SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<Table>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11c or Section 240.14a-12
</Table>
WARWICK VALLEY TELEPHONE COMPANY
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[WVT COMMUNICATIONS LOGO]
DEAR FELLOW SHAREHOLDER:
URGENT UPDATE
You may have recently received a mailing from a Mr. Phillip Goldstein, a
dissident shareholder. We urge you to treat this material with caution. Below is
a summary of recent events, followed by more detail starting on page 3.
CAUTION: DON'T LET PHILLIP GOLDSTEIN HARM YOUR INVESTMENT
Your Company is faced with a disruptive proxy fight waged by Mr.
Goldstein. He is seeking support for his hand-picked director and two
shareholder proposals. Mr. Goldstein is also opposing one of your Board's seven
proposals amending the certificate of incorporation. YOUR BOARD STRONGLY
BELIEVES GOLDSTEIN'S PROPOSALS ARE SELF-SERVING AND NOT IN THE BEST INTERESTS OF
WARWICK VALLEY TELEPHONE COMPANY (WARWICK) shareholders.
- We believe Goldstein's director nominee HAS NO EXPERIENCE IN
OPERATING OR MANAGING A TELECOMMUNICATIONS COMPANY and would
represent a divisive and disruptive element on your Board of
Directors.
- We believe Goldstein's proposal recommending that Warwick register
as an investment company under the Investment Company Act of 1940 is
UNREALISTIC AND UNWORKABLE, AND NOT IN THE BEST INTEREST OF WARWICK
OR WARWICK'S SHAREHOLDERS.
- Mr. Goldstein has included in his proxy another shareholder proposal
recommending that the Company spin-off its interest in the Orange
County-Poughkeepsie Limited Partnership (OCP), claiming - in part -
that a spin-off would end double taxation to shareholders of
Warwick. WE BELIEVE THIS IS MISLEADING IN SEVERAL WAYS AND
ILLUSTRATES MR. GOLDSTEIN'S FUNDAMENTAL MISUNDERSTANDING OF OCP AND
ISSUES RELATED TO IT.
- Mr. Goldstein is also seeking shareholder votes against one of your
Board's seven proposals amending the certificate of incorporation.
We believe Warwick's Proposal IIC is important because the
additional authorized Preferred Shares being proposed would provide
your Board with flexibility to issue additional shares for corporate
purposes. Please be aware that IF PROPOSAL IIC IS NOT APPROVED, THE
STOCK SPLIT OF THE COMMON STOCK WILL NOT --- OCCUR.
- WE BELIEVE GOLDSTEIN'S ESTIMATES OF THE POTENTIAL VALUE OF THE
COMPANY'S STOCK ARE PURELY SPECULATIVE, and his valuation of the
Company's interest in OCP appears to take no account of the factors
usually considered, such as the liquidity or illiquidity of the
market for such interests, the specific activities of the company
and its financial structure, and industry trends. Mr. Goldstein
instead treats OCP as one might if it were a U.S. government bond
with a 30-year maturity.
WHAT YOU SHOULD DO
1. IF YOU AGREE WITH THE COMPANY, DISCARD MR. GOLDSTEIN'S GREEN PROXY CARD.
DO NOT RETURN A GREEN PROXY TO MR. GOLDSTEIN - EVEN IN PROTEST.
2. IF YOU HAVE NOT YET VOTED, PLEASE SIGN, DATE AND RETURN THE ENCLOSED WHITE
PROXY CARD VOTING FOR PROPOSALS I THROUGH IIG AND AGAINST PROPOSALS III
AND IV.
3. IF YOU HAVE ALREADY VOTED, WE ASK YOU TO RECONFIRM YOUR VOTE BY SIGNING,
DATING AND RETURNING THE ENCLOSED WHITE PROXY CARD - REMEMBER: ONLY THE
LATEST DATED CARD COUNTS. PLEASE VOTE FOR PROPOSALS I THROUGH IIG AND
AGAINST PROPOSALS III AND IV.
4. IF YOUR SHARES ARE HELD IN THE NAME OF A BROKER, YOU MUST RETURN YOUR
WHITE PROXY CARD TO YOUR BROKER IN ORDER FOR YOUR SHARES TO BE VOTED AS
RECOMMENDED BY YOUR BOARD. DO NOT RETURN YOUR PROXY TO WARWICK. DO NOT
BRING YOUR PROXY TO THE ANNUAL MEETING TO VOTE.
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WARWICK - ANOTHER SUCCESSFUL YEAR
The year 2002 marked Warwick's 100th year of serving the communication
needs of our customers. It also marked another financially successful year for
your Company and its shareholders. Warwick's stock closed the year at an all
time high of $69.50 per share, up 24.1% for the year (during the same period the
NASDAQ Composite was down 31.5%) - and has continued that rise, closing at
$77.65 on April 10, 2003. It is our belief that many different factors
contributed to the stock's success, including strong revenue retention, cost
containment, smart market initiatives, regular dividends, and income from the
Orange County-Poughkeepsie Limited Partnership. Clearly, Warwick is not a
one-dimensional company.
MR. GOLDSTEIN'S HISTORY CONCERNS YOUR BOARD
In spite of Warwick's successful record, your Company is faced with a
proxy fight waged by Mr. Goldstein. Mr. Goldstein runs a private fund and is a
recent purchaser of Warwick stock (all shares having been acquired within the
past two years).
It appears to us that disruption is just part of the game for Mr.
Goldstein. He has a long history of targeting companies with proxy fights and
litigation. In fact, one of his private partnerships recently SUED YOUR COMPANY
in an attempt to force it to register as an investment company. At the
suggestion of Mr. Goldstein's attorney, that suit was withdrawn with prejudice.
You should know that this year alone, Mr. Goldstein is involved in proxy fights
with at least two other companies.
In the past, Goldstein's favorite targets have been closed-end mutual
funds, where his objective has been to "open end" or liquidate the funds in the
hopes of making a quick profit.
It is this type of short-term mentality that concerns your Board,
particularly in light of the success of our current long-term strategic plan.
Neither Mr. Goldstein, nor his nominee, has presented any business plan
involving the operation of your Company.
MR. GOLDSTEIN WANTS YOU TO PAY FOR HIS FIGHT
Not only has Mr. Goldstein targeted your Company with a proxy fight, he
wants you to pay for it. Mr. Goldstein has stated that he intends to seek
reimbursement from your Company for the expenses HE incurs in connection with
HIS proxy solicitation. Furthermore, Mr. Goldstein has stated that he WILL NOT
ask for you - the shareholders and owners of Warwick - to vote on this
reimbursement of HIS solicitation expenses.
MR. GOLDSTEIN'S DIRECTOR NOMINEE LACKS VITAL EXPERIENCE
Mr. Goldstein has stated that he intends to nominate Gerald Hellerman for
election as a director for your Board. YOU SHOULD BE AWARE THAT WE BELIEVE MR.
GOLDSTEIN VIOLATED THE SECURITIES AND EXCHANGE COMMISSION ("SEC") PROXY RULES BY
NAMING IN HIS PROXY THE COMPANY'S DIRECTORS WHOM HE WOULD LIKE TO SUPPORT
WITHOUT OBTAINING THEIR CONSENT.
In addition, iT APPEARS TO US THAT MR. HELLERMAN HAS NO EXPERIENCE IN
OPERATING OR MANAGING A TELECOMMUNICATIONS COMPANY; rather, his experience
appears to be limited to investment companies.
IN CONTRAST, ALL OF YOUR BOARD'S NOMINEES ARE FAMILIAR WITH THE COMPANY
AND THE SPECIAL CHALLENGES OF OPERATING A REGULATED TELEPHONE COMPANY in a time
of tough competition, rapid technological change, and regulatory changes
occurring at the national and state levels.
- Lynn Pike has over 30 years of operating company experience.
Recently, as President of Warwick, he has led the Company in its
successful effort to provide its customers with extensive
high speed Internet access (DSL) and a complete range of video
services over existing copper wire.
- Robert DeValentino has over 20 years of telecommunications
experience, both at Citizens Telecommunications and as a Board
member of the Company. He is also thoroughly familiar with the
community served by the Company.
- Rafael Collado has unusually deep and broad experience in all of the
technologies that are important for modern telecommunications. He
has already greatly assisted the Company in developing its Internet
services.
WARWICK NEEDS DIRECTORS THAT KNOW THE COMPANY, ITS BUSINESS, AND THE
MARKETS IT SERVES. WE NEED DIRECTORS WHO WILL ACT IN THE INTERESTS OF ALL
WARWICK SHAREHOLDERS. Please vote the WHITE proxy card to support your Company's
director nominees.
REJECT GOLDSTEIN'S PROPOSAL
Mr. Goldstein has submitted a proposal recommending that Warwick register
as an investment company under the Investment Company Act of 1940 (ICA). He
claims that the Company's interest in the Orange County-Poughkeepsie Limited
Partnership, plus its holdings of other so-called investment securities, appear
to be worth more than 40% of its total assets. YOUR BOARD BELIEVES THIS PROPOSAL
IS UNREALISTIC AND UNWORKABLE, AND NOT IN THE BEST INTEREST OF WARWICK OR
WARWICK'S SHAREHOLDERS.
Your Company recognizes that its interest in OCP is valuable. This
interest has allowed your Company to modernize its services without burdening
itself with debt, and it has helped the Company to pay and increase its
dividend. Simply put, the Company does not believe that the value of its
interest in OCP and other so-called investment securities presently represents
more than 40% of the value of the Company's total assets. Since 40% is the
threshold set in the ICA, the Company is not required to register as an
investment company. Despite Goldstein's assertions on this point, it was the
Company's own determination that it had not crossed this threshold that led to
the withdrawal of an application for exemption under the ICA that it had filed
with the SEC.
More importantly, your Company could not effectively operate as a
telecommunications company if it registered as an investment company. There are
numerous rules and requirements under the ICA that were designed for investment
companies, but not for operating companies. To take a simple example,
significant restrictions apply to the securities that an investment company can
issue and the dividends it can pay. These restrictions alone, on top of state
and federal telephone company regulation, would make operations unnecessarily
complicated for the Company.
Mr. Goldstein does not tell you that as an investment company your Company
would actually be allowed to provide LESS business information to its
shareholders, since investment companies are not required to report the type of
detailed business information the Company provides on SEC Forms 10-Q and 10-K
and in its Annual Report to Shareholders. Furthermore, the Company already
provides much more extensive business and financial information about OCP itself
than it would have to report as an investment company. Just compare the business
and financial information the Company already provides about OCP (including
audited financial statements filed as an exhibit to the Company's Form 10-K) to
the level of data Mr. Goldstein wants you to receive if the Company were an
investment company: namely, a single number, the Company's determination of
OCP's fair value.
WE URGE SHAREHOLDERS TO REJECT MR. GOLDSTEIN'S ILL-CONCEIVED PROPOSAL IV.
REJECT THE SPIN-OFF PROPOSAL
In addition to his own proposal, Mr. Goldstein has included in his proxy
the proposal of another shareholder recommending that the Company "spin-off" its
interest in OCP. In his proxy material, Mr. Goldstein is seeking shareholder
support for this proposal, claiming -- in part -- that a "spin-off"
(technically, a dividend distribution in this case) would end double taxation to
shareholders of Warwick. We believe this claim illustrates that Mr. Goldstein
has a fundamental misunderstanding of OCP and issues related to it.
First, in the kind of "spin-off" Mr. Goldstein seems to contemplate, OCP
would in all likelihood become a publicly traded partnership taxed as a
corporation. Accordingly, there would be a tax at both the partnership level and
at the limited partner level. Other "spin-offs" with structures that seem
realistic in the case of the Company would also lead to double taxation. In
other words, the general rule that partners (not partnerships) are taxed would
NOT apply in this situation.
In addition, any such "spin-off" would be taxable to the Company. Warwick
would have to pay a large income tax bill even though it would get no cash to
pay that bill. The dividends received by shareholders would also be taxable and
would provide the shareholders with no cash to pay such taxes. To pay its taxes,
the Company would probably have to borrow substantial amounts.
Taxes are not the only issue. Telephone regulation and the terms of OCP's
partnership agreement also raise serious concerns. Since Warwick acquired its
interest in OCP with money from its rate paying customers and after regulatory
approval, the New York Public Service Commission would have some say in any
"spin-off" and could impose conditions. Since a "spin-off" produces no proceeds
for Warwick and would also result in a tax burden, serious difficulties should
be expected in obtaining approval. The approval of OCP's general partner would
also be required. The Company believes the general partner has the power to deny
approval of any transfer of a limited partnership interest if OCP would become
subject to taxation or would have to register with the Securities and Exchange
Commission as a public company.
WE URGE SHAREHOLDERS TO REJECT PROPOSAL III.
VOTE FOR THE COMPANY'S PREFERRED SHARE PROPOSAL "IIC"
Mr. Goldstein is seeking shareholder votes against the Company's
Proposal IIC regarding an increase in the number of Preferred Shares and changes
in Preferred Shares provisions of the Company's certificate of incorporation. We
believe shareholders should vote FOR Proposal IIC.
We believe Proposal IIC is important because the additional authorized
Preferred Shares being proposed would provide the Board with flexibility to
issue additional shares for corporate purposes, such as raising capital, stock
dividends, acquisitions, and other similar purposes, which include public
offerings or private placements. The proposal would also allow the Board to
structure the terms of a new series of Preferred Shares without further
shareholder approval. Whenever the Company issues new stock it must obtain
permission from the New York Public Service Commission and the New Jersey Board
of Public Utilities. Both regulators evaluate the effect of new securities on
the Company's financial structure.
Unlike unregulated companies, your Company cannot decide on its own
whether to issue new stock of any kind. The regulatory approval process by
itself can be very time-consuming. Requiring new shareholder approval every time
a series of Preferred Shares is to be issued, on top of the need to obtain
regulatory approval, potentially creates such long delays that in most instances
the Company
cannot respond to any need for new Preferred Shares within a practical time
frame.
Please be aware that because the Company believes it is preferable for the
overall structure of its capital stock to be consistent, the Company will not
amend its Certificate of Incorporation to reflect any of the proposed changes to
its Common or Preferred Shares set forth in Proposals IIA, IIB and IIC unless
all of the proposals are approved. Therefore, IF PROPOSAL IIC IS NOT APPROVED,
THE PROPOSAL RELATING TO THE STOCK SPLIT OF THE COMMON STOCK WILL NOT BE GIVEN
EFFECT.
YOUR BOARD URGES YOU TO VOTE FOR PROPOSAL IIC.
YOUR VOTE IS IMPORTANT - PLEASE VOTE TODAY!
We believe the choice is clear - vote FOR your Board's nominees and
proposals and AGAINST proposals III and IV.
PLEASE VOTE YOUR WHITE PROXY CARD TODAY and mail it using the enclosed
envelope. Only your latest dated proxy card will be counted.
Thank you for your continued support.
Sincerely,
/s/ M. Lynn Pike
---------------------------------
M. Lynn Pike
President
On Behalf of Your Board of Directors
IMPORTANT!
- - IF YOU HAVE NOT YET VOTED, PLEASE SIGN, DATE AND RETURN THE ENCLOSED WHITE
PROXY CARD VOTING FOR PROPOSALS I THROUGH IIG AND AGAINST PROPOSALS III
AND IV.
- - IF YOU HAVE ALREADY VOTED, WE ASK YOU TO RECONFIRM YOUR VOTE BY SIGNING,
DATING AND RETURNING THE ENCLOSED WHITE PROXY CARD - REMEMBER: ONLY THE
LATEST DATED CARD COUNTS. PLEASE VOTE FOR PROPOSALS I THROUGH IIG AND
AGAINST PROPOSALS III AND IV.
- - WE URGE YOU NOT TO SIGN ANY GREEN PROXY CARD SENT TO YOU BY MR. GOLDSTEIN,
NOT EVEN AS A VOTE OF PROTEST.
- - IF YOUR SHARES ARE HELD IN THE NAME OF A BROKER, YOU MUST RETURN YOUR
WHITE PROXY TO YOUR BROKER OR BANK IN ORDER FOR YOUR SHARES TO BE VOTED AS
RECOMMENDED BY YOUR BOARD. DO NOT RETURN YOUR PROXY TO WARWICK. DO NOT
BRING YOUR PROXY TO THE ANNUAL MEETING TO VOTE.
IF YOU HAVE ANY QUESTIONS ON HOW TO VOTE YOUR SHARES, PLEASE CALL OUR PROXY
SOLICITOR:
MORROW & CO., INC. AT (800) 662 - 5200
WHITE PROXY CARD -- REVISED THIS PROXY REVOKES ALL PRIOR PROXIES. COMMON
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL NOMINEES FOR
DIRECTOR AND "FOR" PROPOSALS IA AND IIA THROUGH IIG.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR
VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
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I. The Board of Directors has nominated the persons listed below to
serve as directors until 2006:
1) Rafael Collado, 2) Robert J. DeValentino, 3) M. Lynn Pike
FOR WITHHOLD WITHHOLD AUTHORITY
[ ] all nominees [ ] all nominees [ ] to vote for individual
nominee(s) listed below
FOR AGAINST ABSTAIN
IA. PROPOSAL TO FIX THE NUMBER OF DIRECTORS AT NINE [ ] [ ] [ ]
UNTIL THE NEXT ANNUAL MEETING OF SHAREHOLDERS.
FOR AGAINST ABSTAIN
IIA. PROPOSAL TO APPROVE AMENDMENT TO INCREASE THE [ ] [ ] [ ]
NUMBER OF AUTHORIZED COMMON SHARES AND CHANGE FROM
NO-PAR TO $0.01 PAR.
IIB. PROPOSAL TO APPROVE AMENDMENT TO EFFECT 3-FOR-1 [ ] [ ] [ ]
SPLIT OF THE COMPANY'S COMMON SHARES.
IIC. PROPOSAL TO APPROVE AMENDMENT TO INCREASE [ ] [ ] [ ]
AUTHORIZED PREFERRED SHARES, CHANGE PAR VALUE OF
UNISSUED PREFERRED SHARES AND INCREASE FLEXIBILITY
IN ESTABLISHING TERMS OF SERIES.
IID. PROPOSAL TO APPROVE AMENDMENT TO REVISE THE [ ] [ ] [ ]
PURPOSE CLAUSE.
IIE. PROPOSAL TO APPROVE AMENDMENT TO CHANGE THE NUMBER [ ] [ ] [ ]
OF DIRECTORS.
IIF. PROPOSAL TO APPROVE RIGHT TO REMOVE DIRECTORS FOR [ ] [ ] [ ]
CAUSE.
IIG. PROPOSAL TO APPROVE AMENDMENT TO MAKE VARIOUS [ ] [ ] [ ]
OTHER CHANGES TO THE CERTIFICATE OF INCORPORATION.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST SHAREHOLDER PROPOSALS: III & IV
FOR AGAINST ABSTAIN
III. TO RECOMMEND THAT THE COMPANY SPIN OFF ITS [ ] [ ] [ ]
INTEREST IN THE ORANGE COUNTY- POUGHKEEPSIE
CELLULAR PARTNERSHIP.
IV. TO RECOMMEND THAT THE COMPANY REGISTER WITH THE [ ] [ ] [ ]
SECURITIES EXCHANGE COMMISSION AS AN INVESTMENT
COMPANY.
Please check here if you plan to attend the meeting [ ]
Signature: _____________________________________ Date___________________________
Signature: _____________________________________________________________________
Title: _________________________________________________________________________
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- Please detach and mail in the envelope provided -
ANNUAL MEETING OF SHAREHOLDERS OF
WARWICK VALLEY TELEPHONE COMPANY
APRIL 25, 2003
VOTE TODAY
PLEASE DATE, SIGN AND MAIL YOUR PROXY CARD IN THE ENVELOPE PROVIDED
AS SOON AS POSSIBLE.
WHITE PROXY CARD REVISED COMMON
WARWICK VALLEY TELEPHONE COMPANY
47 MAIN STREET
WARWICK, NY 10990
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Herbert Gareiss, Jr. and Colleen Shannon as
proxies, each with full power of substitution, to represent and vote as
designated on the reverse side, all the Common Shares of Warwick Valley
Telephone Company held of record by the undersigned on March 18, 2003 at the
Annual Meeting of Shareholders to be held at Kites Restaurant Atop The Spa at 2
Chamonix Drive, Vernon, New Jersey on April 25, 2003 at 2:00 p.m., local time,
and at any adjournments thereof. In their discretion, the proxies are further
authorized to vote upon such other matters as may properly come before the
Annual Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED AND DELIVERED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED IN FAVOR OF PROPOSAL I, IA AND IIA THROUGH IIG, AND AGAINST
PROPOSALS III AND IV.
Note: This proxy should be signed exactly as the name appears
hereon. When shares are held jointly, each holder should sign. When
signing as executor, administrator, attorney, trustee or guardian,
please give full title as such. If the signer is a corporation,
please sign full corporate name by duly authorized officer, giving
full title as such. If signer is a partnership, please sign in
partnership name by authorized person.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
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- Please detach and mail in the envelope provided -