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 (Amendment No. )
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 Rule 14a-11(c) or Rule 14a-12
360 COMMUNICATIONS COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than The Registrant)
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:
- --------------------------------------------------------------------------------
(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:
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|_| 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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<PAGE>
360 COMMUNICATIONS
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
TO BE HELD ON MAY 12, 1998
To the Shareowners of 360 Communications Company:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareowners of 360
Communications Company, a Delaware corporation (the "Company"), will be held at
The Museum of Contemporary Art, The Education Center, 220 E. Chicago Avenue,
Chicago, Illinois, on Tuesday, May 12, 1998, beginning at 10:00 a.m. local time,
for the following purposes:
1. To elect two directors to hold office until the 2001 Annual Meeting of
Shareowners.
2. To ratify the selection of Ernst & Young LLP as the Company's
independent accountants for the fiscal year ending December 31, 1998.
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Shareowners will not be asked to vote on the proposed merger between the
Company and ALLTEL Corporation at this Annual Meeting. For further information,
see "Recent Developments" in the Proxy Statement accompanying this Notice.
The Board of Directors has fixed the close of business on March 16, 1998 as
the record date for the determination of shareowners entitled to notice of and
to vote at this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
/s/ Kevin C. Gallagher
Kevin C. Gallagher
Senior Vice President, General
Counsel and Secretary
Chicago, Illinois
March 31, 1998
ALL SHAREOWNERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE EITHER COMPLETE, DATE,
SIGN AND RETURN THE ACCOMPANYING PROXY CARD IN THE PROVIDED ENVELOPE (WHICH IS
POSTAGE PREPAID IF MAILED IN THE UNITED STATES) OR VOTE YOUR SHARES BY TELEPHONE
AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING.
EVEN IF YOU HAVE GIVEN YOUR PROXY, WHETHER BY MAIL OR BY TELEPHONE, YOU MAY
STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE NOTE, HOWEVER, THAT IF
YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH
TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN
YOUR NAME.
<PAGE>
360 COMMUNICATIONS COMPANY
8725 W. Higgins Road
Chicago, Illinois 60631-2702
PROXY STATEMENT
INFORMATION CONCERNING VOTING AND SOLICITATION
General
The accompanying proxy is solicited on behalf of the Board of Directors of
360 Communications Company, a Delaware corporation (the "Company"), for use at
the Annual Meeting of Shareowners to be held on May 12, 1998, beginning at 10:00
a.m. local time (the "Annual Meeting"), or at any adjournment or postponement
thereof, for the purposes set forth herein and in the attached Notice of Annual
Meeting of Shareowners. The Annual Meeting will be held at The Museum of
Contemporary Art, The Education Center, 220 E. Chicago Avenue, Chicago,
Illinois. The Company intends to mail this Proxy Statement and the accompanying
proxy on or about March 31, 1998 to all shareowners entitled to vote at the
Annual Meeting.
Voting Rights and Outstanding Shares
The Company has only one class of stock outstanding, the Company's common
stock, $0.01 par value ("Common Stock"). Only holders of record of Common Stock
at the close of business on March 16, 1998 (the "Record Date") will be entitled
to notice of and to vote at the Annual Meeting. On the Record Date, the Company
had outstanding and entitled to vote 121,309,314 shares of Common Stock.
Each holder of record of Common Stock on the Record Date will be entitled
to one vote for each share held on all matters to be voted upon.
All votes will be tabulated by the inspector of election appointed for the
Annual Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be considered shares entitled
to vote in the tabulation of votes cast on proposals presented to the
shareowners and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether a matter has been approved.
Revocability of Proxies
Any person giving a proxy in the form accompanying this Proxy Statement or
by telephone has the power to revoke it at any time before it is voted. It may
be revoked by filing with the Secretary of the Company at the Company's
principal executive offices, 8725 W. Higgins Road, Chicago, Illinois 60631-2702,
a written notice of revocation or a duly executed proxy bearing a later date, or
it may be revoked by attending the Annual Meeting and voting in person.
Attendance at the Annual Meeting will not, by itself, revoke a proxy.
Solicitation
The Company will bear the entire cost of solicitation of proxies, including
the preparation, assembly, printing and mailing of this Proxy Statement, the
accompanying proxy and any additional information furnished to shareowners.
Copies of solicitation materials will be furnished to banks, brokerage houses,
fiduciaries and custodians holding in their names shares of Common Stock
beneficially owned by others to forward to such beneficial owners. The Company
may reimburse persons representing beneficial owners of Common Stock for their
costs of forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular associates of the
Company or, at the Company's request, ChaseMellon Shareholder Services, L.L.C.,
which has been retained by the Company to aid in the solicitation of proxies.
<PAGE>
No additional compensation will be paid to such directors, officers or other
regular associates for such services, but ChaseMellon Shareholder Services,
L.L.C. will be paid its customary fee, estimated to be $4,750 plus out-of-pocket
expenses, if it renders solicitation services.
Shareowner Proposals
Proposals of shareowners intended to be presented at the Company's 1999
Annual Meeting of Shareowners must be received by the Secretary of the Company
at the Company's principal executive offices, 8725 W. Higgins Road, Chicago,
Illinois 60631-2702, not later than November 30, 1998 for inclusion in the proxy
statement for that meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation, as amended
(the "Certificate of Incorporation"), provides that the Board of Directors shall
be divided into three classes, with each class having a three-year term.
Directors are assigned to each class in accordance with a resolution or
resolutions adopted by the Board of Directors. Vacancies on the Board of
Directors resulting from death, resignation, retirement, disqualification,
removal or other causes shall be filled by the affirmative vote of a majority of
the remaining directors then in office, even if less than a quorum of the Board
of Directors. Newly created directorships resulting from any increase in the
number of directors shall also be filled by the affirmative vote of the
directors then in office, even if less than a quorum of the Board of Directors.
A director elected by the Board of Directors to fill a vacancy (including a
vacancy created by an increase in the size of the Board of Directors) shall
serve for the remainder of the full term of the class of directors in which the
vacancy occurred until such director's successor has been duly elected and
qualified.
The Certificate of Incorporation provides that the number of directors
which shall constitute the whole Board of Directors shall be fixed exclusively
by one or more resolutions adopted from time to time by a majority of the Board
of Directors, provided that such number shall not be less than three nor more
than twelve. The authorized number of directors is currently set at eight. Two
seats on the Board of Directors, currently held by Alice M. Peterson and Charles
H. Price, II, have been designated as Class II Board seats, with the term of the
directors occupying such seats expiring as of the Annual Meeting.
Each of the nominees for election to Class II is currently a Class II Board
member of the Company. If elected at the Annual Meeting, each of the two
nominees would serve until the 2001 Annual Meeting of Shareowners, in each case
until their successor has been duly elected and qualified, or until such
director's earlier death, resignation, retirement, disqualification or removal.
Directors are elected by a plurality of the votes of the shares of Common
Stock present in person or represented by proxy and entitled to vote on the
election of directors at the Annual Meeting. Shares represented by executed
proxies or voted by telephone will be voted, if authority to do so is not
withheld, for the election of the two nominees for the two Class II Board seats.
In the event that any nominee should be unavailable for election as a result of
an unexpected occurrence, such shares will be voted for the election of such
substitute nominee as the Board of Directors may propose. Each person nominated
for election has agreed to serve if elected, and the Board of Directors has no
reason to believe that any nominee will be unable to serve.
Set forth below is biographical information for each person nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
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Nominees for Election for a Three-year Term Expiring at the 2001 Annual Meeting
of Shareowners
ALICE M. PETERSON
Alice M. Peterson, age 45, has served as a director of the Company since
April 9, 1996. She is currently Vice President and Treasurer of Sears, Roebuck
and Co., a retail merchandiser. Ms. Peterson joined Sears, Roebuck and Co. in
1989 and was elected to her present position in 1993. She also currently serves
as a director of Fleming Companies, Inc.
CHARLES H. PRICE, II
Charles H. Price, II, age 66, has served as a director of the Company since
March 7, 1996. He currently serves as a director of Hanson PLC, Mercantile Bank
of Kansas City, The New York Times Company, US Industries Inc. and Texaco, Inc.
Mr. Price resigned as Chairman of the Board of Mercantile Bank of Kansas City in
April 1996, a position he was elected to in 1992. He was President and Chief
Executive Officer of Ameribanc, Inc. from 1989 to 1992 and the United States
Ambassador to the United Kingdom of Great Britain and Northern Ireland from 1983
to 1989. Mr. Price resigned as a director of Sprint Corporation effective with
the spinoff of the Company from Sprint Corporation on March 7, 1996. He had been
a director of Sprint Corporation since 1989.
The Board of Directors recommends voting FOR the
election of each of the named nominees.
Directors Continuing in Office Until the 1999 Annual Meeting of Shareowners
LESTER CROWN
Lester Crown, age 72, has served as a director of the Company since
November 5, 1996. He currently serves as Chairman of the Board of Material
Service Corporation, a manufacturing company and a subsidiary of General
Dynamics Corporation, a position he was elected to in 1983 after having served
as its President since 1970. Mr. Crown also currently serves as a director and
Chairman of the Executive Committee of General Dynamics Corporation, as a
director of Maytag Corporation and as President of Henry Crown and Company.
DENNIS E. FOSTER
Dennis E. Foster, age 57, has served as a director of the Company since
March 7, 1996. He was elected President of the Company in March 1993 and
President and Chief Executive Officer of the Company in February 1996. Mr.
Foster had been President and Chief Operating Officer of the Cellular and
Wireless Division of Sprint Corporation since 1993, a position he resigned from
effective with the spinoff of the Company from Sprint Corporation on March 7,
1996, and prior to that he was Senior Vice President of the Local
Telecommunications Division of Sprint Corporation beginning in May 1992. Prior
to joining Sprint Corporation, Mr. Foster was President and Chief Operating
Officer of GTE Mobilnet, a position he had held since June 1991. Mr. Foster had
been Area Vice President and General Manager of GTE North since September 1989.
MICHAEL HOOKER
Michael Hooker, age 52, has served as a director of the Company since April
9, 1996. He is currently Chancellor of the University of North Carolina, a
position he has held since 1995. Mr. Hooker had served as President of
Bennington College in Vermont, as President of the University of Maryland -
Baltimore County and as President of the University of Massachusetts. He also
currently serves as a director of Centura Bank, located in Rocky Mount, North
Carolina.
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Directors Continuing in Office Until the 2000 Annual Meeting of Shareowners
FRANK E. REED
Frank E. Reed, age 63, has served as the non-management Chairman of the
Board of Directors of the Company since March 7, 1996. He is former President
and Chief Executive Officer of Philadelphia National Bank, and currently serves
as a director of Harleysville Group, Inc. Mr. Reed had been President and Chief
Executive Officer of Philadelphia National Bank for more than five years. Mr.
Reed resigned as a director of Sprint Corporation effective with the spinoff of
the Company from Sprint Corporation on March 7, 1996. Prior to becoming a
director of Sprint Corporation in 1993, Mr. Reed had been a director of Centel
Corporation, a predecessor corporation, since 1978.
ROBERT E. R. HUNTLEY
Robert E. R. Huntley, age 68, has served as a director of the Company since
March 7, 1996. He is former Counsel to Hunton & Williams, a law firm, and
currently serves as a director of Philip Morris Companies, Inc. Mr. Huntley had
been Counsel to Hunton & Williams for more than five years. Mr. Huntley resigned
as a director of Sprint Corporation effective with the spinoff of the Company
from Sprint Corporation on March 7, 1996. Prior to becoming a director of Sprint
Corporation in 1993, Mr. Huntley had been a director of Centel Corporation, a
predecessor corporation, since 1975.
VALERIE B. JARRETT
Valerie B. Jarrett, age 41, has served as a director of the Company since
June 11, 1996. She is currently Executive Vice President of The Habitat Company,
a real estate development and property management company. Ms. Jarrett joined
The Habitat Company in her present position in 1995. Prior to joining The
Habitat Company, she served for more than five years in the government of the
City of Chicago, most recently as Commissioner of the Department of Planning and
Development. Ms. Jarrett also serves as Chairman of the Board of Directors of
the Chicago Transit Authority and as a director of the Regional Transportation
Authority.
Board Committees and Meetings
During 1997, the Board of Directors held seven meetings. The Board has an
Audit and Finance Committee and an Organization, Compensation and Nominating
Committee.
The Audit and Finance Committee examines and considers matters relating to
the financial affairs of the Company, including reviewing the Company's annual
financial statements, the scope of the independent annual audit and internal
audits and the independent auditor's letter to management concerning the
effectiveness of the Company's internal financial and accounting controls. The
Audit and Finance Committee also evaluates the effectiveness of the Company's
ethics and compliance policies and reports its findings to the Board of
Directors. The Audit and Finance Committee, which met five times during 1997, is
composed of Ms. Peterson (Committee Chair), Mr. Reed, Mr. Price and Mr. Crown.
The Organization, Compensation and Nominating Committee considers and makes
recommendations to the Board of Directors with respect to programs for human
resource development and management organization and succession, approves
changes in senior executive compensation, considers and makes recommendations to
the Board of Directors with respect to compensation matters and policies and
associate benefit and incentive plans, exercises authority granted to it to
administer such plans, and administers the Company's stock option and equity
based plans and grants stock options and other rights under such plans. The
Organization, Compensation and Nominating Committee also recommends to the Board
of Directors nominees to fill director vacancies (including vacancies created by
an increase in the size of the Board of Directors) and for election at each
annual meeting of shareowners, and recommends policies to the Board of Directors
with respect to corporate governance matters. The Company's Amended and Restated
Bylaws provide procedures for shareowners wishing to recommend or nominate a
candidate for election as director. The Organization, Compensation and
Nominating Committee, which met four times during 1997, is composed of Mr.
Huntley (Committee Chair), Mr. Reed, Mr. Hooker and Ms. Jarrett.
4
<PAGE>
During 1997, each Board member attended at least 75% of the aggregate of
the meetings of the Board of Directors, and the committees on which he or she
served, held during the period for which he or she was a director or committee
member, respectively.
Compensation of Directors
Directors who are not employees of the Company (the "Outside Directors")
are each compensated in the amount of $20,000 annually, 50% of which is provided
in the form of a restricted stock grant. The Chairman of the Board, if an
Outside Director, receives an additional $100,000 annually, 25% of which is
provided in the form of a restricted stock grant. Under the Company's Amended
and Restated Director Equity and Deferred Compensation Plan (the "Director
Equity and Deferred Compensation Plan"), the number of shares of restricted
stock granted is determined by the fair market value of shares of Common Stock
on the date of each annual meeting of shareowners (or on the date the individual
first becomes an Outside Director with respect to the restricted stock grant
associated with his or her first year of service). Restrictions lapse
immediately before the commencement of the first annual meeting of shareowners
following the grant of restricted stock. Each Outside Director, excluding the
Chairman of the Board, receives $1,000 for each Board meeting and committee
meeting attended. Effective January 1, 1998, each Outside Director, excluding
the Chairman of the Board, serving as a Committee Chair receives an additional
$4,000 annually, 50% of which is provided in the form of a restricted stock
grant.
The Director Equity and Deferred Compensation Plan also provides for the
grant of stock options to Outside Directors. Each Outside Director receives an
initial grant of an option to purchase 9,000 shares of Common Stock on the date
he or she first becomes an Outside Director. One-third of the shares subject to
each initial option grant becomes exercisable on December 31 of the year in
which the option is granted and an additional one-third becomes exercisable on
December 31 of each of the two succeeding years. Each Outside Director receives
subsequent grants of an option to purchase 3,000 shares of Common Stock on the
date of each annual meeting of shareowners commencing with the third annual
meeting of shareowners after he or she first becomes an Outside Director.
Twenty-five percent of the shares subject to each of the annual option grants
becomes exercisable on December 31 of the year in which the option is granted
and an additional twenty-five percent becomes exercisable on December 31 of each
of the three succeeding years. All options have an option price equal to 100% of
the fair market value of shares of Common Stock on the date of grant and expire
ten years after the date of the grant.
Outside Directors may also elect to defer some or all of the cash portion
of their annual fees under the Director Equity and Deferred Compensation Plan.
Effective January 1, 1997, the Director Equity and Deferred Compensation Plan
was amended to include the following investment options: 360 Communications
Company Common Stock; Large Market Capitalization Equity; Small Market
Capitalization Equity; International Equity; and Intermediate Bond.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent accountants for the fiscal year ending December 31, 1998 and has
further directed that management submit the selection of independent accountants
for ratification by the shareowners at the Annual Meeting. Representatives of
Ernst & Young LLP are expected to be present at the Annual Meeting, will have an
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
Shareowner ratification of the selection of Ernst & Young LLP as the
Company's independent accountants is not required by the Company's Amended and
Restated Bylaws or otherwise. However, the Board of Directors is submitting the
selection of Ernst & Young LLP to the shareowners for ratification as a matter
of good corporate practice. If the shareowners fail to ratify the selection, the
Board of Directors and the Audit and Finance Committee will reconsider whether
or not to retain that firm. Even if the selection is ratified, the Board of
Directors and the Audit and Finance Committee in their discretion may direct the
5
<PAGE>
appointment of a different independent accounting firm at any time during the
year if they determine that such a change would be in the best interests of the
Company and its shareowners.
The affirmative vote of the holders of a majority of the shares represented
and voting at the Annual Meeting will be required to ratify the selection of
Ernst & Young LLP.
The Board of Directors recommends voting FOR the
ratification of the selection of Ernst & Young LLP.
EXECUTIVE COMPENSATION
Organization, Compensation and Nominating Committee Report on Executive
Compensation
This report on executive compensation is furnished by the Organization,
Compensation and Nominating Committee of the Board of Directors, which is
composed of four independent, non-employee directors, and which is responsible
for administering the Company's executive compensation policies and practices.
Overview. The Organization, Compensation and Nominating Committee (the
"Committee") establishes compensation guidelines and practices that are designed
to be a key support system in the Company's ongoing effort to attract, retain
and motivate highly qualified executives. The Committee's goal is to establish a
total compensation program that (a) creates a strong commonality of interest
between management and the Company's shareowners; (b) places a significant
portion of executive compensation "at risk;" (c) links the level of "at risk"
compensation specifically to Company performance; and (d) remains competitive to
the total compensation programs provided by companies of comparative size, as
measured in annual sales (collectively referred to as "comparison companies").
While the best candidate pool for certain executive officer positions would
include individuals with specific industry experience and knowledge, the
relative newness of the wireless industry and lack of sufficient "pure play"
companies limit the ability to obtain statistically valid industry-specific
compensation information. Therefore, the Committee utilized comparison companies
representing many industries for a "general industry" comparison. The annual
sales for this group ranged from $483 million to $2.9 billion, with an average
of $1.4 billion and a median of $1.3 billion. In 1997, the Committee relied on
information contained in compensation studies performed by an independent
consulting firm. These studies provided important market information regarding
all components of executive officers' compensation.
In 1997, the Company's total compensation program for the executive
officers, including the Chief Executive Officer ("CEO"), consisted of base
salary, an annual cash incentive and a long-term incentive in the form of
non-qualified stock options. The Committee's objective was to target base salary
ranges and total annual cash compensation (midpoint of base salary range plus
target annual cash incentive) of the Company's executive officers at the 50th
percentile of the ranges provided by comparison companies for comparable
executive positions. Long-term incentives were set at the 75th percentile.
Base Salary. The base salaries of individual executive officers, including
the CEO, and their applicable salary ranges, are reviewed annually by the
Committee. In determining base salary ranges for a particular year, the
Committee utilizes the market information previously described. In approving
adjustments to base salary, the Committee considers the position of the
executive officer's salary within his or her salary range and, other than for
the CEO, relies on the performance evaluation completed annually by the
supervisor of each individual officer. The CEO's performance is evaluated in
much the same manner as other executive officers, the difference being that
input is provided by each Committee member instead of from a single supervisor,
and additional comments may be offered by other non-employee members of the
Board of Directors relative to the CEO's performance of pre-determined,
non-financial goals.
6
<PAGE>
Annual Incentive. Executive officers and the CEO, as well as all other
associates of the Company who are not involved in direct sales activities,
participate in an annual cash incentive plan, the Company's Associate Incentive
Plan ("AIP"). The targeted amount of the annual incentive is based on job level;
the higher the job level, the higher the portion of total annual cash
compensation that is "at risk."
In 1997, seventy-five percent of the target incentive amount established
for eligible associates, including the executive officers and the CEO, was based
on the achievement of stated company performance measures, which are reviewed
and approved by the Committee at the beginning of each year. The performance
measures included Service Revenue, Earnings Before Interest, Taxes, Depreciation
and Amortization (EBITDA), Net Access Lines Gained and Customer Turnover
(Churn). Each of these measures was weighted equally and required specific
threshold performance before any incentive was earned.
Twenty-five percent of the target incentive amount was based on the
achievement of personal objectives, as rated by the executive's supervisor, or,
in the case of the CEO, the Committee. These personal objectives included
qualitative factors relating to business unit and departmental results of a
non-financial nature, the support the executive provided in furthering strategic
and tactical objectives, contribution to the progress of the quality improvement
process, and individual professional growth and development.
Based on the achievement in 1997 of both stated company performance
measures and their personal objectives, executive officers, excluding the CEO,
earned AIP payouts that averaged 94.0% of target. The CEO's annual incentive
payout for 1997 equaled 96.4% of target.
Long-Term Incentives. The Company's 1996 Equity Incentive Plan (the "Equity
Incentive Plan") provides, among other things, that stock options and restricted
stock awards may be granted to the CEO, executive officers and other key
associates who contribute to the management, growth and profitability of the
Company. Targeted long-term incentive compensation for 1997 was delivered
exclusively in the form of non-qualified stock option grants.
Policy with Respect to Qualifying Compensation for Deductibility and Other
Matters. Section 162(m) of the Internal Revenue Code ("Section 162(m)")
generally limits the annual tax deductible compensation paid to the CEO and the
four other most highly compensated executive officers of the Company to $1
million. However, this limitation does not apply to performance-based
compensation, provided that certain conditions are satisfied.
The Company's policy is generally to preserve the federal income tax
deductibility of compensation paid. However, notwithstanding the Company's
general policy, the Committee retains the authority to approve payments that may
not be deductible if it believes that such payments are in the best overall
interests of the Company and its shareowners.
No direct cash compensation paid to any individual executive officer
exceeded the $1 million deductibility limit in 1997, nor is the level of direct
cash compensation paid to any executive officer in 1998 expected to exceed this
limit by a significant amount. The vast majority of cash compensation paid to
executive officers is comprised of base salary and annual incentives paid under
the AIP. As discussed above, the AIP covers associates of the Company at all
levels and provides an annual cash payment based on a combination of job grade,
company performance and individual performance. The Committee will continue to
monitor the level of cash compensation paid to executive officers. If, in the
future, an executive officer's cash compensation is expected to significantly
exceed $1 million, the Company will seek shareowner approval for a separate,
performance-based annual incentive plan for designated executive officers.
ORGANIZATION, COMPENSATION AND NOMINATING
COMMITTEE OF THE BOARD OF DIRECTORS
Robert E. R. Huntley, Committee Chair
Frank E. Reed
Michael Hooker
Valerie B. Jarrett
7
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Performance Graph
The graph below provides an indicator of cumulative shareowner returns for
the Company as compared with the S&P MidCap 400 Index and the Peer Group (as
defined below), weighted quarterly for stock market capitalization.
The graph covers the period of time from the Company's spinoff from Sprint
Corporation on March 7, 1996 through December 31, 1997.
[GRAPHIC APPEARS HERE, DATA IN GRAPH APPEARS BELOW]
Measurement Period (1) (2)
<TABLE>
<CAPTION>
3/7/96 3/29/96 6/28/96 9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97
------ ------- ------- ------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
360 $100.00 $102.13 $102.13 $100.00 $ 98.94 $ 73.40 $ 72.87 $ 88.83 $ 85.90
S&P MidCap 400 $100.00 $100.31 $103.20 $106.18 $112.60 $110.95 $127.23 $147.66 $148.87
Peer Group (3) $100.00 $100.55 $ 98.25 $ 92.63 $ 85.63 $ 81.16 $ 95.89 $118.24 $126.80
- ----------
<FN>
(1) Assumes $100 invested on March 7, 1996 in shares of Common Stock, the S&P
MidCap 400 Index and the Peer Group.
(2) Total returns assume reinvestment of dividends on a quarterly basis.
(3) The Peer Group consists of the following cellular and Personal
Communications Services (PCS) carriers: Aerial Communications, Inc.;
Airtouch Communications, Inc.; CoreComm Incorporated (formerly Cellular
Communications of Puerto Rico, Inc.); Centennial Cellular Corp.; Clearnet
Communications, Inc.; CommNet Cellular Inc.; Powertel, Inc. (formerly
InterCel, Inc.); Nextel Communications, Inc.; Omnipoint Corporation; Orange
Plc-ADR; PriCellular Corporation; Rogers Cantel Mobile Communications,
Inc.; Rural Cellular Corporation; United States Cellular Corporation;
Vanguard Cellular Systems, Inc.; Vodafone Group Plc-ADR; Western Wireless
Corporation. Palmer Wireless, Inc., which was included in the Peer Group in
1996, was acquired by Price Communications Corp. on October 7, 1997 and has
therefore been removed and the total returns for the Peer Group in 1996
have been adjusted accordingly. Market returns have been adjusted for
spinoffs of both the Company and any Peer Group companies. If any member of
the Peer Group is a foreign issuer and is not traded on a U.S. stock
exchange, the market value was converted to U.S. dollars. Total returns
only reflect the performance of the stock and not gains or losses due to
currency fluctuations.
</FN>
</TABLE>
8
<PAGE>
Summary Compensation Table
The following table summarizes the cash and non-cash compensation for
services rendered in all capacities to the Company for the year ended December
31, 1997 for the Chief Executive Officer and the four most highly compensated
executive officers (collectively, the "Named Officers") of the Company.
<TABLE>
Summary Compensation Table
<CAPTION>
Long-Term Compensation
---------------------------------
Annual Compensation Awards Payouts
--------------------------------------- ----------------------- --------
Other
Annual Restricted Securities All Other
Compen- Stock Underlying LTIP Compen-
Salary Bonus sation Awards Options Payouts sation
Year ($) (1) ($) (1) ($) ($) (5) (#) ($) ($) (6)
- ----------------------- ------- --------- ---------- --------- ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dennis E. Foster 1997 $472,567 $385,701 $26,632 --- 82,900 --- $447,933
President and Chief 1996 377,196 334,788 59,097 $1,301,800 189,432 --- 324,601
Executive Officer 1995 249,339 147,274 21,519 --- --- --- 4,995
Michael J. Small 1997 220,930 166,556 91,874(4) --- 41,500 --- 52,411
Executive Vice President 1996 193,101 68,480(3) 12,000 285,924 93,051 --- 34,209
& Chief Financial Officer 1995 36,648(2) 8,937 1,000 --- --- --- 328
Kevin L. Beebe 1997 207,189 170,931 26,863 --- 41,500 --- 27,324
Executive Vice 1996 165,321 136,307 19,036 297,419 86,565 --- 15,433
President - Operations 1995 134,979 64,771 14,919 --- --- --- 7,338
Kevin C. Gallagher 1997 174,160 110,052 16,202 --- 14,600 --- 24,378
Senior Vice President, 1996 156,236 90,358 10,800 152,158 79,773 --- 15,427
General Counsel and 1995 144,122 53,189 10,800 --- --- --- 6,301
Secretary
Gary L. Burge 1997 167,733 94,684 16,683 --- 14,600 --- 20,751
Senior Vice President - 1996 150,653 92,784 10,800 154,457 82,720 --- 13,151
Engineering & Network 1995 132,571 68,546 14,588 --- --- --- 4,227
Operations
_________
<FN>
(1) Includes amounts earned for the year specified, including any deferrals
made under the Company's Deferred Compensation Plan and any pre-tax
contributions made under the Company's Flexible Benefit Plan and the
Company's Retirement Savings Plan (the "401(k) Plan").
(2) Includes $25,000 of consulting fees earned by Mr. Small in 1995 prior to
his becoming an associate of the Company on December 1, 1995.
(3) Excludes bonus amount associated with Mr. Small's election to receive
options in lieu of 50% of his short-term annual target incentive
opportunity under the provisions of Sprint Corporation's Management
Incentive Stock Option Plan prior to the Company's spinoff from Sprint
Corporation.
(4) Includes the cost of $73,875 to reimburse Mr. Small for initial club
membership plus monthly expenses and associated tax gross-up.
(5) On December 31, 1997, the Named Officers held the following number of
shares of restricted stock with the following value, based on the closing
per share price of Common Stock on December 31, 1997 of $20.1875: Mr.
Foster - 56,600 shares at $1,142,613 (of which 3,600 shares will vest on
March 9, 1999); Mr. Small - 12,600 shares at $254,363 (of which 2,600
shares will vest on March 9, 1999); Mr. Beebe - 13,100 shares at $264,456
(of which 3,100 shares will vest on March 9, 1999); Mr. Gallagher - 6,700
shares at $135,256 (of which 1,700 shares will vest on March 9, 1999); and
Mr. Burge - 6,800 shares at $137,275 (of which 1,800 shares will vest on
March 9, 1999).
(6) Includes the following amounts for: (a) Mr. Foster - $84,372 in relocation
expenses; $17,500 in company contributions made to the 401(k) Plan, $70,848
in non-cash credits allocated to a non-qualified, defined contribution
restoration plan, $273,950 in non-cash credits allocated to a supplemental
retirement arrangement, as provided under the terms of an employment
agreement effective March 9, 1996 between the Company and Mr. Foster, and
$1,263 representing the portion of interest credits earned at above-market
rates on a portion of Mr. Foster's supplemental retirement and defined
9
<PAGE>
contribution restoration plan accounts; (b) Mr. Small - $29,387 in
relocation expenses, $12,700 in company contributions made to the 401(k)
Plan, $10,311 in non-cash credits allocated to a non-qualified, defined
contribution restoration plan, and $13 of interest credits earned at
above-market rates on a portion of Mr. Small's deferred compensation and
defined contribution restoration plan accounts; (c) Mr. Beebe - $12,700 in
company contributions made to the 401(k) Plan, and $14,624 in non-cash
credits allocated to a non-qualified, defined contribution restoration
plan; (d) Mr. Gallagher - $14,284 in company contributions made to the
401(k) Plan, and $10,094 in non-cash credits allocated to a non-qualified,
defined contribution restoration plan; and (e) Mr. Burge - $12,604 in
company contributions made to the 401(k) Plan, and $8,147 in non-cash
credits allocated to a non-qualified, defined contribution restoration
plan.
</FN>
</TABLE>
Option Grants
The following table summarizes options granted during 1997 to the Named
Officers under the Company's Equity Incentive Plan. No stock appreciation rights
were granted on these awards.
<TABLE>
Option Grants in Last Fiscal Year
<CAPTION>
Potential Realizable Value
Number of % of Total at Assumed Annual Rates
Securities Options Market of Stock Price Appreciation
Underlying Granted to Exercise Price per for Option Term (3)
Options Employees or Base Share --------------------------------
Granted in Fiscal Price on Grant Expiration
Name (#) Year ($/share) Date (1) Date 0% 5% 10%
- -------------------- ---------- ------------ ----------- ------------ ------------ ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dennis E. Foster 82,900 11.69% $19.9375 $19.9375 2/10/07 (2) $ - $1,039,449 $2,634,167
Michael J. Small 41,500 5.85% 19.9375 19.9375 2/10/07 (2) - 520,351 1,318,672
Kevin L. Beebe 41,500 5.85% 19.9375 19.9375 2/10/07 (2) - 520,351 1,318,672
Kevin C. Gallagher 14,600 2.06% 19.9375 19.9375 2/10/07 (2) - 183,063 463,919
Gary L. Burge 14,600 2.06% 19.9375 19.9375 2/10/07 (2) - 183,063 463,919
- ----------
<FN>
(1) Reflects the average of the high and low sales price of shares of Common
Stock as of February 10, 1997, the date on which the options were awarded.
(2) 25% of these options became exercisable on February 10, 1998, and an
additional 25% will become exercisable on February 10 of each of the next
three successive years.
(3) The dollar amounts in these columns are the result of calculations at the
assumed appreciation rates set by the Securities and Exchange Commission
and are not intended to forecast future appreciation of shares of Common
Stock.
</FN>
</TABLE>
10
<PAGE>
Option Exercises and Fiscal Year-End Values
The following table summarizes the value of the outstanding options at
December 31, 1997, for the Named Officers. There were no exercises of options by
the Named Officers during 1997.
Year-End Option/SAR Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at 12/31/97(#) Options/SARs at 12/31/97($)(1)
---------------------------- ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------- ------------ -------------- ------------ -------------
Dennis E. Foster 79,896 192,436 $244,062 $100,312
Michael J. Small 50,110 84,441 - -
Kevin L. Beebe 35,518 92,547 64,329 19,984
Kevin C. Gallagher 65,781 28,592 483,821 15,146
Gary L. Burge 58,462 38,858 355,312 24,824
- ----------
(1) The value of unexercised, in-the-money options/SARs is the difference
between the exercise price of the options and the average of the high and
low sales price of shares of Common Stock as of December 31, 1997
($19.7188).
Employment Agreement
In March 1996, the Company entered into an employment agreement with Mr.
Foster which became effective as of March 9, 1996 and was amended in December
1997 (as so amended, the "Employment Agreement").
The initial term of the Employment Agreement is five years, with automatic
one year renewals thereafter unless either party provides notice of intent not
to renew. If a change in control (as defined) occurs, the Employment Agreement
will be irrevocable for the greater of the remaining term or two years. The
Employment Agreement provides a base salary of at least $400,000 and an annual
incentive opportunity of no less than 50% of base salary.
If Mr. Foster remains employed by the Company for the full initial term of
the Employment Agreement, the Company will provide both him and his spouse with
post-retirement medical insurance benefits at the same cost and coverage levels
as is then provided to active associates (with a carve-out for Medicare
benefits). This commitment is subject to change or termination to the same
extent the active associate's plan is changed or terminated. Coverage will also
be provided if termination occurs during the initial term due to death,
disability, termination by the Company without cause or termination by the
executive for good reason.
Under the Employment Agreement, the Company also provides Mr. Foster a
supplemental retirement benefit in the form of a defined contribution
arrangement. The amount of the Company contribution is based on the actuarially
computed value necessary to provide an annual replacement of 40% of Mr. Foster's
final compensation (annual base salary and annual target incentive) for his
expected life beginning at age 65, offset by the age 65 pension benefit provided
by his former employers. The actuarial calculation is leveled such that all
future contributions equate to a relatively level percentage of compensation.
This non-qualified, general asset promise is backed by a rabbi trust that is
required to be funded not less than annually. Company contributions, and the
actual earnings thereon, will fully vest at the earlier of Mr. Foster reaching
age 60, death, disability, involuntary termination without cause, voluntary
termination for good reason or change in control. Vested benefits will be
distributed in five annual installments beginning at the time of termination
unless he elects an alternative form of distribution, which may include a lump
sum.
11
<PAGE>
The Employment Agreement also provides for the following payments and
benefits in the case of Mr. Foster's termination of employment.
Death or Disability. The Company will pay base salary and pro rata target
incentive through termination plus all other compensation and benefits to which
Mr. Foster had a vested right, including the supplemental retirement benefit and
vesting of restricted stock and stock options.
Voluntary Termination Without Good Reason or Termination For Cause. The
Company will pay base salary through termination plus all other compensation and
benefits to which Mr. Foster had a vested right.
Involuntary Termination by the Company Without Cause or Termination for
Good Reason. Termination for good reason includes a significant adverse change
in duties or responsibilities, a required relocation, material reduction in
compensation or benefits other than a prospective change which applies similarly
to all executives and a material breach of contract by the Company. The Company
will pay base salary and pro rata target incentive through termination, a lump
sum cash amount equal to two times the then-current base salary and target
incentive at termination plus all other compensation and benefits to which Mr.
Foster had a vested right. The supplemental retirement benefit accrued to date
will become fully vested and funded in the rabbi trust. Vesting of outstanding
restricted stock and stock option grants will be accelerated and Mr. Foster will
be eligible for outplacement services for a period of two years (with a maximum
expense of 25% of base salary).
Change in Control. For purposes of the Employment Agreement, a change in
control would occur as a result of certain changes in the ownership of the
Company or in the composition of the Board of Directors or of the approval of
certain extraordinary transactions by the Company's shareowners (e.g.,
liquidation, merger, consolidation, sale or disposition of all or substantially
all of the assets, etc.). Following a change in control, severance benefits
would become payable if, within 24 months after the change in control, Mr.
Foster's employment terminates for one or more of the following reasons: (i)
termination by the Company without cause; (ii) termination by Mr. Foster for
good reason; (iii) failure of a successor company to assume obligations under
the Employment Agreement; (iv) breach of contract by the Company; or (v) any
termination by Mr. Foster during the 13th full month following the change in
control. Payments and benefits include: (i) base salary and pro rata target
incentive through termination plus all other compensation and benefits to which
Mr. Foster had a vested right; (ii) lump-sum cash payment equal to three times
base salary and target incentive; (iii) immediate full vesting and funding of
the supplemental retirement benefit accrued to date; (iv) immediate full vesting
of restricted stock and stock options; and (v) outplacement services for a
period of two years (with a maximum expense of 35% of base salary). Under
certain circumstances, a portion of the present value of the benefits payable
under the Employment Agreement or of the acceleration of the vesting of the
restricted stock or the stock options could be subject to a 20% excise tax under
the Internal Revenue Code and be nondeductible by the Company. The Company has
agreed to reimburse Mr. Foster for any such excise taxes, together with any
additional excise or income taxes resulting from such reimbursement.
Compensation and Benefits Assurance Agreements
In March 1996, the Company entered into Compensation and Benefits Assurance
Agreements (the "Change in Control Agreements") with all executive officers
other than Mr. Foster. The initial term of the Change in Control Agreements is
three years, with automatic three-year renewals thereafter unless either party
provides timely notice of intent not to renew. If a change in control (as
defined therein) occurs, the Change in Control Agreements are irrevocable for
the greater of the remaining term or two years.
Under the Change In Control Agreements, a change in control would occur as
a result of certain changes in the ownership of the Company or in the
composition of the Board of Directors or upon the approval of certain
extraordinary transactions by the Company's shareowners (e.g. liquidation,
merger, consolidation, sale or disposition of all or substantially all of the
assets, etc.). Change in control severance benefits will be triggered if, within
24 months of a change in control, termination of a covered executive officer
occurs as a result of one or more of the following: (i) involuntary termination
12
<PAGE>
without cause; (ii) voluntary termination for good reason; (iii) failure of a
successor company to assume obligations under the Change in Control Agreements;
(iv) material breach of contract by the Company; or (v) any termination by the
executive during the 13th full month following the change in control. Payments
and benefits will include: (i) base salary and pro rata target incentive through
termination plus all other compensation and benefits to which the executive
officer had a vested right; (ii) lump-sum cash payment equal to three times base
salary and target incentive; (iii) continuation of health insurance at the same
cost and coverage level as in effect at termination for the greater of 36 months
or until similar benefits are obtained from a subsequent employer; (iv)
immediate full vesting of restricted stock and stock options; and (v)
outplacement services for a period of two years (with a maximum expense of 25%
of base salary). Under certain circumstances, a portion of the present value of
the benefits payable under the Change in Control Agreements or of the
acceleration of the vesting of the restricted stock or the stock options could
be subject to a 20% excise tax under the Internal Revenue Code and be
nondeductible by the Company. The Company has agreed to reimburse the executive
officer for any such excise taxes, together with any additional excise or income
taxes resulting from such reimbursement.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 16, 1998
with respect to shares of Common Stock that were owned beneficially by: (i) each
beneficial owner of more than 5% of the outstanding shares of Common Stock; (ii)
each of the Named Officers of the Company; (iii) each of the directors; and (iv)
all executive officers and directors of the Company as a group. As of March 16,
1998, 121,309,314 shares of Common Stock were outstanding.
<TABLE>
<CAPTION>
Beneficial Owners, Number of Shares Percent of
Directors and Executive Officers (1) Beneficially Owned (2)(3) Outstanding Shares
- ------------------------------------- ------------------------- --------------------
<S> <C> <C>
Southeastern Asset Management, Inc. 18,299,197 (4) 15.09%
6075 Poplar Avenue
Suite 900
Memphis, TN 38119
Lester Crown, Director 6,588,219 (5) 5.43
Dennis E. Foster, Director, 194,344 (6) *
President and Chief
Executive Officer
Michael J. Small, 96,684 (7) *
Executive Vice President
and Chief Financial Officer
Kevin L. Beebe, Executive 76,989 (8) *
Vice President - Operations
Kevin C. Gallagher, Senior Vice 86,341 (9) *
President, General Counsel
and Secretary
Gary L. Burge, Senior Vice 82,357 (10) *
President - Engineering
and Network Operations
Frank E. Reed, Chairman of the 12,217 (11) *
Board of Directors
Robert E. R. Huntley, Director 10,006 (12) *
Michael Hooker, Director 9,033 (13) *
Alice M. Peterson, Director 7,533 (14) *
13
<PAGE>
Charles H. Price, II, Director 7,428 (15) *
Valerie B. Jarrett 7,215 (16) *
Directors and executive 7,250,770 (17) 5.98
officers as a group
(15 persons)
- ------------
<FN>
*Represents less than 1%.
(1) This table is based upon information supplied by directors, executive
officers and principal shareowners. This table does not reflect the option
granted to ALLTEL Corporation to purchase, under certain circumstances, up
to 19.9% (approximately 24,140,553 shares) of the number of shares of
Common Stock outstanding immediately prior to such option grant pursuant to
the Stock Option Agreement (defined below). See "Recent Developments"
herein.
(2) Unless otherwise indicated in the following notes, each of the shareowners
named in this table has sole voting and investment power with respect to
the shares shown as beneficially owned. This table includes the number of
the Company stock options exercisable currently or within 60 days by each
director and executive officer. The number of such Company stock options
held by each director and executive officer is indicated in the following
notes. This table excludes the aggregate number of phantom stock units
("Phantom Stock Units") accrued as of December 31, 1997 by each director
under the Company's Amended and Restated Director Equity and Deferred
Compensation Plan and each executive officer under the Company's 401(k)
Restoration Plan and the Company's Deferred Compensation Plan
(collectively, the "Deferred Compensation Plans"). The aggregate number of
Phantom Stock Units accrued by each director and executive officer under
the Deferred Compensation Plans is indicated in the following notes.
(3) The executive officers are participants in the Company's Retirement Savings
Plan (the "401(k) Plan"). This table includes the number of shares of
Common Stock beneficially held by each executive officer in the 401(k) Plan
as of December 31, 1997. The number of such shares of Common Stock held by
each executive officer is indicated in the following notes.
(4) According to a Schedule 13G/A, dated February 4, 1998, Southeastern Asset
Management, Inc. has sole voting power with respect to 10,387,600 shares,
shared voting power with respect to 6,143,637 shares and no voting power
with respect to 1,767,960 shares. Such firm has sole investment power with
respect to 12,155,560 shares and shared investment power with respect to
6,143,637 shares. At the time of acquisition by such firm, such shares
represented only 14.84% of the total number of outstanding shares of Common
Stock.
(5) Includes 4,379,186 shares held by Independent Cellular Network Partners, a
partnership of which a partner is a trust of which Mr. Crown is a trustee
for the benefit of his children, 1,356,885 shares held by CC Industries,
Inc., of which Mr. Crown is Chairman of the Board, 757,029 shares held by
The Crown Fund, a partnership of which Mr. Crown is a partner, and 88,100
shares held in charitable funds of which Mr. Crown is the trustee or a
co-trustee. Mr. Crown disclaims beneficial ownership of all shares held by
such entities except to the extent of his interest therein. Includes 6,000
shares that may be acquired upon exercise of stock options exercisable
currently or within 60 days. Excludes 604 Phantom Stock Units accrued under
the Deferred Compensation Plans.
(6) Includes 693 shares jointly held by Mr. Foster's spouse, and as to such
shares Mr. Foster and his spouse share voting power and investment power.
Includes 207 shares invested in the 401(k) Plan and 126,925 shares that may
be acquired upon exercise of stock options exercisable currently or within
60 days.
(7) Includes 360 shares jointly owned by Mr. Small's spouse, and as to such
shares Mr. Small and his spouse share voting power and investment power.
Includes 4,622 shares invested in the 401(k) Plan and 74,800 shares that
may be acquired upon exercise of stock options exercisable currently or
within 60 days.
(8) Includes 460 shares jointly owned by Mr. Beebe's spouse, and as to such
shares Mr. Beebe and his spouse share voting power and investment power.
Includes 441 shares invested in the 401(k) Plan and 62,988 shares that may
be acquired upon exercise of stock options exercisable currently or within
60 days.
14
<PAGE>
(9) Includes 1,479 shares jointly owned by Mr. Gallagher's spouse, and as to
such shares Mr. Gallagher and his spouse share voting power and investment
power. Includes 1,297 shares invested in the 401(k) Plan and 75,771 shares
that may be acquired upon exercise of stock options exercisable currently
or within 60 days. Excludes 218 Phantom Stock Units accrued under the
Deferred Compensation Plans.
(10) Includes 2,873 shares jointly owned by Mr. Burge's spouse, and as to such
shares Mr. Burge and his spouse share voting power and investment power.
Includes 3,269 shares invested in the 401(k) Plan and 68,684 shares that
may be acquired upon exercise of stock options exercisable currently or
within 60 days.
(11) Includes 6,000 shares that may be acquired upon exercise of stock options
exercisable currently or within 60 days.
(12) Includes 825 shares jointly owned by Mr. Huntley's spouse, and as to such
shares Mr. Huntley and his spouse share voting power and investment power.
Includes 6,000 shares that may be acquired upon exercise of stock options
exercisable currently or within 60 days.
(13) Includes 6,000 shares that may be acquired upon exercise of stock options
exercisable currently or within 60 days. Excludes 215 Phantom Stock Units
accrued under the Deferred Compensation Plans.
(14) Includes 6,000 shares that may be acquired upon exercise of stock options
exercisable currently or within 60 days.
(15) Includes 400 shares held by Charles H. and Carol Swanson Price Foundation,
of which Mr. Price is a trustee. Mr. Price disclaims beneficial ownership
of such shares. Includes 6,000 shares that may be acquired upon exercise of
stock options exercisable currently or within 60 days.
(16) Includes 6,000 shares that may be acquired upon exercise of stock options
exercisable currently or within 60 days.
(17) Includes 10,246 shares invested in the 401(k) Plan and 506,624 shares that
may be acquired upon exercise of stock options exercisable currently or
within 60 days. Excludes 1,052 Phantom Stock Units accrued under the
Deferred Compensation Plans.
</FN>
</TABLE>
15
<PAGE>
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Exchange Act of 1934, as amended, requires the
Company's directors and executive officers, and holders of more than 10% of the
outstanding shares of Common Stock, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. The Company believes
that during 1997, each of its directors, executive officers and holders of more
than 10% of the outstanding shares of Common Stock complied with all Section
16(a) filing requirements, except for Charles H. Price, II, a director of the
Company, who filed a late Form 4 in March 1998 relating to the July 1997 sale of
333 shares of Common Stock by Mr. Price's spouse. In making these statements,
the Company has relied upon the written representations of its directors and
executive officers.
CERTAIN TRANSACTIONS
In connection with the Company's acquisition (the "ICN Acquisition") of
Independent Cellular Network, Inc. and affiliated companies completed in
November 1996, the Company issued, in addition to the payment of other
consideration, its subordinated non-negotiable promissory notes (the
"Subordinated Notes") with an aggregate face principal amount of $122 million.
The Subordinated Notes are due October 31, 2006 and originally accrued interest
at the rate of 9.5% per annum, which was reduced to 9.0% on February 10, 1997.
Fifty percent of the interest due and owing on the Subordinated Notes is paid on
each semiannual interest payment date and the remaining 50% of the interest due
and owing is capitalized and becomes part of the principal amount owed
thereunder.
As of December 31, 1997, Independent Cellular Network Partners, a
partnership, held Subordinated Notes with an aggregate face principal amount of
$92,561,229 and Arie and Ida Crown Memorial, a not-for-profit corporation, held
Subordinated Notes with an aggregate face principal amount of $9,867,053. Lester
Crown, a director of the Company, is a trustee for the benefit of his children
of a trust which is a partner of Independent Cellular Network Partners. Mr.
Crown is also a director of Arie and Ida Crown Memorial.
The Exchange and Merger Agreement (the "Exchange and Merger Agreement")
dated as of May 31, 1996 entered into by and between the Company and Independent
Cellular Network Partners and certain of its affiliates (collectively "ICNP") in
connection with the ICN Acquisition contains provisions providing each party
thereto with indemnification, subject to certain limitations, from and against
all damages resulting from the breach of the other parties' representations and
warranties thereunder. Under the Exchange and Merger Agreement, Henry Crown and
Company (Not Incorporated) irrevocably and unconditionally guaranteed the
indemnification obligations of ICNP to the Company. Mr. Crown is a trustee for
the benefit of his children of a trust which is a partner of Henry Crown and
Company (Not Incorporated).
RECENT DEVELOPMENTS
On March 16, 1998, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") with ALLTEL Corporation, a Delaware corporation
("ALLTEL"), and Pinnacle Merger Sub, Inc., a Delaware corporation and a wholly
owned subsidiary of ALLTEL ("Merger Sub"), pursuant to which Merger Sub will
merge with and into the Company (the "Merger"). As a result of the Merger, (a)
each outstanding share of the Company's Common Stock (other than shares owned by
ALLTEL or Merger Sub or held by the Company), will be converted into the right
to receive .74 shares of the of the common stock, par value $1.00 per share, of
ALLTEL and (b) the Company will become a wholly owned subsidiary of ALLTEL.
Consummation of the Merger is subject to certain conditions, including the
approval of the Merger by the respective shareowners of the Company and ALLTEL
and the receipt of required regulatory approvals, including the approval of the
Federal Communications Commission and the expiration of the applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended. Pending the receipt of such approvals, the Company expects to complete
the Merger in the third quarter of 1998. The Merger Agreement may be terminated
under certain circumstances relating to a third party offer to acquire the
Company, in which event the Company will be obligated to pay to ALLTEL a
termination fee of $100 million (the "Termination Fee").
16
<PAGE>
Concurrently with the execution of the Merger Agreement, the Company and
ALLTEL entered into a Stock Option Agreement (the "Stock Option Agreement")
whereby the Company granted to ALLTEL an option (the "Option") to purchase up to
19.9% of the number of shares of the Company's Common Stock issued and
outstanding immediately prior to the grant of the Option at an exercise price of
$33.90 per share (subject to adjustment in certain circumstances). The Option is
exercisable by ALLTEL only in the event that ALLTEL becomes entitled to receive
the Termination Fee. Concurrently with any exercise of the Option, the Company
has the option to repurchase from ALLTEL, at a price of $35.90 per share, any
shares issued upon the exercise of the Option.
The foregoing descriptions of the Merger Agreement and the Stock Option
Agreement, and the transactions contemplated thereby, do not purport to be
complete and are qualified in their entirety by reference to the Merger
Agreement and the Stock Option Agreement, copies of which are filed as Exhibits
2.1 and 2.2, respectively, to the Company's Current Report on Form 8-K/A dated
March 16, 1998 filed with the Securities and Exchange Commission.
Although consummation of the Merger requires the affirmative vote of the
holders of at least a majority of the outstanding shares of the Company's Common
Stock, shareowners will not be asked to vote on the Merger at the Annual Meeting
but rather at a Special Meeting of Shareowners to be held at a later date. Prior
to the Special Meeting, the Board of Directors will fix a record date for the
determination of shareowners entitled to notice of and to vote at the Special
Meeting.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the Annual Meeting, it is the intention of the persons named on the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
/s/ Kevin C. Gallagher
Kevin C. Gallagher
Senior Vice President, General
Counsel and Secretary
March 31, 1998
17
<PAGE>
If signed and returned, the shares represented by this Proxy will be voted in
accordance with the specifications given. If this Proxy is executed but no
specifications are given as to the voting of each item, this Proxy will be voted
FOR all Proposals.
Please mark your votes
as indicated in this
example |X|
The Board of Directors recommends a vote FOR all Proposals.
1. To elect the following nominees as Directors:
FOR all nominees WITHHOLD
except any AUTHORITY
(01) Alice M. Peterson indicated to vote for all
(02) Charles H. Price, II listed nominees
|_| |_|
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name on the line below)
_____________________________________________________________________________
2. To ratify the selection of Ernst & FOR AGAINST ABSTAIN
Young LLP as the Company's independent |_| |_| |_|
accountants for the fiscal year ending
December 31, 1998.
***IF YOU WISH TO VOTE BY TELEPHONE, PLEASE READ THE INSTRUCTIONS BELOW***
YES NO
Please check YES |_| |_|
if you plan to attend
the meeting.
Signature__________________________________________
Signature__________________________________________Date__________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
VOTE BY TELEPHONE
QUICK *** EASY *** IMMEDIATE
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
You will be asked to enter a Control Number which is located in the box in the
lower right hand corner of this form.
OPTION #1: To vote as the Board of Directors recommends on ALL proposals:
Press 1.
When asked, please confirm your vote by Pressing 1.
OPTION #2: If you choose to vote on each proposal separately, press 0. You will
hear these instructions:
Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL
nominees, press 9.
To WITHHOLD FOR AN INDIVIDUAL nominee, press 0 and listen to the
instructions.
Proposal 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
When asked, please confirm your vote by Pressing 1.
PLEASE DO NOT RETURN THE ABOVE PROXY CARD IF VOTED BY TELEPHONE.
Call ** Toll Free ** On a Touch-Tone Telephone
1-800-840-1208-ANYTIME
There is NO CHARGE to you for this call.
<PAGE>
PROXY/VOTING INSTRUCTION CARD
360 COMMUNICATIONS COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints D.E. Foster, M.J. Small and K.C. Gallagher, and
each of them, acting jointly or severally and with full power of substitution,
for and in the name of the undersigned to vote, as specified on the reverse
side, all shares of Common Stock of 360 Communications Company that the
undersigned is entitled to vote at the Annual Meeting of Shareowners to be held
on Tuesday, May 12, 1998, at 10:00 local time at The Museum of Contemporary Art,
The Education Center, 220 E. Chicago Avenue, Chicago, Illinois, or at any
adjournment thereof.
The undersigned also hereby revokes previous proxies and acknowledges receipt of
360 Communications Company's Notice of Annual Meeting of Shareowners and Proxy
Statement.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
- --------------------------------------------------------------------------------
oFOLD AND DETACH HERE o
360 Communications Company
Annual Meeting of Shareowners
Tuesday, May 12, 1998 at 10:00 a.m.
The Museum of Contemporary Art
The Education Center
220 E. Chicago Avenue
Chicago, Illinois 60611
All shareowners are cordially invited to attend the Annual Meeting in person.
