SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities and Exchange Act of 1934
Filed by the Registrant[x]
Filed by a Party other than the Registrant[ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a 6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a 11(c) or
240.14a 12
CONESTOGA ENTERPRISES, INC.
Commission File Number 0 24064
a Pennsylvania Corporation Employer IRS No. 23 2565087
202 East First Street, Birdsboro, Pennsylvania 19508
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0 11(c)(1)(ii), 14a
6(i)(1), 14a 6(i)(2) or Item 22(a)(2) of Schedule
14A.
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a 6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a 6(i)(4) and 0 11.
1) Title of each class of securities to which
transaction applies:
2) Aggregate number of securities to which
transaction applies:
3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act
Rule 0 11 (Set forth the amount on which the
filing fee is calculated and state how it was
determined):
4) Proposed maximum aggregate value of
transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as
provided by Exchange Act Rule 0 11(a)(2) and
identify the filing for which the offsetting fee
was paid previously. Identify the previous filing
by registration statement number, or the Form or
Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
March 14, 2000
Securities and Exchange Commission
Division of Corporate Finance
Washington, D.C. 20549
Re: Conestoga Enterprises, Inc.
Commission File No. 0 24064
Gentlemen:
We are submitting the following:
1. Proxy Statement for the captioned.
2. Form of Proxy.
3. Form of Restated Articles of Incorporation.
4. Form of amendments to By Laws
The Company is filing the Proxy Statement and related
materials because of proposals contained therein to amend
its Articles of Incorporation and By Laws. We do not anticipate
controversy concerning these materials.
Please address any questions or comments concerning the
submitted materials to the Companys attorney, John S. Hibschman,
Esquire, Barley, Snyder, Senft & Cohen, LLC, P.O. Box 942, 501
Washington Street, Reading, Pennsylvania 19603 09422, telephone
number (610) 376 6651, facsimile number (610) 376 5243.
We plan to mail the Proxy Statement and related materials
on April 14, 2000.
I wish to thank you for your attention to the foregoing.
Very truly yours,
Donald R. Breitenstein
Senior Vice President and CFO
2000
CONESTOGA ENTERPRISES, INC.
P R O X Y
THIS PROXY IS
SOLICITED ON
NUMBER OF SHARES BEHALF OF THE
MANAGEMENT OF
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) Thomas E. Brown and Robert M.
Myers, 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 March 31, 2000, at the annual meeting of shareholders
to be held on May 6, 2000, or any adjournment thereof.
1. ELECTION OF DIRECTORS WITHHOLD AUTHORITY TO VOTE
FOR all nominees FOR all nominees listed
below[ ] listed below [ ]
(except as marked to
the contrary below)
Jean M. Ruhl, John M. Sausen, and Richard G. Weidner
(INSTRUCTIONS: To withhold authority to vote for any individual
nominee, write that nominees name on the space provided below.)
2. Proposal to approve the amendment of the Companys Articles of
Incorporation to increase the number of the Companys
authorized common shares from twenty million to two hundred
million.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Proposal to approve the amendment of the Companys Articles of
Incorporation to eliminate cumulative voting.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Proposal to approve amendments of the Companys By Laws.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. Proposal to ratify the appointment of Beard & Company, Inc.,
as the independent accountants of the Company for 2000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
6. 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, 4 and 5. 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
Sign Here
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 6, 2000
TO THE SHAREHOLDERS OF THE COMPANY:
The annual meeting of the Shareholders of CONESTOGA
ENTERPRISES, INC. (the Company) will be held at the Birdsboro
Community Memorial Center, 201 East Main Street, Birdsboro, Pennsylvania,
19508, on Saturday, May 6, 2000, at 10:00 A.M., for the following
purposes:
1. To elect 3 Class III Directors for a term of 3 years.
2. To approve the amendment of the Companys Articles of
Incorporation to increase the number of the Companys authorized
common shares from twenty million to two hundred million.
3. To approve the amendment of the Companys Articles of
Incorporation to eliminate cumulative voting.
4. To approve amendments of the Companys By Laws.
5. To ratify the appointment of Beard & Company, Inc.,
as independent accountants of the Company for 2000.
6. 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 14, 2000 Kenneth A. Benner, Secretary
PROXY STATEMENT
2000 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 2000
annual meeting of shareholders to be held on May 6, 2000 (the
Annual Meeting). Only shareholders of record on March 31, 2000
will be entitled to vote at that meeting. On March 1, 2000, the
Company had 7,816,625 shares of Common Stock issued and
outstanding.
The Companys 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
14, 2000.
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 III Directors to the Board. The
nominees for Class III directors are Richard G. Weidner, Jean M.
Ruhl and John M. Sausen.
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 III 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 Companys
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 III (Term Expires in 2003)
Richard G. Weidner; Age 73; 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 58; 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 66; 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.
Information Concerning Directors Who Are Not Standing for
Election at the 2000 Annual Meeting
Class I (Term Expires in 2002)
John R. Bentz; Age 64; 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&Ts board of directors
since October, 1986.
James H. Murray; Age 71; 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 52; 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.
Class II (Term Expires in 2001)
Kenneth A. Benner; Age 52; Secretary Treasurer
Mr. Benner has been a member of the Board and the Companys
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.
Thomas E. Brown; Age 47; Manager of Feed Division of F. M. Browns
Sons, Inc., Feed and Flour Manufacturers, Sinking Spring, PA
Mr. Brown has been a member of the Board since June, 1999.
He is Manager of the Feed Division of F.M. Browns Sons, Inc.,
feed and flour manufacturers, Sinking Spring, Pennsylvania.
Donald R. Breitenstein; Age 59; Senior Vice President and CFO
Mr. Breitenstein has been a member of the Board since June,
1989. In March 2000 he was appointed Senior Vice President and
CFO. He had previously been the Companys Controller since June,
1989. He has been employed by CT&T since 1962. He was appointed
CT&Ts Controller in 1986, and to its board of directors in 1987.
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 or she 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. Weidner 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. Weidner 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 1999, the Company paid each non employee member of
the Board an annual directors 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
Companys 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.
Certain Business Relationships
Mr. Murray is Of Counsel to the law firm of Barley, Snyder,
Senft & Cohen, LLC., which firm provides legal services to the
Company.
Certain Indebtedness
Ara M. Kervandjian, the Senior Vice President, Competitive
Wireline Services, of the Company and the President of TeleBeam,
Incorporated (TeleBeam), a telecommunications subsidiary that was
merged into a subsidiary of the Company on February 1, 2000, is
indebted to TeleBeam in the amount of $714,285.98. Interest is
accruing on the outstanding amount of the indebtedness at the
rate of 6% per annum. The obligation is secured by Mr.
Kervandjians pledge of 40,000 shares of the Companys stock.
Hrach Kervandjian, a former Vice President of TeleBeam, and
the Father of Ara M. Kervandjian, is indebted to TeleBeam in the
amount of $276,257.02. Interest is accruing on the outstanding
amount of the indebtedness at the rate of 6 percent per annum.
The indebtedness is secured by Mr. Kervandjians pledge of 15,000
shares of the Companys stock.
SECURITY OWNERSHIP OF MANAGEMENT
The following table reflects, as of March 1, 2000, 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 Companys 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 37,965 .49
John R. Bentz 28,399 .36
Donald R. Breitenstein 10,225 .13
Thomas E. Brown 26,795 .34
James H. Murray 55,547 .71
Robert M. Myers 5,759 .07
Jean M. Ruhl 75,000 .96
John M. Sausen 136,983 1.75
Richard G. Weidner 4,410 .06
Thomas C. Keim 51,520 .66
Albert H. Kramer 3,274 .04
Joseph J. Laffey 3,566 .05
Harrison H. Clement, Jr. 23,245 .30
All Directors and Officers 468,463 5.99
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, 2000 and percentages of share
ownership are calculated based upon 7,816,625 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 Companys executive compensation program is administered
by the Boards Compensation Committee, composed of Messrs. Weidner,
Murray and Sausen.
The executive compensation administered by the Committee is
primarily that of Albert H. Kramer, President and Chief Executive
Officer; Thomas C. Keim, Senior Vice President, Local Exchange
Services; Joseph J. Laffey, Senior Vice President,
Administration; Donald R. Breitenstein, Senior Vice President and
CFO; and Harrison H. Clement, Jr., Senior Vice President,
Wireless Services and President, Infocore, Inc.
The Companys executive compensation program consists of
three elements; annual base salary, potential annual cash
incentive award (the Executive Incentive Plan), and longer term
incentives under a stock option plan (the Stock Option Plan); and
is designed to achieve the following objectives:
(1) attracting and retaining key executives with
outstanding abilities and motivating them to perform to the full
extent of those abilities;
(2) supporting the Companys 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 corporate financial
performance and individual job performance; and
(4) aligning the interests of executives with the
interests of shareholders through ownership of Company stock.
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 January 1999, the Committee reviewed Mr. Kramers
performance during 1998. Based upon the accomplishments achieved
in 1998 such as launching the new PCS business, successfully
negotiating the sale of the Companys cellular limited partnership
interest, and obtaining long term financing at very competitive
rates; the Committee increased Mr. Kramers base salary 5.3%, to
$148,000.
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 the 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 1999, 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 Companys
financial performance in 1999, plan participants (including Mr.
Kramer) received incentive bonuses equal to 20% of base pay.
In 1999, the shareholders approved the Companys Stock
Option Plan which allows the Company to issue incentive or
nonqualified stock options to certain key management employees.
The stock options vest over a three year period and must be
exercised within ten years of their vesting date. Stock options
are designed to reward executives as the fair market value of the
stock increases. In 1999, a total of 41,750 nonqualified options
were granted to employees at an exercise price of $22.34 per
share.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE COMPANYS BOARD OF DIRECTORS:
John M. Sausen
James H. Murray
Richard G. Weidner
Compensation Committee Interlocks and Insider Participation
Messrs. Weidner, Murray and Sausen are the members of the
Companys Executive Committee.
During 1999, Mr. Murray was a Vice President of the
Company. During 1999, Mr. Murray was Of Counsel to the law firm
of Barley, Snyder, Senft & Cohen, LLC, 501 Washington 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.
Mr. Weidner provides consulting services to the Company.
He 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, 1999, 1998 and
1997 of those persons who were, at December 31, 1999, the chief
executive officer, or had served as such at any time during 1999,
and the four other most highly compensated executive officers of
the Company whose compensation in 1999 exceeded $100,000 (the
Named Executive Officers):
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities
Annual Restricted Under-
Name and Compen- Stock lying LTIP All Other
Principal Bonus sations Awards Option Payouts Compen-
Position Year Salary ($)(1) ($) ($) SARs(#) ($) sation
($) ($)(2)(3)
Albert H. 1999 146,702 28,100 None 0 7,500 0 7,208
Kramer, 1998 139,513 13,480 None 0 0 0 6,967
President 1997 132,302 15,300 None 0 0 0 6,898
Joseph J. 1999 126,048 24,300 None 0 3,750 0 6,084
Laffey, Sr. 1998 120,548 11,600 None 0 0 0 6,043
V.P. 1997 117,072 13,750 None 0 0 0 4,307
Admin.
Donald R. 1999 117,117 22,580 None 0 3,750 0 17,466
Breitenstein1998 111,965 10,750 None 0 0 0 16,818
Sr. V. P. 1997 108,794 12,938 None 0 0 0 16,570
& CFO
Thomas C. 1999 111,756 21,640 None 0 3,750 0 5,433
Keim, Sr. 1998 107,473 10,400 None 0 0 0 5,400
V. P. 1997 105,230 12,500 None 0 0 0 5,632
Local
Exchange
Services
Harrison H. 1999 114,846 22,000 None 0 3,750 0 4,020
Clement, Jr.1998 112,742 5,500 None 0 0 0 4,007
Sr. V. P. 1997 102,000 12,000 None 0 0 0 2,868
Wireless
Services
1. The bonus is an incentive bonus paid to each
of the Named Executive Officers under the Companys annual
executive incentive plan instituted in 1996.
2. All Other Compensation includes amounts
accrued during each of the years stated in the Table for
the account of Mr. Breitenstein under the employment
contract, described under the heading Employment Contract,
between CT&T and Mr. Breitenstein.
3. All Other Compensation includes amounts
contributed for the accounts of the Named Executive
Officers under the Companys 401(k) Plan. Messrs. Kramer,
Laffey, Breitenstein, Keim and Clement participated in the
401(k) Plan in 1999. The amounts contributed against their
contributions were $7,208, $6,084, $5,754, $5,433 and
$4,020 respectively.
Stock Options
Stock Options were granted to certain employees of
the Company during 1999 under the Companys 1999 Stock
Option Plan. The options vest three (3) years after the
date of grant and expire ten (10) years thereafter.
The following table provides details regarding stock
options granted to the Named Executive Officers in 1999 to
purchase shares of the Company under the Companys 1999
Stock Option Plan.
OPTION SAR GRANTS IN LAST FISCAL YEAR
Potential
Realizable
Value at
Assumed Annual
Rates of Stock
Price Appreciation
Individual Grants for Option Term
(a) (b) (c) (d) (e) (f) (g)
Number
of % of
Securities Total
Under- Options
lying SARs
Options Granted to Exercise
SARs Employees or Base
Granted in Fiscal Price Expiration
Name (#) Year ($ Sh) Date 5% ($) 10% ($)
Albert H.
Kramer 7,500 17.96% $22.34 6 1 2009 105,375 267,000
Joseph J.
Laffey 3,750 8.98% $22.34 6 1 2009 52,688 133,500
Donald R.
Breitenstein 3,750 8.98% $22.34 6 1 2009 52,688 133,500
Thomas C.
Keim 3,750 8.98% $22.34 6 1 2009 52,688 133,500
Harrison H.
Clement, Jr. 3,750 8.98% $22.34 6 1 2009 52,688 133,500
AGGREGATED OPTION SAR EXERCISES AND FISCAL YEAR END OPTION SAR VALUE
TABLE
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In the Money
Options SARs Options SARs
Shares At FY End (#) At FY End ($)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexerisable
Albert H.
Kramer 0 0 0 / 7,500 0
Joseph J.
Laffey 0 0 0 / 3,750 0
Donald R.
Breitenstein 0 0 0 / 3,750 0
Thomas C.
Keim 0 0 0 / 3,750 0
Harrison H.
Clement,
Jr. 0 0 0 / 3,750 0
Pension Plan
The following table shows the estimated annual pension
benefits payable to a covered participant at normal retirement
age (65) under the Companys 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
$200,000:
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
200,000 30,000 40,000 51,000 62,000 75,000 88,000
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 employees last 10
years as a plan participant. For 1999 the covered compensation
for the Named Executive Officers was the amount reported as
salary for them in the Summary Compensation Table. In 2000, Mr.
Kramer will have 5, Mr. Laffey 4, Mr. Breitenstein 38, and Mr.
Keim 36 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.
Employment Contracts
CT&T has entered into an employment contract with Donald R.
Breitenstein, dated March 22, 1989, as amended by an amendment
dated June 1, 1999, whereby CT&T has agreed to pay to Mr.
Breitenstein, or his estate, at such time as he (1) elects to
retire from the active and daily service of CT&T on or after
December 31, 2002, (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 January 1, 1989. 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 amount of $11,712 accrued in 1999 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, 1999, was $105,948, which upon his retirement on or after
December 31, 2002, disability or death would provide him equal
monthly payments of $882.90 for ten years. The obligation of CT&T
to make such payments is conditioned and contingent upon Mr.
Breitenstein remaining an employee of CT&T until December 31,
2002, unless prior to attaining such retirement age he dies,
becomes disabled, or terminates his employment with CT&T for
proper cause. CT&T is obligated to employ Mr. Breitenstein until
he attains the age of 65 unless his employment is terminated
prior thereto as a result of his early retirement, death,
disability or proper cause.
The Company, or a subsidiary, have entered into an
employment contract with each of Messrs. Kramer, Laffey, Clement
and Keim. Each contract provides for a three year term with
provision for renewal. Each prescribes the employees
compensation, duties and the extent of his services. If the
employees employment is terminated by the Company, other than for
cause, prior to the expiration of the term of the contract, the
Company will pay to the employee an amount equal to the greater
of: (i) fifty percent (50%) of his annual salary determined as
of the date of termination of employment, or (ii) the aggregate
salary otherwise payable to him for the balance of the three (3)
year term of the contract. The contract includes a change of
control provision, which provides that, if during the term of the
contract and after a change of control of the Company, the
employees employment with the Company is terminated, either by
the employee or the Company, the Company will pay to the employee
his annual salary, determined as of the date of the termination,
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.
The contract between the Company and Mr. Kramer is dated
September 1, 1998, for a three year term commencing on September
1, 1998, and terminating on August 31, 2001.
The contract between the Company and Mr. Laffey is dated
May 29, 1999, for a three year term commencing on May 29, 1999,
and terminating on May 28, 2002.
The contract between the Company and Mr. Keim is dated June
1, 1999, for a three year term commencing on June 1, 1999, and
terminating on May 31, 2002.
Infocore, Inc. entered into the contract with Mr. Clement.
The contract is dated June 30, 1999, for a three year term
commencing June 1, 1999, and terminating on May 31, 2002.
Infocores obligations under the contract are guaranteed by the
Company. The change of control provision applies to a change of
control of Infocore as well as the Company.
SHAREOWNER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly
percentage change in the cumulative total shareowner return on
the Companys 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, 1994 and
ending on December 31, 1999.
Comparison of Five Year Cumulative Total Return
400
300
200
100
0
1994 1995 1996 1997 1998 1999
CEI S&P 500 S&P TEL
1994 1995 1996 1997 1998 1999
CEI 100 122 111 141 170 147
S&P 500 100 138 169 226 290 351
S&P TEL. 100 151 152 212 312 330
PROPOSAL NO. 2
AMENDMENT OF THE COMPANYS ARTICLES OF INCORPORATION TO
INCREASE THE NUMBER OF THE COMPANYS AUTHORIZED COMMON SHARES FROM
TWENTY MILLION SHARES TO TWO HUNDRED MILLION SHARES
The Board has authorized an amendment to the Companys
Articles of Incorporation to increase the authorized number of
the Companys common shares from 20 million shares to 200 million
shares. The full text of the Companys Restated Articles of
Incorporation reflecting this amendment is attached to this Proxy
Statement as Exhibit A.
The additional common shares for which authorization is
sought will have the same rights and privileges as the common
shares presently outstanding. Holders of common shares have no
preemptive rights to subscribe for any additional shares of the
Company.
The large increase in the authorized common stock of the
Company is primarily necessitated by the adoption of a
Shareholders Rights Plan, effective March 1, 2000, by the Board
of Directors of the Company. The Plan was adopted to discourage
unfair or financially inadequate takeover proposals and abusive
takeover practices and to encourage third parties who may in the
future be interested in acquiring the Company to negotiate with
the Board of Directors.
Under the Rights Plan the Company will issue to each of the
Companys shareholders one Right for each outstanding share of the
Companys common stock which he or she owns. Each Right will be a
right to purchase one share of the Companys common stock at
$180.00 per share.
Under the Rights Plan, upon the acquisition of 15 percent
or more of the Companys shares by an adverse party, or upon a
tender offer by an adverse party to purchase 15 percent or more
of the Companys shares, the Rights of the adverse party are void,
while the Rights of all other shareholders entitle them to
purchase $360 worth of the Companys common stock at its then
current market price for $180.00. For example, if the market
price of the Companys common stock were $20.00 at the time of the
activation of the Rights, the holder of each share of stock would
have the right to purchase 18 shares of the Company for $180.00
(360.00 20.00). Because the Rights would then permit
shareholders to purchase shares at a significant discount from
market price, their exercise would substantially dilute the value
of the takeover bidders shares. The only way a takeover bidder
could avoid this result would be to convince the Board of
Directors to redeem the Rights, which it would not do if the
takeover bidders proposal involved terms which were not favorable
and fair to all shareholders.
The Company must set aside for possible issuance under
the Rights Plan a number of shares equal to the number of
outstanding shares at any time (7,816,625 shares as of March 1,
2000), plus additional shares, so that, if the Rights were
activated in a hostile takeover situation, the Company would have
enough authorized shares available to issue shares pursuant to
the Rights Plan. Depending upon the market price of the Companys
shares at the time of a hostile takeover situation, the Rights
Plan could give rights to purchase a number of shares equal to as
many as 20 times the number of currently outstanding shares, that
is almost 160,000,000 shares. The primary reason for requesting
authorization to increase the authorized shares to 200,000,000
shares is to have sufficient shares authorized to cover the
possibilities under the Rights Plan.
The Company currently has approximately 2.1 million
authorized common shares available for issuance without
shareholder approval, taking into account the shares that (i) are
currently outstanding; (ii) committed under the Rights Plan (one
share for each outstanding share); (iii) reserved for issuance
upon the conversion of the Companys outstanding $3.42 Series A
Preferred Shares; and (iv) reserved for the Companys 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 Companys 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, for issuance under the
Rights Plan and for other general corporate purposes. The
additional common shares would be available for issuance without
further action by the Companys 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 will 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.
Under Pennsylvania law and the Companys 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 to approve the
amendment of the Companys Articles of Incorporation increasing
the number of the Companys authorized shares.
PROPOSAL NO. 3
AMENDMENT OF THE COMPANYS ARTICLES OF INCORPORATION TO
ELIMINATE CUMULATIVE VOTING
The Board has authorized an amendment to the Companys
Articles of Incorporation to eliminate cumulative voting. The
full text of the Companys Restated Articles of Incorporation,
including this amendment, is attached to this Proxy Statement as
Exhibit A.
The Companys shareholders currently have the right of
cumulative voting in the election of members of the Companys
Board of Directors. Cumulative voting is the right of each
shareholder in an election of directors to cast in the aggregate
a number of votes equal to the number of shares held by the
shareholder multiplied by the number of directors to be elected
and to cast the whole number of his or her votes for one
candidate or distribute such votes among two or more candidates.
Pennsylvania Corporation Law provides that the
shareholders of a corporation have cumulative voting
rights, unless the articles of incorporation expressly
provide otherwise. The Companys original Articles of
Incorporation failed to eliminate cumulative voting. This
proposal is to amend the Companys Articles of Incorporation
to eliminate cumulative voting under applicable
Pennsylvania Corporation Law.
The Companys shareholders, as a matter of practice,
do not exercise the right of cumulative voting in the
election of the Companys directors. It has been standard
practice for the Companys shareholders to vote their shares
separately for each nominee for director and not to
cumulate them for one or more nominees. Cumulative voting
could enable an organized minority of shareholders to elect
one of three directors being elected at a shareholders
meeting by casting all of their votes for that director
instead of spreading their votes among the three nominees.
By this practice minority shareholders could force the
election of a director to the Board.
Under Pennsylvania Law and the Companys 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 to approve
the amendment of the Companys Articles of Incorporation
eliminating cumulative voting.
PROPOSAL NO. 4
AMENDMENT OF THE COMPANYS BY LAWS
The Board has authorized an Amendment to the Companys By Laws to:
1. amend Article II, Section 2, to provide that the
annual meeting of the stockholders of the Company shall be held
on or before May 31st of each year;
2. amend Article II, Section 7, to provide that there
shall be no cumulative voting for the election of directors;
3. amend Article III, Section 1, to provide that the
number of directors shall be not less than nine nor more than
eleven;
4. amend Article III, Section 1, to detail the
application procedures for nominees for directors; and
5. amend Article III, Section 2, to restate the provisions
concerning the qualifications of Directors.
The text of the proposed Amendments to the By Laws is attached
hereto as Exhibit B.
The Amendment to Article II, Section 2, Annual Meeting,
changes the scheduled time of the annual meeting of the
shareholders from the first Saturday of May to on or before May
31st of each year. This is to give the Company more flexibility
with respect to scheduling the annual meeting of shareholders.
It might in the future be desirable to hold the annual meeting on
a day other than a Saturday or on a Saturday other than the first
Saturday of May.
The Amendment to Article II, Section 7, Right to Vote,
changes the last sentence of that paragraph to provide, There
shall be no cumulative voting for the election of directors.
This is consistent with Proposal No. 3 hereof which proposes to
amend the Companys Articles of Incorporation to eliminate
cumulative voting. The purpose of the proposed change to the By
Laws is to make the By Laws, as amended, consistent with the
Companys Articles of Incorporation, as proposed to be amended
under Proposal No. 3. The reasons for the elimination of
cumulative voting are stated under Proposal No. 3.
The proposed amendment to Article III, Section 1, Number of
Directors, is to delete the reference to the number of directors
in the first sentence of Section 1 and to add a second sentence
as follows: The number of directors shall be not less than nine
nor more than eleven, as may be determined by the Board from time
to time. The reason for the proposed amendment is to give the
Companys Board of Directors the discretionary authority to
increase its number by up to two members. It might be advisable
in the context of an acquisition of another company for a
representative of that company to be on the Companys Board of
Directors or it might be advisable at some time to appoint
persons with special knowledge and experience to the Board. The
Company has no immediate plans to appoint additional members to
the Board of Directors.
In the short run, the ability of the existing Board to
appoint two additional directors would give it the ability to
protect the incumbent directors and management from an attempt by
adverse parties to obtain control of the Board. However, in the
long run, the appointment of two additional directors will merely
give the shareholders more potential directors from which to
choose.
The Company also proposes to amend Article III, Section 1,
Number of Directors, as follows:
Any stockholder who desires to become a Director
of the Corporation shall give written notice to the
Secretary of the Corporation at least forty five (45)
days before the annual stockholders election in order to
have his name placed on the ballot. In addition, a
stockholder desiring to become a Director shall submit
with his notice the following information: name,
address, age, principal occupation, number of shares
owned, and the total number of shares that, to the
knowledge of the stockholder, will be voted in favor of
his election. Any nomination for director not made in
accordance with this section shall be disregarded by the
presiding officer of the meeting, and votes cast for
each such nominee shall be disregarded by the judges of
election.
The purpose of the proposed amendment is to enable the
Board of Directors to review the qualifications of any applicant
for membership on the Board of Directors in a timely manner prior
to the meeting of shareholders at which the applicant desires to
run for director. This provision will solidify the position of
incumbent directors and management, because it will afford them
greater opportunity to screen applicants not nominated by the
Board prior to the meeting at which they propose to run. The
increase from 15 to 45 days in the time required for written
notice for an applicant for director to have his name placed on
the ballot gives the Board more time to review the qualifications
of the applicant and to act thereon. An applicant for director
who has not given notice and submitted his credentials to the
Board in accordance with the amended provision will not be able
to surprise the Board by having shareholders vote for him at the
last minute.
The proposed Amended Article III, Section 2, is as follows:
Each of the Directors shall be a stockholder of the
Corporation. Directors shall be elected each year by the
stockholders at the annual meeting of stockholders of the Corporation.
Each Director shall be elected for the term of three (3) years and until
his successors shall be elected and shall qualify. The Directors shall
be classified in respect to the time for which they shall severally
hold office with approximately one third being in each class and the
term of office of at least one class expiring in each year. Each class
of Directors to be elected at an annual meeting of stockholders of the
Corporation shall be elected in a separate election. At each annual
meeting of stockholders, Directors shall be elected to the class whose
terms shall expire in that year and shall hold office for a term of
three (3) years and until their respective successors are elected.
The second two sentences are being revised for grammatical
improvements. The third sentence is being amended to reflect the
possibility that the number of Directors will be increased to eleven (11).
The proposed amendment provides that "approximately one-third (1/3)
of the Directors" shall be in each class, rather than specifying that
three Directors be in each class.
Under Pennsylvania Law and the Companys 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 the vote to approve the
amendment of the Companys By Laws set forth above
PROPOSAL NO. 5
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, 2000, subject to the approval of
the Shareholders. Beard & Company, Inc., was the independent
certified public accountants for the Company for the year ended
December 31, 1999. The Shareholders are asked to approve the
action of the Board of Directors in making such appointment for
2000, 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 & Company, Inc., as
independent accountants.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
If any Shareholder desires to have a proposal included in
the proxy statement for the 2001 Annual Meeting of Stockholders,
the proposal must be received by the Company in writing on or
before December 16, 2000, 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
Companys 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. Any proposal not received in writing by the Corporate
Secretary at the address stated above by December 16, 2000, will
not be included in the Companys proxy material for the 2001
Annual Meeting. Any proposal submitted with respect to the
Companys 2001 Annual Meeting of Stockholders later than December
16, 2000, will be considered untimely for purposes of Rule 14a 4
under the Securities Exchange Act of 1934, if notice thereof is
received by the Company later than February 28, 2001.
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 14, 2000
Exhibit A
RESTATED ARTICLES OF INCORPORATION
CONESTOGA ENTERPRISES, INC.
A DOMESTIC BUSINESS CORPORATION
1. The name of the corporation is Conestoga Enterprises, Inc.
2. The address of this corporations 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 1933, as amended.
4. The purposes of the corporation shall be to engage
in and to do any lawful act or acts concerning any or all
lawful business for which corporations may be incorporated under
the provisions of the Business Corporation Law of Pennsylvania,
Act of May 5, 1933, P.L. 364, as amended and supplemented, and to
do all things and exercise all powers, rights and privileges
which a business corporation may now or hereafter be organized or
authorized to do or to exercise under such Act.
5. The corporation shall have authority to issue capital
stock as follows:
i. 200,000,000 shares of voting common
stock, par value $1.00 per share;
ii. 900,000 shares of Series A Convertible
Preferred Stock in accordance with the provisions of
Exhibit 1, attached hereto.
6. There shall be no cumulative voting for the election of Directors.
7. The restated Articles of Incorporation supersede the original
Articles and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has
caused these Restated Articles of Incorporation to be signed by a
duly authorized officer thereof this day of , 2000.
CONESTOGA ENTERPRISES, INC.
By:
Title:
Exhibit 1
ESTABLISHMENT AND DESIGNATION OF
CONESTOGA ENTERPRISES, INC.
SERIES A CONVERTIBLE PREFERRED STOCK
AS A CLASS OF CAPITAL STOCK
There is hereby authorized and established, as an
additional class of the corporations authorized capital stock,
Series A Convertible Preferred Stock having a par value of $65.00
per share (such class being herein called the Series A Stock),
having the following voting rights, designations, preferences,
limitations and special rights under and subject to the following
provisions:
Section 1. Designation. There shall be a class of capital
stock which shall consist of 900,000 shares and shall be
designated as Series A Convertible Preferred Stock. The Series A
Stock is being issued in connection with the transactions
contemplated by that certain Agreement and Plan of Merger dated
as of October 18, 1995 among Conestoga Enterprises, Inc., CB
Merger Corporation and Buffalo Valley Telephone Company which
transactions closed on May 31, 1996.
Section 2. Definitions.
(a) The term Common Stock as used herein shall be
deemed to mean stock of the Corporation of any class, whether now
or hereafter authorized, which has the right to participate in
the distribution of either earnings or assets of the Corporation
without limit as to the amount or percentage; except that Common
Stock issuable upon conversion of Series A Stock as provided
herein shall mean only Common Stock authorized at the time of
original issue of Series A Stock and stock of any other class
into which the then authorized Common Stock shall thereafter have
been changed by reclassification or otherwise.
(b) The term Dividend Parity Stock as used herein
with respect to Series A Stock shall be deemed to mean all other
stock of the Corporation ranking equally therewith as to the
payment of dividends. The term Liquidation Parity Stock as used
herein with respect to Series A Stock shall be deemed to mean all
other stock of the Corporation ranking equally therewith as to
distribution of assets upon liquidation.
(c) The term Junior Stock as used herein with
respect to Series A Stock shall be deemed to mean the Common
Stock and all other stock of the Corporation ranking junior to
the Series A Stock as to the payment of dividends and the distri-
bution of assets upon liquidation. The term Dividend Junior
Stock as used herein with respect to Series A Stock shall be
deemed to mean the Common Stock and all other stock of the
Corporation ranking junior to the Series A Stock as to the
payment of dividends. The term Liquidation Junior Stock as used
herein with respect to Series A Stock shall be deemed to mean the
Common Stock and all other stock of the Corporation ranking
junior to the Series A Stock as to distribution of assets upon
liquidation.
(d) The term Senior Stock as used herein with
respect to Series A Stock shall be deemed to mean all other stock
of the Corporation ranking senior thereto as to the payment of
dividends or distribution of assets upon liquidation.
Section 3. Dividends.
(a) The holders of record of Series A Stock shall
be entitled to receive, as and if declared by the board of
directors, cumulative cash dividends thereon of $3.42 per annum,
and no more, but only out of funds legally available for the
payment of such distributions under 15 Pa.C.S. 1551 (relating
to distributions to shareholders) or under any corresponding
superseding provision of law. Dividends on the Series A Stock
shall be payable semi annually on November 30 and May 31 in each
year. Dividends shall accrue from May 31, 1996. Accumulations
of dividends shall not bear interest. Unless full cumulative
dividends on outstanding shares of Series A Stock have been paid,
no dividend or other distribution (except in Junior Stock) shall
be declared or paid on Common Stock or on other Dividend Junior
Stock and no amount shall be set aside or applied to the
redemption, purchase or other acquisition of Common Stock or
other Dividend Junior Stock other than by exchange therefor of
Junior Stock or, with respect to redemptions, purchases or other
acquisitions of Dividend Junior Stock other than Common Stock,
out of the proceeds of a substantially concurrent sale of shares
of Junior Stock.
(b) In the event that full cumulative dividends
upon the Series A Stock and stated dividends on all Dividend
Parity Stock are not paid in full, all shares of Series A Stock
and all shares of Dividend Parity Stock shall participate ratably
in the payment of dividends, including accumulations, if any, in
accordance with the sums which would be payable thereon if all
dividends thereon were declared and paid in full.
Section 4. Liquidation Rights.
(a) In the event of any liquidation, dissolution
or winding up of the Corporation, the holders of Series A Stock
shall be entitled to receive from the assets of the Corporation
payment in cash of $65.00 per share, plus a further amount equal
to unpaid cumulative dividends on Series A Stock accrued to the
date when such payments shall be made available to the holders
thereof, and no more, before any amount shall be paid or set
aside for, or any distribution of assets shall be made to the
holders of Common Stock or other Liquidation Junior Stock. If,
upon such liquidation, dissolution or winding up, the amounts
available for distribution to the holders of Series A Stock and
all Liquidation Parity Stock, shall be insufficient to permit the
payment in full to such holders of the preferential amounts to
which they are entitled, then such amounts shall be paid ratably
among the shares of Series A Stock and Liquidation Parity Stock
in accordance with the respective preferential amounts (including
unpaid cumulative dividends, if any) payable with respect thereto
if paid in full.
(b) None of the following shall be considered a
liquidation, dissolution or winding up of the Corporation within
the meaning of this section:
(1) a consolidation of the Corporation with
any other corporation;
(2) a merger of the Corporation into any
other corporation or a merger of any other
corporation into the Corporation;
(3) a reorganization of the Corporation;
(4) the purchase or redemption of all or
part of the outstanding shares of any class or
classes of the Corporation;
(5) a sale or transfer of all or any part of
the assets of the Corporation;
(6) a share exchange to which the
Corporation is a party; or
(7) a division of the Corporation.
Section 5. Redemption at the Option of the Corporation.
Commencing on the fourth anniversary of the Closing Date, the
Series A Stock may be called for redemption and redeemed at the
option of the Corporation by resolution of the board of
directors, in whole at any time or in part at any time or from
time to time upon the notice herein after provided for in section
7, by the payment in cash of a redemption price equal to the
applicable percentage of $65.00 per share specified below, plus
an amount equal to the accrued and unpaid cumulative dividends
thereon to the date fixed by the board of directors as the
redemption date:
If redeemed during the period Applicable
(dates inclusive) percentage
May 31, 2000 through May 30, 2001 103.00%
May 31, 2001 through May 30, 2002 102.00%
May 31, 2002 through May 30, 2003 101.00%
From and after May 31, 2003 100.00%
Section 6. Redemption at the Option of the Holders.
Commencing on the second anniversary of the Closing Date and at
any time or from time to time thereafter in accordance with this
section 6, each holder of Series A Stock shall have the right, at
such holders option, to require the Corporation to redeem all or
a portion of such holders shares of Series A Stock at a
redemption price of $65.00, plus an amount equal to the accrued
and unpaid cumulative dividends thereon to the redemption date.
To exercise the redemption right provided for in this section 6,
a holder must provide to the Corporation (i) an irrevocable
written notice of the holders exercise of such right, which
notice shall set forth the name of the holder of the Series A
Stock, the number of shares to be redeemed and a statement that
the election to exercise the redemption right is being made
thereby; and (ii) the shares of Series A Stock with respect to
which such redemption right is being exercised, duly endorsed for
transfer to the Corporation. Such written notice shall be
irrevocable and (unless the Corporation shall default in making
the requested redemption) shall terminate all conversion rights
of the holder under section 11 with respect to the shares of
Series A Stock to be redeemed pursuant to this section 6.
Holders may not exercise the redemption right pursuant to this
section 6 for less than 100 shares of Series A Stock (or, if less
than 100, all shares of Series A Stock owned by such holder).
Subject to the last sentence of this section 6, the Corporation
as of each March 31, June 30, September 30 and December 31 shall
redeem all shares (if any) of Series A Stock for which a notice
of redemption under this section 6 has been received by the
Corporation prior to the close of business on the immediately
preceding February 15, May 15, August 15 or November 15,
respectively. The Corporation shall also redeem all shares (if
any) of Series A Stock for which a notice of redemption under
this section 6 has been received by the Corporation during the 30
day period following the date of mailing by the Corporation
pursuant to paragraphs 11(g)(3) and 11(g)(4) of notice of a
reclassification, capital reorganization, merger, consolidation,
share exchange, division, sale, lease, exchange or other
disposition of assets, liquidation, dissolution or winding up;
any shares submitted for redemption during such 30 day period
shall be redeemed no later than 60 days following the mailing
date of such notice.
Section 7. Manner of Redemption of Series A Stock
(a) If less than all of the outstanding shares of
Series A Stock shall be called for redemption under section 5,
the particular shares to be redeemed shall be selected by lot or
by such other equitable manner as may be prescribed by resolution
of the board of directors.
(b) Notice of redemption under section 5 of any
shares of Series A Stock shall be given by the Corporation by
first class mail, not less than 30 nor more than 60 days prior to
the date fixed by the board of directors of the Corporation for
redemption (the redemption date), to the holders of record of the
shares to be redeemed at their respective addresses then
appearing on the records of the Corporation. The notice of the
redemption shall state:
(1) the redemption date;
(2) the redemption price;
(3) that the redemption is an optional
redemption pursuant to section 5;
(4) if less than all outstanding shares of
Series A Stock of the holder are to be redeemed,
the identification of the shares of Series A
Stock to be redeemed;
(5) the conversion price on the date of the
notice,
(6) that on the redemption date the
redemption price will become due and payable
upon each share of Series A Stock to be redeemed
and the right to convert each such
share shall cease as of the close of business
on the business day prior to the redemption date,
unless default shall be made in the
payment of the redemption price; and
(7) the place or places where such shares of
Series A Stock to be redeemed are to be
surrendered for payment of the redemption price.
(c) On or before the redemption date for a
redemption made under section 5 or section 6, the Corporation may
deposit in trust, for the account of the holders of the shares to
be redeemed, so as to be and continue to be available therefor,
the moneys necessary for such redemption with a bank or trust
company, to be designated in the notice of such redemption, doing
business in New York City, Philadelphia, Reading, Lewisburg or
Harrisburg, and having capital, surplus and undivided profits
aggregating at least $100,000,000. Upon the making of such
deposit, and upon the mailing as hereinabove provided in this
section 7 or in section 6 of the notice of such redemption or
upon the earlier delivery to the bank or trust company of
irrevocable authorization and direction to mail such notice, all
shares with respect to the redemption of which such deposit shall
have been made and such mailing effected or authorization
therefor given shall, whether or not the certificates for such
shares shall have been surrendered for cancellation, be deemed to
be no longer outstanding for any purpose and all rights with
respect to such shares shall thereupon cease and terminate,
except only the right of the holders of the certificates for such
shares (i) to receive, out of the moneys so deposited in trust,
from and after the time of such deposit, the amount payable upon
the redemption thereof, without interest and (ii) to exercise any
privilege of conversion not theretofore expiring. At the
expiration of two years after the redemption date any such moneys
then remaining on deposit with such bank or trust company shall
be paid over to the Corporation, free of trust, and thereafter
the holders of the certificates for such shares shall have no
claims against such bank or trust company, but only claims as
unsecured creditors against the Corporation for amounts equal to
their pro rata portions of the moneys so paid over, without
interest; except that any moneys so deposited which shall not be
required for the payment of the redemption price of such shares
because of the exercise of any right of conversion subsequent to
the date of such deposit, shall, upon request of the Corporation,
be paid over to the Corporation forthwith. Interest, if any,
accrued on moneys deposited with any bank or trust company
pursuant to the foregoing provisions of this section shall belong
to and upon its request be paid over to the Corporation. The
Corporation and its agents shall not be liable to any holder of
Series A Stock failing to surrender certificates for cancellation
for any property delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(d) Shares of Series A Stock redeemed by the
Corporation shall be restored to the status of authorized and
unissued shares of Series A, and may be reissued by the
Corporation as shares of Series A Stock.
(e) Where less than all of the Series A Stock
represented by a holders certificate have been redeemed in
accordance with section 5 or section 6 hereof, the Corporation
shall promptly provide such holder a new certificate representing
that number of shares of Series A Stock that remain outstanding
following such redemption.
Section 8. Limitation on Redemption or Purchase. Unless
full cumulative dividends due on outstanding shares of Series A
Stock have been paid or declared and set apart for payment and
all prior redemptions pursuant to section 6 of Series A Stock
made or provided for, the Corporation shall not redeem any Series
A Stock, Dividend Parity Stock or Liquidation Parity Stock unless
all outstanding shares of Series A Stock are redeemed, and the
Corporation shall not purchase or otherwise acquire for value any
Series A Stock, Dividend Parity Stock or Liquidation Parity Stock
except in accordance with a purchase or exchange offer made
simultaneously by the Corporation to all holders of record of
Series A Stock and Dividend Parity Stock and Liquidation Parity
Stock which, considering the annual dividend rates and the other
relative rights and preferences of such shares, in the reasonable
opinion of the board of directors (whose determination shall be
conclusive), will result in fair and equitable treatment among
all such shares.
Section 9. Voting Rights.
(a) Except as expressly provided to the contrary
herein or as otherwise required by law, the holders of Series A
Stock shall have no right to vote at, or to participate in, any
meeting of shareholders of the Corporation, or to receive any
notice of such meeting.
(b)(1) In the event that (i) dividends upon the
Series A Stock shall be in arrears in an amount equal to three
full semi annual dividends thereon or (ii) any redemption of
Series A Stock has not been made or provided pursuant to section
6, the number of directors constituting the full board shall be
increased by two, and the holders of the Series A Stock, voting
noncumulatively separately as a single class together with the
holders of any other shares of preferred stock having the right
to elect directors as a class under such circumstances, shall be
entitled to elect two additional members of the board of
directors of the Corporation at the next annual meeting of
shareholders of the Corporation or at a special meeting called as
hereinafter provided in this section. Such voting rights of the
holders of Series A Stock shall continue until all accumulated
and unpaid dividends thereon and all redemptions thereof shall
have been paid in full, whereupon such special voting rights of
the holders of Series A Stock shall cease (and the term of the
two additional directors shall thereupon expire and the number of
directors constituting the full board shall be decreased by two)
subject to being again revived from time to time upon the
recurrence of the conditions described in this section as giving
rise thereto.
(2) At any time when such right of holders of
Series A Stock to elect two additional directors shall have so
vested, the Corporation may, and upon the written request of the
holders of record of not less than 10% of the Series A Stock then
outstanding (or 10% of all shares of preferred stock having the
right to vote for such directors in case holders of shares of
other classes or series of preferred stock shall also have the
right to elect directors as a class in such circumstances) shall,
call a special meeting of holders of such Series A Stock (and
other class or series of preferred stock, if applicable) for the
election of directors. In the case of such a written request,
such special meeting shall be held within 60 days after the
delivery of such request, and, in either case, at the place and
upon the notice provided by law and in the bylaws of the
Corporation; except that the Corporation shall not be required to
call such a special meeting if such request is received less than
120 days before the date fixed for the next ensuing annual
meeting of shareholders of the Corporation.
(3) Whenever the number of directors of the
Corporation shall have been increased by two as provided in this
section, the number as so increased may thereafter be further
increased or decreased in such manner as may be permitted by the
bylaws of the Corporation and without the vote of the holders of
Series A Stock. No such action shall impair the right of the
holders of Series A Stock to elect and to be represented by two
directors as provided in this section.
(4) The two directors elected as provided in this
section shall serve until the next annual meeting of shareholders
of the Corporation and until their respective successors shall be
elected and qualified or the earlier expiration of their terms as
provided in this section. No such director may be removed
without the vote or consent of holders of a majority of the
shares of Series A Stock (or holders of a majority of shares of
preferred stock having the right to vote in the election of such
director in case holders of shares of other classes or series of
preferred stock shall also have the right to elect such director
as a class). If, prior to the expiration of the term of any such
director, a vacancy in the office of such director shall occur,
such vacancy shall, until the expiration of such term, in each
case be filled by appointment made by the remaining director
elected as provided in this section.
Section 10. Restrictions on Certain Corporate Action.
(a) Without the affirmative vote of the holders of
at least a majority of the Series A Stock at the time outstanding
or, if holders of other classes or series of preferred stock have
the right to vote as a class on such matter under the articles of
incorporation of the Corporation, the holders of at least a
majority of Series A Stock and other classes or series of
preferred stock voting as a single class, the Corporation shall
not:
(1) permit to be outstanding any shares of
any class or series of Senior Stock, or increase the outstanding
number of shares of any class or series of Senior Stock beyond
the number of shares permitted in accordance with this section
10; or
(2) merge, consolidate, divide or
participate in a share exchange with any other corporation if any
corporation surviving or resulting from such merger,
consolidation, division or share exchange would have after such
merger, consolidation, division or share exchange any outstanding
shares of any class or series of Senior Stock in excess of the
number of shares of Senior Stock of the Corporation permitted to
be outstanding immediately preceding such merger, consolidation,
division or share exchange.
(b) Without the affirmative vote of the holders of
at least a majority of the Series A Stock at the time
outstanding, the Corporation shall not amend, alter, change or
repeal any of the express terms of the Series A Stock.
(c) At all meetings at which the holders of the
Series A Stock have the right to vote under the express
provisions of section 9 or this section 10 (regardless of whether
or not holders of any other classes or series of preferred stock
have voting rights on such matter), each holder of Series A Stock
shall be entitled to one vote or fraction thereof, for each
$10.00 or fraction thereof, of the involuntary liquidating value
represented by the shares of Series A Stock.
Section 11. Conversion Rights.
(a) The holder of any outstanding share or shares
of Series A Stock shall have the right at any time or from time
to time to convert, subject to the provisions of this section,
any such share or shares, at the initial conversion price per
share of Common Stock of $34.425, into that number of fully paid
and nonassessable shares of Common Stock of the Corporation
determined by dividing $65.00 by the conversion price in effect
at the time of such conversion; except that (i) such conversion
price shall be subject to adjustment upon the happening of
certain contingencies as provided in subsection (b), (ii)
whenever the Corporation shall call for redemption any Series A
Stock, the conversion rights of the holder thereof shall
terminate as to the shares called for redemption at the close of
business on the business day next preceding the redemption date
unless default shall be made in the payment of the redemption
price or in the conversion thereof and (iii) in the event of the
liquidation of the Corporation, whether voluntary or involuntary,
or a consolidation or merger of the Corporation with or into any
other corporation or a share exchange or division, as a result of
which consolidation, merger, share exchange or division only cash
shall be payable or distributable to the holders of the Common
Stock, the conversion rights of the holders of Series A Stock
shall terminate on such date as shall be fixed by the board of
directors, not less than 30 days after the mailing to such
holders of the notice required by subsection (g).
(b) The conversion price shall be subject to
adjustment as follows:
(1) If the Corporation shall:
(i) pay or make a dividend or
distribution on its Common Stock in
shares of its capital stock;
(ii) subdivide its outstanding
shares of Common Stock into a
greater number of shares;
(iii) combine its outstanding
shares of Common Stock into a
smaller number of shares;
(iv) issue to holders of Common Stock by
reclassification of its shares of Common
Stock or any recapitalization or
reorganization any shares of capital stock of
the Corporation; or
(v) take any other action having the
same effect as any of the actions
described in subparagraphs (i) through (iv);
then, in each such case, the conversion price in effect
immediately prior thereto shall be adjusted so that the holder of
any share of Series A Stock thereafter surrendered for conversion
shall be entitled to receive the number of shares of the
Corporation which such holder would have owned or been entitled
to receive after the happening of any of such events had such
share of Series A Stock been converted immediately prior to the
happening thereof. An adjustment made pursuant to this paragraph
(1) shall become effective retroactively as of the time
immediately after the record date in those cases specified in
subparagraph (i) and shall become effective as of the time
immediately after the effective date in those cases specified in
subparagraphs (ii) through (v).
(2) If the Corporation shall issue rights or
warrants to all holders of its Common Stock entitling them (for a
period expiring within 90 days after the record date mentioned in
the last sentence of this paragraph) to subscribe for or purchase
shares of Common Stock at a price per share less than the current
market price (determined as provided in paragraph (5) of this
subsection) per share of Common Stock on the business day
immediately preceding the record date mentioned in the last
sentence of this paragraph or, if earlier, the date such issuance
is given effect for trading purposes, the conversion price in
effect immediately prior thereto shall be adjusted so that the
same shall equal the price determined by multiplying the
conversion price in effect immediately prior thereto by a
fraction, of which the numerator shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights
or warrants (without giving effect to their exercise) plus the
number of shares which the aggregate exercise price of the total
number of shares offered for subscription or purchase would
purchase at such current market price, and of which the
denominator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants
(without giving effect to their exercise) plus the number of
additional shares of Common Stock offered for subscription or
purchase. Such adjustment shall be made whenever such rights or
warrants are issued and shall become effective retroactively as
of the time immediately after the record date for the
determination of shareholders entitled to receive such rights or
warrants.
(3) If the Corporation shall distribute to
all holders of its Common Stock evidences of its indebtedness or
assets (excluding cash dividends) or rights or warrants to
subscribe for or purchase Common Stock (excluding those referred
to in paragraph (2)) or other securities issued by the
Corporation or property of the Corporation, then and in each such
case the conversion price shall be adjusted so that the same
shall equal the price determined by multiplying the conversion
price in effect immediately prior thereto by a fraction, of which
the numerator shall be the current market price per share of the
Common Stock on the business day immediately preceding the record
date mentioned in the last sentence of this paragraph or, if
earlier, the date such distribution is given effect for trading
purposes less the then fair market value (as determined in good
faith by resolution of the board of directors of the Corporation,
whose determination shall be conclusive) of the portion of the
assets or evidences of indebtedness so distributed or of such
rights or warrants applicable to one share of Common Stock, and
of which the denominator shall be the current market price per
share of Common Stock on the business day immediately preceding
the record date mentioned in the last sentence of this paragraph
or, if earlier, the date such distribution is given effect for
trading purposes. Such adjustment shall be made whenever any
such distribution is made and shall become effective
retroactively as of the time immediately after the record date
for the determination of shareholders entitled to receive such
distribution.
(4) If any such rights or warrants referred
to in paragraphs (2) and (3) above shall expire without having
been exercised, the conversion price as theretofore adjusted
because of the issue of such rights or warrants shall forthwith
be readjusted to the conversion price which would have been in
effect had an adjustment been made on the basis that the only
rights or warrants so issued or sold were those rights or
warrants actually exercised and that with respect to any such
rights or warrants to subscribe for or purchase securities issued
by the Corporation, other than Common Stock, or property of the
Corporation the fair market value thereof shall be the fair
market value of the rights or warrants actually exercised.
(5) For the purpose of any computation under
this subsection, the current market price per share of Common
Stock at any date shall be deemed to be the average of the daily
closing prices for the ten consecutive business days commencing
five business days before the day in question. The closing price
for each day shall be, in the event that the Common Stock is
listed on any national securities exchange, the last reported
sale price regular way or, in case no such reported sale takes
place on such day, the average of the last reported bid and asked
prices regular way, in either case as reported on the applicable
consolidated or composite tape for issues traded on the principal
national securities exchange on which the Common Stock is
admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, the
average of the last reported bid and asked prices in the over the
counter market as furnished by any national quotation system or,
if not available, any New York Stock Exchange member firm
selected from time to time by the Corporation for the purpose.
The term business day shall include any day on which securities
are traded on such exchange or in such market.
(6) No adjustment in the conversion price
shall be required unless such adjustment would require an
increase or decrease of at least one percent; except that any
adjustments which by reason of this sentence are not required to
be made shall be carried forward, and taken into account in
calculating each subsequent adjustment, until made. All
calculations under this subsection shall be made to the nearest
cent or to the nearest 1 100 of a share as the case may be.
(7) In determining the number of shares of
Common Stock outstanding at any particular time, for the purpose
of computations pursuant to the formula in this subsection there
shall be included all Common Stock issuable in respect of any
then outstanding scrip certificates representing fractional
interests with respect to Common Stock.
(c) Notwithstanding anything to the contrary set
forth in subsection (b), no adjustment of the conversion price
shall be made as a result of or in connection with the issuance
of Common Stock of the Corporation pursuant to any dividend
reinvestment plan now existing or hereafter established by the
Corporation for the benefit of holders of Common Stock.
(d) In the event of any:
(1) capital reorganization of the
Corporation;
(2) merger, consolidation or share exchange
of the Corporation with or into another corporation;
(3) division of the Corporation; or
(4) sale, lease, exchange or other
disposition of all or substantially all of the property and
assets of the Corporation as a result of which sale, lease,
exchange or other disposition of property, other than solely
cash, shall be payable or distributable in exchange for shares of
Common Stock, then, as a condition of such reorganization,
merger, consolidation, share exchange, division, sale, lease,
exchange or other disposition, the Corporation or such successor
or purchasing corporation, as the case may be, shall make
provision that the holder of each share of Series A Stock shall
have the right thereafter to convert such share into the kind and
amount of stock, securities or assets receivable upon such
reorganization, merger, consolidation, share exchange, division,
sale, lease, exchange or other disposition by a holder of the
number of shares of Common Stock into which such share of Series
A Stock might have been converted immediately prior to such
reorganization, merger, consolidation, share exchange, division,
sale, lease, exchange or other disposition, subject to
adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in subsection (b).
The provisions of this subsection shall similarly apply to
successive reorganizations, mergers, consolidations, share
exchanges, divisions, sales, leases, exchanges or other
dispositions.
(e) Subject to the provisions of subsection (b) of
section 3 above, upon conversion of any shares of Series A Stock,
the Corporation shall deliver to the holder of the shares,
together with the certificates for the Common Stock issued upon
conversion, payment (but only out of funds legally available for
the payment of such distributions under 15 Pa.C.S. 1551) for
all accrued and unpaid cumulative dividends on such shares
through the date of conversion as determined in accordance with
subsection (h) below.
(f) Whenever the conversion prices shall be
adjusted as provided in subsection (b), the Corporation, as soon
as practicable and in no event later than ten business days
thereafter, shall file with each transfer agent and conversion
agent for Series A Stock a statement, signed by the president,
any vice president or the treasurer of the Corporation, stating
the adjusted conversion prices determined as therein provided and
setting forth in reasonable detail the facts requiring such
adjustment, and shall promptly mail a copy of such statement to
each holder of Series A Stock at the address of such holder then
appearing on the record books of the Corporation. Each transfer
and conversion agent shall be fully protected in relying on such
statement and shall be under no duty to examine into the truth or
accuracy thereof. If any question shall at any time arise with
respect to the adjusted conversion prices, it shall be resolved
by a firm of independent public accountants selected by the
Corporation, who may be the Corporations auditors, and such
determination shall be binding upon the Corporation and the
holders of such shares.
(g) If the Corporation shall propose:
(1) to pay any dividend in stock upon its
Common Stock or to make any other distribution, other than a cash
dividend payable out of retained earnings, to the holders of its
Common Stock;
(2) to offer to the holders of its Common
Stock rights to subscribe to any additional shares of any class
or any other rights or options;
(3) to effect any reclassification of its
Common Stock (other than a reclassification involving merely the
subdivision or combination of outstanding Common Stock), or to
effect any capital reorganization, or to engage in any merger,
consolidation, share exchange, division or sale, lease, exchange
or other disposition of all or substantially all of its property
and assets in a transaction in which approval of any holders of
the Common Stock or Series A Stock is required; or
(4) to liquidate, dissolve or wind up;
then, in each such case, the Corporation shall file with each
transfer agent for Series A Stock and shall mail to the holders
of record of Series A Stock at their respective addresses then
appearing on the record books of the Corporation notice of such
proposed action, such notice to be filed and mailed at least ten
days, if the proposed action is that referred to in paragraph (1)
or (2), and at least 30 days, if the proposed action is that
referred to in paragraph (3) or (4), prior to the record date for
the purpose of determining holders of the Common Stock entitled
to the benefits of the action referred to in paragraph (1) or (2)
or to vote with respect to the action referred to in paragraph
(3) or (4) or, if no record date is taken for any such purpose,
the date of the taking of such proposed action. Such notice
shall specify the record date for such stock dividend,
distribution of such rights or options, or the date on which such
reclassification, reorganization, merger, consolidation, share
exchange, division, sale, lease, exchange or other disposition,
liquidation, dissolution or winding up shall take place, as the
case may be, and the date of participation therein by the holders
of Common Stock if any such date is to be fixed. If such notice
relates to any proposed action referred to in paragraph (3) or
(4), it shall set forth facts with respect thereto as shall be
reasonably necessary to inform each transfer agent and the
holders of such shares as to the effect of such action upon their
conversion rights. Failure to file any certificate or notice, or
to mail any notice, or any defect in any certificate or notice,
pursuant to this subsection, shall not affect the legality or
validity of any adjustment, dividend, distribution or right
referred to in this subsection.
(h) In order to convert shares of Series A Stock
into Common Stock the holder thereof shall surrender at the
office of any transfer or conversion agent for the Series A Stock
the certificate or certificates therefor, duly endorsed to the
Corporation or in blank, and give written notice to the
Corporation at such office that the holder elects to convert such
shares and shall state in writing therein the name or names (with
addresses) in which such holder wishes the certificate or
certificates for Common Stock to be issued. Shares of Series A
Stock shall be deemed to have been converted immediately prior to
the close of business on the date of the receipt by the transfer
or conversion agent of such certificate or certificates for
shares for conversion as provided in this subsection, and the
person or persons entitled to receive the Common Stock issuable
upon such conversion shall be treated for all purposes as the
record holder or holders of such Common Stock after such date of
receipt. As soon as practicable on or after the date of
conversion, the Corporation shall issue and deliver at such
office a certificate or certificates for the number of full
shares of Common Stock issuable upon such conversion, together
with (x) a scrip certificate for, or cash in lieu of, any
fraction of a share, as provided in subsection (j), and (y) all
accrued and unpaid cumulative dividends on the converted shares
of Series A Stock through the date of conversion as provided in
subsection (e), to the person or persons entitled to receive the
same.
(i) The Corporation shall pay any and all federal
or state original issue taxes that may be payable in respect of
the issue or delivery of shares of Common Stock on conversion of
shares of Series A Stock pursuant to this resolution. The
Corporation shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issue
and delivery of shares of Common Stock in a name other than that
in which the shares of Series A Stock so converted were
registered, and no issue or delivery shall be made unless and
until the person requesting such issue has paid to the
Corporation the amount of any such tax, or has established to the
satisfaction of the Corporation either that such tax has been
paid or that no such tax is payable.
(j) The Corporation shall not issue fractional
shares of Common Stock upon any conversion of shares of Series A
Stock. As to any final fraction of a share which the holder of
one or more shares of Series A Stock would be entitled to receive
upon exercise of such shareholders conversion right, the
Corporation shall, at its option as to any such exercise, either:
(1) deliver a scrip certificate of the
Corporation in respect of such final fraction; or
(2) pay a cash adjustment in respect of such
final fraction in an amount equal to the same fraction times the
closing price per share of Common Stock on the business day which
next precedes the day of exercise.
The closing price for such day shall be, in the event that the
Common Stock is listed on any national securities exchange, the
last reported sale price regular way or, in case no such reported
sale takes place on such day, the average of the last reported
bid and asked prices regular way, in either case as reported on
the composite tape for issues traded on the principal national
securities exchange on which the Common Stock is listed or
admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, the
average of the last reported bid and asked prices in the over the
counter market as furnished by any national quotation system or,
if not available, any New York Stock Exchange member firm
selected from time to time by the Corporation for the purpose.
(k) The Corporation shall at all times have
authorized and unissued a number of shares of Common Stock
sufficient for the satisfaction of any scrip certificates and the
conversion of all shares of Series A Stock at the time
outstanding.
(l) For so long as the Common Stock is listed or
included for quotation or trading on any securities exchange or
market or trading system, the Company agrees to list or include
on any such exchange, market or system all shares of Common Stock
issuable upon conversion of the Series A Stock.
Section 12. Shareholder Rights as to Dividends and
Redemptions. It shall be the mandatory and not discretionary
duty of the board of directors to (i) declare and cause to be
paid all dividends relating to the Series A Stock and (ii) make
redemptions of shares of Series A Stock in accordance with the
terms of such stock, so long as such dividends or redemptions are
not then prohibited by 15 Pa.C.S. 1551(b) (or any successor
provision). The rights of a holder to the declaration and
payment of dividends on, and the redemption of, shares of Series
A Stock shall be specifically enforceable by a holder to the
maximum extent permitted by 15 Pa.C.S. 1521(b) (or any
successor provision).
Section 13. Financial Statements and Information. For so
long as any shares of Series A Stock shall be outstanding, the
Corporation shall furnish to the holders of record of the Series
A Stock at their respective addresses then appearing on the
record books of the Corporation, copies of all annual and
quarterly reports, proxy statements and all other information and
reports furnished by the Corporation to the holders of Common
Stock. Such information shall be furnished in the same manner
and by the same means as furnished to the holders of Common
Stock. If at any time the Corporation shall cease to be
required, under the Securities Exchange Act of 1934, as amended,
to furnish reports and proxy statements to the holders of the
Common Stock, then the Corporation shall in lieu of such
information furnish the holders of Series A Stock the financial
reports required by, within the time period specified in, Pa.C.S.
1554 (or any successor provision).
Exhibit B
PROPOSED BY LAW AMENDMENTS
ARTICLE II
STOCKHOLDERS
Section 2. ANNUAL MEETING. There shall be an
annual meeting of the stockholders of the Corporation for
the purpose of electing Directors and transacting other
proper business, which shall be held on or before May 31st
of each year.
Section 7. RIGHT TO VOTE. Except as otherwise
provided by law, each common stockholder of record shall
be entitled, at every meeting of the Corporation, to cast
one vote for each share of common stock standing in the
name of such common stockholder on the books of the
Corporation. There shall be no cumulative voting for the
election of Directors.
ARTICLE III
DIRECTORS
Section 1. NUMBER OF DIRECTORS. The property,
affairs, and business of the Corporation shall be managed
and controlled by a Board of Directors who may exercise
all such powers of the Corporation and do all such lawful
acts and things as are not by law, the charter of the
Corporation, or its By Laws, required to be exercised or
to be done by the stockholders. The number of directors
shall be not less than nine nor more than eleven, as may
be determined by the Board from time to time. Any
stockholder who desires to become a Director of the
Corporation shall give written notice to the Secretary of
the Corporation at least forty five (45) days before the
annual stockholders election in order to have his name
placed on the ballot. In addition, a stockholder
desiring to become a Directors shall submit with his
notice the following information: name, address, age,
principal occupation, number of shares owned, and the
total number of shares that, to the knowledge of the
stockholder, will be voted in favor of his election. Any
nomination for director not made in accordance with this
section shall be disregarded by the presiding officer of
the meeting, and votes cast for each such nominee shall
be disregarded by the judges of election.
ARTICLE III
Section 2. QUALIFICATION AND TERM. Each of the
Directors shall be a stockholder of the Corporation. Directors
shall be elected each year by the stockholders at the annual
meeting of stockholders of the Corporation. Each Director shall
be elected for the term of three (3) years and until
his successors shall be elected and shall qualify. The Directors
shall be classified in respect to the time for which they shall
severally hold office with approximately one third being in
each class and the term of office of at least one class
expiring in each year. Each class of Directors to be elected
at an annual meeting of stockholders of the Corporation shall
be elected in a separate election. At each annual meeting of
stockholders, Directors shall be elected to the class whose
terms shall expire in that year and shall hold office for a
term of three (3) years and until their respective successors
are elected.
