discussions and
decisions concerning executive compensation.
Summary of Cash and Certain Other Compensation
The following table sets forth information concerning annual and long term
compensation for services in all capacities to the Company during the years
ended December 31, 1998, 1997 and 1996 of those persons who were, at December
31, 1998, the chief executive officer, or had served as such at any time
during 1998, and the four other most highly compensated executive officers of
the Company whose compensation in 1998 exceeded $100,000 (the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) d) (e) (f) (g) (h) (i)
Other Securities
Annual Restricted Under-
Name and Compen- Stock lying LTIP All Other
Principal sations Awards Option/ Payouts Compen-
Position Year Salary($) Bonus($) ($) ($) SARs(#) ($) sation($)
(1) (2) (3)(4)
John R.
Bentz 1998 $119,812 $ 7,725 None 0 0 0 $ 13,388
President 1997 156,319 18,653 None 0 0 0 $ 22,757
(Until) 1996 147,832 25,371 None 423 900 0 $ 21,435
May, 1998)
Albert H. 1998 $139,513 $13,480 None 0 0 0 $ 6,967
Kramer, 1997 132,302 15,300 None 0 0 0 6,898
President 1996 121,948 21,000 None 0 0 0 5,488
(from May,
1998)
Executive
Vice
President
(until May,
1998)
Joseph J.
Laffey 1998 $120,548 $11,600 None 0 0 0 $ 6,043
Vice 1997 117,072 13,750 None 0 0 0 4,307
President, 1996 77,604 19,250 None 0 0 0 2,817
Regulatory
and External Affairs
Donald R. 1998 $111,965 $10,750 None 0 0 0 $16,818
Breitenstein 1997 108,794 12,938 None 0 0 0 16,570
Controller 1996 103,000 17,672 None 94 200 0 14,935
Thomas C.
Keim, 1998 $107,473 $10,400 None 0 0 0 $ 5,400
Vice 1997 105,230 12,500 None 0 0 0 5,632
President 1996 98,176 15,844 None 212 450 0 4,159
Telecom-
munications Group
Harrison
H.Clement, 1998 $112,742 $ 5,500 None 0 0 0 $ 4,990
Jr. 1997 102,000 12,000 None 0 0 0 2,868
President
and CEO of Infocore, Inc.
1. Mr. Bentz' salary for 1998 includes salary as President prior to his
retirement on May 31, 1998, totaling $76,062; consulting fees paid after
June 1,1998, totaling $31,000; and director's fees paid for his services as
director after June 1, 1998, totaling $12,750.
2. The bonus is an incentive bonus paid to each of the Named Executive
Officers under the Company's annual executive incentive plan instituted in
1996.
3. "All Other Compensation" includes amounts accrued during each of the
years stated in the Table for the accounts of Messrs. Bentz and Breitenstein
under the employment contracts, described under the heading "Employment
Contracts", between each of them and CT&T.
4. "All Other Compensation" includes amounts contributed for the
accounts of the Named Executive Officers under the Company's 401(k) Plan.
Messrs. Bentz, Kramer, Laffey, Breitenstein, Keim and Clement participated in
the 401(k) Plan in 1998. The amounts contributed against their contributions
were $5,782; $6,967; $6,043; $5,621; $5,400 and $4,900, respectively.
Pension Plan
The following table shows the estimated annual pension benefits payable
to a covered participant at normal retirement age (65) under the Company's
qualified defined benefit pension plan for employees with years of service
ranging from 15 through 40 years and earning compensation ranging from
$100,000 to $190,000:
PENSION PLAN TABLE
Years of Service
Compensation 15 20 25 30 35 40
100,000 15,000 20,000 25,500 31,000 37,500 44,000
110,000 16,500 22,000 28,050 34,100 41,250 48,400
120,000 18,000 24,000 30,600 37,200 45,000 52,800
130,000 19,500 26,000 33,150 40,300 48,750 57,200
140,000 21,000 28,000 35,700 43,400 52,500 61,600
150,000 22,500 30,000 38,250 46,500 56,250 66,000
160,000 24,000 32,000 40,800 49,600 60,000 70,400
170,000 25,500 34,000 43,350 52,700 63,750 74,800
180,000 27,000 36,000 45,900 55,800 67,500 79,200
190,000 28,500 38,000 48,450 58,900 71,250 83,600
The normal retirement benefit at age 65 is 1.0% of the employees' "average
pay" multiplied by years of service to normal retirement date for the first
twenty (20) years of service; 1.1% for service in excess of twenty (20) years
but less than thirty (30) years; 1.3% for service in excess of thirty (30)
years but less than forty (40) years; and 1.0% for service in excess of forty
(40) years. "Average pay" is defined as the average of the highest 5
consecutive years of salary during an employee's last 10 years as a plan
participant. With the exception of Mr. Bentz, for 1998 the covered
compensation for the Named Executive Officers was the amount
reported as "salary" for them in the Summary Compensation Table. Mr. Bentz'
covered compensation did not include the amounts paid to him after his
retirement as director's and consulting fees. In 1999, Mr. Kramer will have 4,
Mr. Laffey 3, Mr. Breitenstein 36, and Mr. Keim 33 credited years of service
under the Plan. Benefits are computed as straight-life annuity amounts. The
benefits listed in the Pension Plan Table are not subject to any deduction
for Social Security or other offset amounts. Although the normal retirement
age is 65, an employee with ten years of service may retire at age 55 with
actuarially reduced benefits. An employee who has attained the age of 55, but
not 65, may retire without any actuarial reduction of his benefits, if the sum
of his age and years of service with CT&T is at least eighty (80) when he
retires. The years and months of service of an employee are the total length
of time that he is employed by CT&T. On June 1, 1998, Mr. Bentz retired
and has since then been paid the monthly benefits to which he is entitled
under the Plan.
Employment Contracts
CT&T has entered into employment contracts with John R. Bentz and Donald R.
Breitenstein, whereby CT&T has agreed to pay to each of them, or his estate,
at such time as he (1) elects to retire from the active and daily service of
CT&T on or after a specified date, (2) becomes disabled or (3) dies at any
time during the period of employment covered by the agreement, additional
retirement, disability, or death compensation equal to ten percent (10%) of
his annual gross salary, before deductions, for each year he is employed by
CT&T after the date specified in his contract. Such compensation is payable
commencing one (1) month after his retirement on or after his specified
retirement date, his disability or death, as applicable, in equal monthly
installments of 1/120 of the amount of additional compensation accumulated.
The obligation of CT&T to make such payments is conditioned and contingent
upon the employee remaining an employee of CT&T until his specified retirement
date, unless prior to attaining such retirement age he dies, becomes disabled
becomes disabled, or terminates his employment with CT&T for proper cause.
CT&T is obligated to employ each of them until he attains the age of 65 unless
his employment is terminated prior thereto as a result of his early
retirement, death, disability or for proper cause.
Mr. Bentz' contract is dated January 28, 1987. Benefits were accrued under
it for each full year he was employed by CT&T after January 1, 1983. The
amount of $7,606 accrued through May 1998, for Mr. Bentz under his contract
and is included in the Summary Compensation Table under the heading "All Other
Compensation." Mr. Bentz retired on June 1, 1998. The sum of $165,670 had
accrued for him under the contract at the time of his retirement. On July 1,
1998, CT&T started to pay him benefits under the contract in the monthly amount
of $1,382. Mr. Bentz will receive these monthly payments until June 1, 2008.
Mr. Breitenstein's contract is dated March 22, 1989, and benefits accrue
under it for each year he is employed by CT&T after January 1, 1989. His
retirement date is on or after December 31, 2005. The amount of $11,197
accrued in 1998 for Mr. Breitenstein under his contract and is included in
the Summary Compensation Table under the heading "all other compensation".
The total amount accrued for Mr. Breitenstein under his contract as of
December 31, 1998, was $94,236, which upon his retirement on or after December
31, 2005, disability or death would provide him equal monthly payments of $785
for ten years.
The Company and Mr. Kramer entered into an employment contract dated
September 1, 1998. The contract provides for a three year term commencing on
September 1, 1998, and terminating on August 31, 2001, with provision for
renewal. It prescribes Mr. Kramer's compensation, duties and the extent of
his services. The contract includes a change of control provision, which
provides that, if during the term of the contract and after a change of
control, Mr. Kramer's employment with the Company is terminated, either by Mr.
Kramer or the Company, the Company will pay to Mr. Kramer his annual salary
for a period of three years after the date of termination in such periodic
installments as were being paid at the time of the termination.
CT&T and Mr. Laffey have entered into an employment contract dated May 29,
1996. The contract provides for a three year term commencing on May 29, 1996,
and terminating on May 28, 1999, with provision for renewal. It prescribes
Mr. Laffey's compensation, duties and the extent of his services. It does not
provide for deferred compensation.
As part of the Infocore merger transaction, Infocore and Mr. Clement,
entered into an employment contract dated April 30, 1997, guaranteed by the
Company. The contract provides that until April 30, 1999, Infocore would
employ Mr. Clement at the same salary and benefits he was receiving prior to
the merger. The contract includes a change of control provision, which
provides that, if during the term of the contract and after a change of
control, Mr. Clement's employment with Infocore is terminated, either by Mr.
Clement or Infocore without cause, Infocore would pay to Mr. Clement at least
an amount equal to one and one-half times his annual salary, determined
as of the date of termination of his employment.
SHAREOWNER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareowner return on the Company's Common Stock against
the cumulative total return of the S & P 500 Stock Index and the S & P
Telephone Index for the period of five calendar years commencing on December
31, 1993 and ending on December 31, 1998.
Comparison of Five Year Cumulative Total Return
300
250
200
150
100
50
0
Dec. Dec. Dec. Dec. Dec. Dec.
1993 1994 1995 1996 1997 1998
CEI S&P 500 S&P TEL
1993 1994 1995 1996 1997 1998
CEI 100 105 128 116 147 178
S&P 500 100 101 139 171 229 294
S&P TEL. 100 96 144 146 204 299
PROPOSAL NO. 2
AMENDMENT OF THE COMPANY'S ARTICLES OF INCORPORATION
INCREASING THE NUMBER, AND DECREASING THE PAR VALUE, OF THE COMPANY'S
AUTHORIZED COMMON SHARES FROM TEN MILLION SHARES, $5 PAR VALUE, TO
TWENTY MILLION SHARES, $1 PER VALUE
The Board has authorized an Amendment to the Company's Articles of
Incorporation to increase the authorized number, and decrease the par value,
of the Company's common shares from 10 million shares, $5.00 par value, to
20 million shares, $1.00 par value. The full text of the Articles of
Amendment to the Company's Articles of Incorporation reflecting this amendment
is attached to this Proxy Statement as Exhibit "A".
The additional common shares for which authorization is sought would have
the same rights and privileges as the common shares presently outstanding,
except for the decrease in par value. Holders of common shares have no
preemptive rights to subscribe to or for any additional shares of the Company.
The Company currently has approximately 1.3 million authorized common
shares available for issuance without shareholder approval, taking into
account the shares that (i) are currently outstanding; (ii) committed for
issuance under a 3 for 2 stock split that was authorized by the Directors at
their meeting on January 26,1999; (iii) reserved for issuance upon the
conversion of the Company's outstanding $3.42 Series A Preferred Shares; and
(iv) reserved for the Company's various stock purchase and stock option plans.
Although the Company has no present plan or agreement for the issuance of
additional common shares, other than those described above, the Board believes
that the number of common shares available for issuance could be insufficient
to meet the Company's future share requirements. The Board believes that it
is desirable to have additional authorized but unissued common shares
available for possible financing and acquisition transactions, for additional
stock plans like the ones described above and other general corporate
purposes. The additional common shares would be available for issuance
without further action by the Company's shareholders, unless such action were
required by applicable law or the rules of the National Association of
Securities Dealers, Inc.'s NASDAQ National Market System ("NASDAQ/NMS"). The
authorization of additional common shares may enable the Company to issue
additional shares to take advantage of market conditions and the availability
of acquisition and other opportunities without the potential delay and
expense associated with holding a special meeting of its shareholders,
where such issuance would not otherwise require shareholder action.
The decrease in the par value of the common stock from $5.00 per share to
$1.00 per share is intended to preserve the flexibility of the Company to
issue additional shares and pay dividends. The principal effect of decreasing
the par value of the common stock from $5 per share to $1 per share will be
to change the presentation of the "Common Shareholders' Equity" in the
Company's financial statements. The item entitled "Common stock" will state
the total number of outstanding common shares at $1 per share and move the
balance of that account to "Additional paid-in capital". This change will
give the Company a larger Additional Paid-in Capital account to which to
debit additional shares issued as stock dividends or as stock splits.
Consequently, the Company will be able to issue additional shares as stock
dividends or stock splits without decreasing its "Retained Earnings" account.
Since cash dividends paid are debited to the Retained Earnings account, the
decrease in par value enables the Company to issue additional common
shares as stock dividends or stock splits without impacting the ability of
the Company to pay cash dividends out of the Retained Earnings account.
Under Pennsylvania law and the Company's articles of incorporation, the
affirmative vote of a majority of those shares voted in person or by proxy
at the meeting with respect to this proposal is required for approval.
will have the same effect as votes against this proposal.
The Board of Directors recommends a vote to approve the amendment of the
Company's Articles of Incorporation increasing the number, and decreasing the
par value, of the Company's authorized common shares.
PROPOSAL NO. 3
APPROVAL OF THE CONESTOGA ENTERPRISES, INC. 1999 STOCK OPTION PLAN
The Board has adopted, subject to shareholder approval, the Company's 1999
Stock Option Plan (the "Plan") to make 450,000 shares of the Company's common
stock (the "Shares") available for the grant of stock options to selected
employees of the Company. A copy of the Plan is attached hereto as Exhibit
"B".
Purpose of the Proposed Plan. The purpose of the Plan is to benefit the
Company and its subsidiaries by (i) enhancing shareholder value by aligning
the goals of management and shareholders to maximize the value of the
Company's shares (ii) attracting and retaining officers and employees of
outstanding ability, (iii) motivating officers and employees by means of
performance related incentives to achieve longer range performance goals and
(iv) enabling officers and employees to participate in the long-term growth
and financial success of the Company by the use of stock-based incentives.
Duration of the Plan; Types of Awards; Eligible Participants;
Administration. Subject to shareholder approval of the Plan, awards can be
made under the Plan during the ten-year period beginning on June 1, 1999 and
ending May 31, 2009. The Plan provides for two types of equity-based
incentive awards; incentive stock options and non-qualified stock options,
subject to time-based vesting. Certain employees of the Company or any
subsidiary of the Company are eligible to receive awards under the Plan. The
Plan is administered by a committee of the Board, composed of members to be
determined from time to time by the Board, who are not then, and have not been
for one year prior to appointment, officers or employees of the Company.
Number of Shares Subject to the Plan. Awards encompassing a total of not
more than 450,000 shares of the Company's common stock, representing
approximately 6.4% of the outstanding shares at April 15, 1999, after the 3
for 2 stock split, may be made over the ten-year term of the Plan.
Shares Used for the Plan; Effect of Stock Split, Etc. Awards made under
the Plan may consist of either authorized and unissued shares or shares held
in, or acquired by, the treasury of the Company. If an option lapses or
expires or is forfeited, terminated or canceled, the shares which are subject
to such option will again be available for the purpose of new awards under the
Plan (assuming that the Plan is then in effect). If there is any change in
the capitalization of the Company, such as a stock split or dividend, or a
merger, consolidation, or reorganization with another company, or any other
relevant change in the capitalization of the Company, the number of shares
available for options under the Plan and the number of shares subject to
outstanding options granted under the Plan shall be adjusted to prevent
dilution or enlargement of rights.
Persons Eligible for Awards. Awards under the Plan may be made to certain
employees of the Company or a subsidiary of the Company.
Effective Date. Subject to the shareholder approval, the Plan will be
effective June 1, 1999. No awards may be made under the Plan on or after May
31,2009 (unless the Plan is extended with shareholder approval).
Effect of Termination of Employment; Certain Transfers of Awards. The
Plan Committee has the discretion to specify the extent to which awards expire
in the event of voluntary or involuntary termination of employment.
Option Grants: Exercise Price. The exercise price of stock options
granted under the Plan shall be the fair market value of the Company's stock
on the date the option is granted. Fair market value is defined as the
average of the closing prices of the Company's common stock on the ten trading
days ending on the third trading day prior to the date of the grant. For
purposes of determining Fair Market Value,"Closing Price" shall mean the
closing price, regular way, of the Common Stock on the NASDAQ/NMS during such
ten day period.
Option Grants: Terms of Options. Options granted under the Plan shall
expire at such time as the Plan Committee shall determine, but not later than
the tenth anniversary of the date of the grant. Options granted under the
Plan shall be exercisable at such times and be subject to such restrictions
and conditions as the Plan Committee shall approve, which need not be the same
for each grant or for each participant.
Option Grants: Federal Income Tax Consequences. The federal income tax
consequences of the issuance and exercise of options under the Plan depend on
the nature of the options granted.
(a) Nonqualified Stock Options. Under the applicable provisions of the
Internal Revenue Code, as presently in effect, no tax will be payable by the
recipient of a non-qualified stock option at the time of the grant. Upon
exercise of a non-qualified stock option, the excess of the fair market value
of the shares with respect to which the option is exercised over the total
option price of such shares will be treated for federal tax purposes as
ordinary income. Any profit or loss realized on the sale or exchange of any
shares actually received will be treated as a capital gain or loss. The
Company will be entitled to deduct the amount, if any, by which the fair
market value on the date of exercise of the shares with respect to which the
option was exercised exceeds the exercise price.
(b) Incentive Stock Options. With respect to an incentive stock option
("ISO"), generally, no taxable gain or loss will be recognized when the option
is granted and no taxable gain or loss will be recognized when the option is
exercisable. If the shares acquired upon the exercise of an ISO are held for
at least two years after the date of the grant of the option and for at least
one year after the date of the exercise of the option, any gain or loss
realized upon their sale will be treated as long-term capital gain or loss to
the optionee, and the Company will not be entitled to an income tax deduction.
If the shares are not held for these time periods, the optionee is taxed at
ordinary income rates in the year the stock is sold. The amount so taxed will
generally be the difference between the fair market value of the stock on the
date of exercise and the exercise price. Any additional gain arising after
the stock is purchased will be capital gain. If the optionee were to sell the
stock at a price below the value of the stock at the time of exercise, the
amount of ordinary income is limited to the excess of the sales price over
the exercise price. Generally, no tax deduction is available to the
Company, either at the time of exercise of the ISO or upon a sale of the ISO
stock. However, if the optionee is required to recognize ordinary income under
the rules stated above, the Company will be entitled at that time to a tax
deduction equal to the amount of ordinary income recognized by the optionee.
Amendments of the Plan. The Board may amend or terminate the Plan in
whole or in part at any time, subject to any requirements of shareholder
approval imposed by applicable law, rule or regulation. No amendment,
modification or termination of the Plan shall adversely affect in any material
way any award previously granted under the Plan without the written consent of
the holder of the award.
Prospective Awards. It is not possible to determine the amount and type
of awards that will be made under the Plan after the date of this Proxy
Statement, because such determinations are within the discretion of the Plan
Committee, based on such factors as they deem pertinent in selecting
participants under the Plan and establishing awards.
Shares Outstanding; Current Share Price. At March 1, 1999, approximately
4,687,929 shares of common stock of the Company were issued and outstanding.
On March 1, 1999, the closing price of the Company's common stock on the
NASDAQ/NMS was $31.625.
Approval Requirement. Under Pennsylvania law and the Company's articles of
incorporation, the affirmative vote of a majority of those shares voted in
person or by proxy at the meeting with respect to this proposal is required
for approval.
The Board of Directors recommends a vote FOR the approval of the 1999 Stock
Option Plan.
PROPOSAL NO. 4
RATIFICATION OF THE APPOINTMENT OF
BEARD & COMPANY, INC., AS AUDITORS
The Board of Directors has appointed the firm of Beard & Company, Inc.,
independent certified public accountants, to audit the accounts and certify
the financial statements of the Company for the year ending December 31, 1999,
subject to the approval of the Shareholders. Beard and Company, Inc., was the
independent certified public accountants for the Company for the year ended
December 31, 1998. The Shareholders are asked to approve the action of the
Board of Directors in making such appointment for 1999, and it is intended
that proxies not limited to the contrary will be voted for ratification of
such appointment. A representative of Beard and Company, Inc., is expected to
be present at the Shareholders' meeting with the opportunity to make a
statement if he so desires, and such representative is expected to be
available to respond to appropriate questions.
The Board of Directors recommends a vote FOR the ratification of the
appointment of Beard and company, Inc., as independent accountants.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
If any Shareholder desires to have a proposal included in the proxy
statement for the 2000 Annual Meeting of Stockholders, the proposal must be
received by the Company in writing on or before December 11, 1999, by
certified mail, return receipt requested. The proposal must comply in all
respects with applicable rules and regulations of the Securities and Exchange
Commission, the laws of the Commonwealth of Pennsylvania and the Company's
By-Laws relating to such inclusion. Stockholder proposals may be mailed to
the Corporate Secretary, Conestoga Enterprises, Inc., 202 East First Street,
Birdsboro, Pennsylvania 19508.
OTHER MATTERS
The foregoing are the only items of business which the Management intends
to present, or is informed that others will present, at the meeting for any
action as to which proxies received in response to this solicitation are to be
exercised or used for a quorum. However, if other matters properly come
before the meeting, it is the intention of the persons named in the proxy to
vote the same in accordance with their judgment.
By Order of the Board of Directors
Kenneth A. Benner, Secretary
Dated: April 9, 1999 EXHIBIT A
ARTICLES OF AMENDMENT
CONESTOGA ENTERPRISES, INC
A DOMESTIC BUSINESS CORPORATION
In compliance with the requirements of 15 Pa. C.S. 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to
amend its Articles, hereby states that:
1. The name of the corporation is Conestoga Enterprises, Inc.
2. The address of this corporation's current registered office in
this Commonwealth is: 202 East First Street, Birdsboro, Berks County,
Pennsylvania 19508.
3. The statute by or under which it was incorporated is: the
Business Corporation Law of 1988, as amended.
4. The original date of incorporation is: January 27, 1989.
5. The amendment shall be effective upon filing these Articles of
Amendment in the Department of State.
6. The amendment was adopted by the shareholders pursuant to 15 Pa.
C.S. 1914(a) and (b).
7. The amendment adopted by the corporation, set forth in full, is
as follows:
"The corporation shall have authority to issue capital stock as
follows:
i. 20,000,000 shares of voting common stock, par value,$1.00
per share; and
ii. Series A Convertible Preferred Stock, as described in an
Amendment to the corporation's Articles filed with the
Department of State on May 31,1996, which amendment and
share provisions shall remain in full force and effect."
IN TESTIMONY WHEREOF, the undersigned corporation has caused these
Articles of Amendment to be signed by a duly authorized officer thereof this
day of May, 1999.
CONESTOGA ENTERPRISES, INC.
By:
Title:
EXIBIT B
CONESTOGA ENTERPRISES, INC.
1999 Stock Option Plan
1. Purpose of the Plan
The purpose of the Conestoga Enterprises, Inc. 1999 Stock Option Plan
(the "Plan") of Conestoga Enterprises, Inc. (the "Company") and its
subsidiaries (the "Subsidiaries") by (i) attracting and retaining officers
and employees of outstanding ability, (ii) motivating officers and employees,
by means of performance-related incentives, to achieve longer-range
performance goals and (iii) enabling officers and employees to participate in
the long-term growth and financial success of the Company.
2. Administration
The Plan shall be administered by a committee (the "Committee") of the
Board of Directors of the Company (the "Board"). The Committee shall be
composed of a number, to be determined from time to time by the Board of
Directors, of members of the Board of Directors of who are not then, and have
not been for one year prior to appointment, officers or employees of the
Company. The Committee shall have the sole and absolute power, authority and
discretion to interpret the Plan, to prescribe, amend and rescind rules and
regulations to further the purposes of the Plan, and to make all other
determinations necessary for the administration of the Plan. All such actions
by the Committee shall be final and binding. Notwithstanding the foregoing,
until the Committee is duly constituted and its membership is appointed, the
functions of the Committee hereunder shall be performed by the Board.
3. Incentive and Nonqualified Stock Options
Awards under the Plan may be in the form of stock options ("Options")
which qualify as "incentive stock options" ("Incentive Stock Options") within
the meaning of Section 422 or any successor provision of the Internal Revenue
Code of 1986, as amended (the "Code"), or stock options which do not so
qualify ("Nonqualified Stock Options"). Each award of an Option shall be
designated in the applicable award agreement as an Incentive Stock Option or a
Nonqualified Stock Option, as appropriate.
4. Shares Subject to the Plan
Options in respect of an aggregate of up to 450,000 shares of the
Common Stock of the Company, par value $1.00 per share (the "Common Stock"),
shall be available for award under the Plan. If any Option shall cease to be
exercisable in whole or in part for any reason, the shares which were covered
by such Option but as to which the Option had not been exercised shall again
be available under the Plan. Shares issuable under the Plan shall be made
available from authorized and unissued or reacquired Common Stock.
5. Participants; Option Awards
The Committee shall determine and designate from time to time those
officers and employees of the Company and the Subsidiaries who shall be
awarded Options under the Plan and the number of shares of Common Stock to be
covered by each such Option. In making its determinations, the Committee
shall take into account the present and potential contributions of the
respective officers and employees to the success of the Company and the
Subsidiaries, and such other factors as the Committee shall deem relevant in
connection with accomplishing the purposes of the Plan. Each Option award
shall be evidenced by an award agreement in such form as the Committee shall
approve from time to time.
6. Fair Market Value
For all purposes under the Plan, the term "Fair Market Value" shall
mean, as of any applicable date, the average of the Closing Prices (as defined
below) per share of the Common Stock on the ten (10) trading days ending on
the third trading day prior to the date of grant. For purposes of determining
Fair Market Value, "Closing Price" shall mean the applicable of: (i) if the
Common Stock is listed on a national securities exchange or is authorized for
quotation on the National Association of Securities Dealers, Inc.'s NASDAQ
National Market System ("NASDAQ/NMS"), the closing price, regular way, of the
Common Stock on such exchange or NASDAQ/NMS, as the case may be, or if no such
reported sale of the Common Stock shall have occurred on such date, on the
next preceding date on which there was such a reported sale; or (ii) if the
Common Stock is not listed for trading on a national securities exchange or
authorized for quotation on NASDAQ/NMS, the Fair Market Value of the Common
Stock as determined in good faith by the Committee.
7. Exercise Price
Incentive Stock Options shall be granted at an exercise price of not
less than 100% of the Fair Market Value of the underlying shares of Common
Stock on the date of grant, provided, however, that Incentive Stock Options
granted to a participant who at the time of such grant owns (within the
meaning of Section 424(d) of the Code) more than ten percent of the total
combined voting power of all classes of stock of the Company or its parent or
subsidiary corporation (a "10% Holder") shall be granted at an exercise price
of not less than 110% of the Fair Market Vale on the date of grant.
Nonqualified Stock Options shall be granted at an exercise price per share of
not less than the Fair Market Value (as defined above) as of the date of grant.
8. Option Period
The Committee shall determine the period or periods of time within
which Options may be exercised by participants, in whole or in part, provided
that (i) the term of an Option shall not exceed ten years from the date of
grant; (ii) the term of an Incentive Stock Option granted to a 10% Holder
shall not exceed five years from the date of grant; and (iii) the aggregate
Fair Market Value (determined on the date of grant) of Common Stock with
respect to which Incentive Stock Options granted to a participant become
exercisable for the first time in any single calendar year shall not exceed
$100,000.
9. Other Terms and Conditions
The Committee shall have the discretion to determine terms and
conditions, consistent with this Plan, that will be applicable to Options
granted hereunder. Options granted to the same or different participants,
or at the same or different times, need not contain similar provisions.
10. Payment for Common Stock
Full payment for shares of Common Stock purchased upon the exercise of
the Option shall be made at the time the Option is exercised in whole or in
part. Payment of the purchase price shall be made in cash or in such other
form as the Committee may approve in the applicable award agreement,
including, without limitation, by the delivery to the Company by the
participant of (i) a promissory note containing such terms as the Committee
may determine or (ii) shares of Common Stock that have been held by the
participant for at least six months prior to exercise of the Option, valued
at the Fair Market Value of such shares on the date of exercise; provided,
however, that if payment is made pursuant to clause (i), the par value of the
purchased shares shall be paid in cash. No shares of Common Stock
shall be issued to the participant until such payment has been made, and a
participant shall have none of the rights of a stockholder with respect to
Options held except to the extent such Options have been exercised.
11. Termination of Options
Unless otherwise determined by the Committee and provided in the
applicable award agreement or an amendment thereto, all rights to exercise or
surrender Options shall terminate thirty (30) days (but not after the scheduled
expiration date of such Option) following the date of termination of the
participant's employment for any reason other than the participant's death or
retirement on or after his normal retirement age in accordance with the
Company's retirement policy for officers and/or employees, as appropriate, and
one (1) year following the date of termination of employment by reason of the
participant's death or retirement on or after his normal retirement age in
accordance with the Company's retirement policy for officers and/or employees,
as appropriate (or, if earlier, on the scheduled expiration date of such
Option).
12. Effect of Change in Stock Subject to the Plan
In the event of any subdivision or combination of the outstanding
shares of Common Stock, stock dividend, recapitalization, reclassification of
shares, sale, lease or transfer of substantially all of the assets of the
Company, substantial distributions to stockholders, merger, consolidation or
other corporate transactions which would result in a substantial dilution or
enlargement of the rights or economic benefits inuring to participants
hereunder, the Committee shall make such equitable adjustments as it may deem
appropriate in the Plan and the outstanding Options, including, without
limitation, any adjustment in the total number of shares of Common Stock which
may thereafter be available under the Plan.
13. Nonassignability
Options shall not be transferable other than by will or the laws of
descent and distribution and are exercisable during participant's lifetime
only by the participant.
14. Withholding
The Company shall have the right to deduct from all amounts paid to a
participant in cash as salary, bonus or other compensation any taxes required
by law to be withheld in respect of Options under this Plan. In the
Committee's discretion, a participant may be permitted to elect to have
withheld from the shares otherwise issuable to the participant upon exercise
of an Option; or to tender to the Company, the number of shares of Common
Stock whose Fair Market Value equals the amount required to be withheld.
15. Construction of the Plan
The validity, construction, interpretation, administration and effect
of the Plan and of its rules and regulations, and rights relating to the Plan,
shall be determined solely in accordance with the laws of the Commonwealth of
Pennsylvania, other than the conflict of law provisions of such laws.
16. Amendment
The Board may, by resolution, amend or revise the Plan, except that
such action shall not be effective without stockholder approval if such
stockholder approval is required to maintain the compliance of the Plan and/or
awards granted hereunder with Rule 16b-3 of the Securities and Exchange
Commission or the deductibility limits of Section 162(m) of the Code. The
Board may not alter or impair any Options previously granted under the Plan
without the consent of the holders thereof, except in accordance with the
provisions of Paragraph 12.
17. Effective Date; Termination of Plan
The Plan shall become effective on the date on which it is adopted by
the Board of Directors, subject to the approval of the Plan by the
shareholders of the Company. The Plan shall terminate on the tenth (10th)
anniversary of the effective date, unless it is earlier terminated by the
Board. Termination of the Plan shall not affect Options previously granted
under the Plan.
