OFFICE OF THE CHAIRMAN
March 24, 1995
To Our Stockholders:
The Board of Directors joins me in extending to you a cordial invitation
to attend the 1995 Annual Meeting of Stockholders. The meeting will be held
in Lincoln, Nebraska, at 10:30 a.m. on Wednesday, April 26, 1995.
In addition to voting on the matters described in this Proxy Statement,
we will review the Corporation's 1994 business and discuss our plans for 1995
and beyond. There will be an opportunity to discuss matters of interest to
you as a stockholder.
We hope many Lincoln Telecommunications Company stockholders will find
it convenient to be present at the meeting, and we look forward to greeting
those personally able to attend. It is important that your shares be
represented and voted whether or not you plan to be present. THEREFORE,
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, PLEASE COMPLETE, SIGN, AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE POSTAGE-PAID ENVELOPE PROVIDED. No
postage is necessary if the envelope is mailed in the United States. The
prompt return of your proxy will save the expense involved in further
communications. Any stockholder attending the meeting may vote in person
even if a proxy has been returned.
We hope that you will be able to attend the meeting, and we look forward
to seeing you.
Sincerely,
/s/ Thomas C. Woods, III
THOMAS C. WOODS, III
Chairman of the Board
LINCOLN TELECOMMUNICATIONS COMPANY
1440 M STREET
LINCOLN, NEBRASKA 68508
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 26, 1995
To the Holders of Common Stock of
LINCOLN TELECOMMUNICATIONS COMPANY:
Notice is hereby given that the Annual Meeting of Stockholders of
Lincoln Telecommunications Company, a Nebraska corporation (hereinafter the
"Corporation"), will be held at the Cornhusker Hotel, 333 South 13th Street,
Lincoln, Nebraska, 68508, on Wednesday, April 26, 1995, at 10:30 a.m. for the
following purposes:
(1) To elect four (4) directors to hold office for a term of three
years or until their successors are elected and qualified.
(2) To transact any other business which may be properly brought
before the meeting or any adjournment or postponement thereof.
The close of business on March 10, 1995, has been fixed as the date of
record for the determination of common stockholders entitled to receive
notice of and to vote at the Annual Meeting and any adjournment or
postponement thereof. Accordingly, only common stockholders of record at the
close of business on that date will be entitled to notice of and to vote at
said meeting. A list of the stockholders entitled to vote at the Annual
Meeting will be open for examination by any stockholder for any purpose
germane to the meeting during ordinary business hours for a period of ten
days prior to the meeting at the offices of the Corporation, which address is
set forth above, and will also be available for examination at the Annual
meeting until its adjournment.
It is important that your shares of stock be represented at this Annual
Meeting. If you do not expect to be present in person, you are requested by
Management to fill in, sign, date and return the proxy in the enclosed
envelope. No postage need be affixed if mailed within the United States.
By order of the Board of Directors,
LINCOLN TELECOMMUNICATIONS COMPANY
/s/ Michael J. Tavlin
Michael J. Tavlin, Secretary
Lincoln, Nebraska
March 24, 1995
YOUR VOTE IS IMPORTANT. TO ENSURE YOUR REPRESENTATION AT THE MEETING,
PLEASE DATE THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS,
SIGN EXACTLY AS YOUR NAME APPEARS THEREON AND RETURN IMMEDIATELY.
LINCOLN TELECOMMUNICATIONS COMPANY
1440 M STREET
LINCOLN, NEBRASKA 68508
PROXY STATEMENT
SOLICITATION OF PROXIES
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 26, 1995
This proxy statement is furnished in connection with the solicitation of
proxies on behalf of the Management of the Corporation for use at the Annual
Meeting of Stockholders to be held on April 26, 1995 for the purposes set
forth in the foregoing Notice. This statement and the form of proxy are
being first sent to security holders on or about March 24, 1995.
The accompanying form of proxy, in ballot form, has been prepared at the
direction of the Board of Directors and is sent to you at its request. The
proxies named therein have been designated by Management.
Stockholders who execute proxies retain the right to revoke them at any
time before they are voted by attending the Annual Meeting and voting in
person or by notifying the Secretary of the Corporation at 1440 M Street,
Lincoln, Nebraska, 68508, in writing of such revocation prior to the
Meeting. A proxy, when properly executed, duly returned and not so revoked,
will be voted and, if it contains any specification, will be voted in
accordance therewith; provided the proxy is not mutilated or otherwise
received in such form or at such time as to render it unvotable. If no
choice is specified, the proxy will be voted in accordance with the
recommendations of Management, as stated on the proxy form and in this proxy
statement.
The solicitation will be conducted by mail, except that in a limited
number of instances proxies may be solicited by officers, directors and
regular employees of the Corporation personally, by telephone or by
telegraph. The Corporation does not anticipate payment of any compensation
or fees of any nature to anyone for the solicitation of these proxies, except
that the Corporation may pay persons holding shares in their name, or of
their nominees, for sending proxies and proxy material to principals. The
entire cost of solicitation will be borne by the Corporation.
Outstanding Shares and Voting Rights
The voting securities of the Corporation consist of 32,377,290 shares of
Common Stock (CUSIP 534780 10 1), issued and outstanding as of March 10,
1995, each of which is entitled to one vote. Only holders of Common Stock of
record at the close of business on March 10, 1995 are entitled to notice of
and to vote with respect to this solicitation.
The following table sets forth information as of March 10, 1995,
regarding the only persons or entities known by the Corporation based on
Schedule 13D and Schedule 13G filings with the Securities and Exchange
Commission, to own more than 5% of the Corporation's Common Stock. Except as
otherwise indicated below, both entities own such Common Stock directly with
sole investment and sole voting power.
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership Of Class
- ------------------- -------------------- --------
Sahara Enterprises, Inc.* 3,176,776 9.82
Suite 2000
Three First National Plaza
Chicago, Illinois 60602
Gabelli Funds Inc., and
associated entities** 1,869,100 5.78
One Corporate Center
Rye, New York 10580-1434
* Reference should be made to the table and footnotes thereto under
"Security Ownership of Management" on pages 5 and 6, especially the
information concerning beneficial ownership of shares by Messrs. Woods
and Wheatley.
** These are investment firms which have the power to vote and dispose of
the stock owned by each, shared in part with others in a portfolio
management/agency relationship in respect to a number of accounts.
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
Pursuant to a policy adopted by the Board of Directors providing that
service on the Board should terminate at the end of a term in which a member
attains age 70, Mr. J. Taylor Greer is retiring from the Board and not
standing for re-election. The members of the Board and Management of the
Corporation appreciate Mr. Greer's years of service on the Board of
Directors.
Four (4) Directors are to be elected at the Annual Meeting for a term of
three years or until their respective successors are elected and qualified.
The persons named in the accompanying form of proxy will vote the shares
represented by all executed proxies which are received for the election of
Management's nominees hereinafter named, unless the authority to do so is
withheld on the proxy. All nominees are presently serving as Directors of
the Corporation, being elected to office by its stockholders.
The holders of a majority of the Common Stock issued and outstanding,
present in person, or represented by proxy, shall constitute a quorum at the
Annual Meeting for the transaction of business. Shares represented by
proxies on which the authority to vote for a director nominee or nominees is
withheld and broker non-votes are counted only for purposes of determining
the presence of a quorum for the transaction of business. If a quorum is
present, the affirmative vote of the majority of the shares of Common Stock
represented at the Annual Meeting shall be necessary for the election of a
director nominee. A director nominee must receive the affirmative vote of
the majority of Common Stock represented at the Annual Meeting in order to be
elected, and shares represented by proxies or ballots on which authority to
vote is withheld and non-votes are not treated as votes for a nominee.
At the Annual Meeting, votes will be counted by an employee of Chemical
Mellon Shareholder Services, the Corporation's independent transfer agent and
registrar. Such individual will process the votes cast by the stockholders,
will make a report of his inspection and count of the votes cast by the
stockholders and will certify the affirmative votes and votes withheld for
the election of each director nominee.
Under Nebraska law, holders of Common Stock are entitled to cumulative
voting rights in the election of directors. Cumulative voting allows a
stockholder to vote the number of shares owned by him for as many persons as
there are directors to be elected, or to cumulate said votes and give one
person as many votes as the number of directors to be elected multiplied by
the number of his shares, or to distribute said votes among as many directors
to be elected as he sees fit. Unless directed differently on any executed
proxy, the persons named in the proxy will vote the shares represented by any
proxy equally among those nominees for whom the stockholder has not withheld
authority to vote.
Management has no reason to believe that any nominee will refuse to act
or be unable to accept election; however, in such event and if any other
unforeseen contingency should arise, it is the intention of the persons named
in such accompanying form of proxy to vote for other nominees selected by the
Board in accordance with their best judgment.
The following table sets forth certain information about each director,
including each person's business experience for the past five years, and
presents certain information for all present executive officers and directors
as a group. Information presented is stated as of February 28, 1995.
NOMINEES FOR TERM TO EXPIRE IN 1998
CHARLES R. HERMES; Director since 1992; Age 52; Hastings, Nebraska. Mr.
Hermes is President of Dutton-Lainson Company (wholesale electrical and
plumbing supplies, and a manufacturer of hardware and marine specialties) of
Hastings, Nebraska, and has held such position since 1974.
FRANK H. HILSABECK; Director since 1990; Age 50; Lincoln, Nebraska. Mr.
Hilsabeck is President and Chief Executive Officer of the Corporation, and is
President of its principal subsidiary, The Lincoln Telephone and Telegraph
Company. He was the Corporation's President and Chief Operating Officer from
March 1991 to May 1993, was President-Telephone Operations from March 1990 to
March 1991, was Vice President-Telephone Operations from 1986 to March 1990,
and was Executive Vice President-Operations of such principal subsidiary from
1986 to March 1990.
PAUL C. SCHORR, III; Director since 1973; Age 58; Lincoln, Nebraska. Mr.
Schorr is President and Chief Executive Officer of ComCor Holding
Incorporated (an electrical contractor specializing in construction
consulting services) of Lincoln, Nebraska, and has held such position since
1989. He was also President of Fischbach Corporation (a diversified
electrical/mechanical contractor) from 1990 to 1992.
JAMES W. STRAND; Director since 1990; Age 48; Lincoln, Nebraska. Mr. Strand
is President-Diversified Operations of the Corporation, Executive Vice
President-Marketing and Customer Services of its principal subsidiary, The
Lincoln Telephone and Telegraph Company and is President of its subsidiaries,
LinTel Systems Inc. and Prairie Communications, Inc. He was the
Corporation's Vice President-Diversified Operations from 1987 to March 1990.
PRESENT TERM EXPIRES 1996
DUANE W. ACKLIE; Director since 1983; Age 63; Lincoln, Nebraska. Mr. Acklie
is Chairman of Crete Carrier Corporation (a contract and common motor
carrier) of Lincoln, Nebraska, and has held such position since 1991. He was
President and Chief Executive Officer from 1971 to 1991. Mr. Acklie is a
Director of FirsTier Financial, Inc. of Omaha, Nebraska.
TERRY L. FAIRFIELD; Director since 1993; Age 46; Lincoln, Nebraska. Mr.
Fairfield is President and Chief Executive Officer of the University of
Nebraska Foundation, Lincoln, Nebraska. He has held such position since
1987.
JOHN HAESSLER; Director since 1993; Age 58; Lincoln, Nebraska. Mr. Haessler
is President and Chief Executive Officer of Woodmen Accident and Life Company
of Lincoln, Nebraska, and has held such position since 1986. (See Note 1
below.)
WILLIAM C. SMITH; Director since 1983; Age 61; Lincoln, Nebraska. Mr. Smith
retired in 1989 from the position of Chairman and Chief Executive Officer of
FirsTier Financial, Inc. of Omaha, Nebraska, a position which he had held
since 1988. Mr. Smith is currently self-employed in business and financial
consulting.
LYN WALLIN ZIEGENBEIN; Director since 1992; Age 42; Omaha, Nebraska. Mrs.
Ziegenbein is an attorney and is Executive Director of Peter Kiewit
Foundation of Omaha, Nebraska, and has held such position since 1983. (See
Note 2 below.)
PRESENT TERM EXPIRES 1997
WILLIAM W. COOK, JR.; Director since 1981; Age 58; Beatrice, Nebraska. Mr.
Cook is Chairman, President and Chief Executive Officer of Beatrice National
Bank & Trust Co., of Beatrice, Nebraska, and has held such position since
1993. He was President and Chief Executive Officer of such company from 1971
to 1993.
JAMES E. GEIST; Director since 1973; Age 65; Lincoln, Nebraska. Mr. Geist
retired in 1993 from the positions of Chairman of the Board and Chief
Executive Officer of the Corporation and its principal subsidiary, The
Lincoln Telephone and Telegraph Company, and also retired from the positions
of Chairman of the Board of the Corporation's other subsidiaries, LinTel
Systems Inc. and Prairie Communications, Inc., all of Lincoln, Nebraska. He
was the President and Chief Executive Officer of the Corporation and The
Lincoln Telephone and Telegraph Company from 1988 to 1990. Mr. Geist is
currently President of Geist, Inc., an equipment manufacturer.
DONALD H. PEGLER, JR.; Director since 1979; Age 68; Lincoln, Nebraska. Mr.
Pegler is Chairman of the Board and Chief Executive Officer of Pegler-Sysco
Food Services Company (distributors of institutional food, food service
supplies and equipment), of Lincoln, Nebraska, and has held such position
since 1989.
CHARLES N. WHEATLEY; Director since 1993; Age 44; Chicago, Illinois. Mr.
Wheatley is President and Chief Executive Officer of Sahara Enterprises, Inc.
(a diversified holding company) and has held such position since July, 1992.
He was Vice President and Secretary of Sahara Enterprises, Inc. from 1985 to
July 1992. Mr. Wheatley is a Director of Sahara Enterprises, Inc.
THOMAS C. WOODS, III; Director since 1979; Age 49; Lincoln, Nebraska. Mr.
Woods is Chairman of the Board of the Corporation and its principal
subsidiary, The Lincoln Telephone and Telegraph Company. He was the
Corporation's Vice Chairman of the Board-Corporate Relations and
Communications from March 1990 to April 1993, and was Vice President
Corporate Relations from March 1985 to March 1990. Mr. Woods is a director
of Sahara Enterprises, Inc.
Note 1. Woodmen Accident and Life Company is the insurer from which the
Corporation and its principal subsidiary, The Lincoln Telephone and Telegraph
Company, purchase key man life insurance and employee group life insurance.
The total net premiums paid for such insurance coverages in 1994 were
$991,492. The Corporation believes that the rates paid for such insurance
are comparable to market rates.
Note 2. The Woods & Aitken law firm, in which Mr. John H. Ziegenbein,
the husband of Mrs. Ziegenbein, is of counsel, provided legal services to the
Corporation and its subsidiaries, The Lincoln Telephone and Telegraph
Company, LinTel Systems Inc., and Prairie Communications, Inc., during 1994
for which it received fees in the amount of $229,257.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
During 1994, six meetings of the Board of Directors were held. One
director, Mrs. Ziegenbein, attended fewer than 75% of the aggregate number of
meetings of the Board of Directors and the committee on which she served.
The Corporation has no standing nominating committee, but does have the
following three standing committees:
Executive Committee
The Executive Committee, in accordance with By-Law 17 of the Corporation's
By-Laws, and subject to the limitations of the Nebraska Business Corporation
Act, possesses and may exercise all powers of the Board of Directors. The
Committee did not meet during 1994. Committee members during 1994 were:
Frank H. Hilsabeck, Chairman; William W. Cook, Jr.; J. Taylor Greer; Paul
C. Schorr, III; and William C. Smith.
Audit Committee
The Audit Committee recommends the independent auditors for the Corporation
to the full Board of Directors, reviews the scope of the audit and approves
the fees for the auditors. In addition, the Committee reviews the work of
the Corporation's Internal Audit Section. The Committee met four times
during 1994. Committee members during 1994 were: Charles R. Hermes,
Chairman; Terry L. Fairfield; John Haessler; and Charles N. Wheatley.
Executive Compensation Committee
The Executive Compensation Committee reviews and makes recommendations to the
full Board of Directors for compensation levels of the Corporation's officers
and administers the 1989 Stock and Incentive Plan participated in by
executive officers and other key employees. The Committee met three times
during 1994. Committee members during 1994 were: Duane W. Acklie, Chairman;
Paul C. Schorr, III; Charles N. Wheatley; and Lyn Wallin Ziegenbein.
SECURITY OWNERSHIP OF MANAGEMENT
Set forth on the next page is a tabulation indicating as of February 28,
1995, the shares of the Corporation's Common Stock beneficially owned by each
director and nominee, each of the named executive officers, and directors and
executive officers of the Corporation as a group.
Name of Beneficial Principal Amount and Nature of Percent of
Owner Position Beneficial Ownership (Note 1) Class
Thomas C. Woods, III. Chairman of the 57,063 Direct 10.21%
Board and Director 3,245,800 Indirect* Note 4
Frank H. Hilsabeck President & Chief 35,855 Direct Note 3
Executive Officer 200 Indirect*
and Director
James W. Strand President-Diversified 20,659 Direct Note 3
Operations & Director 100 Indirect*
Charles P. Arnold Senior Vice President- 18,585 Direct Note 3
Network Operations (Note 2) None Indirect*
Robert L. Tyler Senior Vice President- 23,602 Direct Note 3
Chief Financial Officer None Indirect*
Duane W. Acklie Director 91,523 Direct Note 3
61,200 Indirect*
William W. Cook, Jr. Director 6,770 Direct Note 3
944 Indirect*
Terry L. Fairfield Director None Direct Note 3
34,312 Indirect*
James E. Geist Director 26,631 Direct Note 3
29,418 Indirect*
J. Taylor Greer Director 25,232 Direct Note 3
7,168 Indirect*
John Haessler Director 4,000 Direct Notes 3 & 5
242,432 Indirect*
Charles R. Hermes Director 2,000 Direct Note 3
32,400 Indirect*
Donald H. Pegler, Jr. Director 800 Direct Note 3
40,000 Indirect*
Paul C. Schorr, III. Director 1,731 Direct Note 3
26,819 Indirect*
William C. Smith Director 2,400 Direct Note 3
None Indirect
Charles N. Wheatley Director None Direct 9.82%
3,176,776 Indirect* Note 4
Lyn Wallin Ziegenbein Director 4,000 Direct Note 3
10 Indirect*
All Directors and
Executive Officers as
a Group (19 persons) TOTAL 4,098,166**
TOTAL PERCENT OF CLASS 12.66%
* Includes shares held by individual's spouse, held by the individual in
custodianship for minor children, or held by a corporation with which the
individual is affiliated, and to the extent listed as owned by the director
or named executive officer should not be construed as an admission of
beneficial ownership.
** Total shares and percent of class ownership do not reflect the cumulative
effect of beneficial ownership by Messrs. Woods and Wheatley of shares held
of record by Sahara Enterprises, Inc. (See Note 4 below.)
Note 1. Approximate number of shares of Common Stock owned, directly or
indirectly, as of February 28, 1995. This information has been furnished by
each Director or Officer. Also includes all Short-Term Incentive awards of
Restricted Stock of the Corporation under the 1989 Stock and Incentive Plan
(the "Plan") and any Long-Term Incentive awards of Stock Options under the
Plan. Certain executive officers have unexercised options for the following
number of shares which are included in their direct ownership shown above as
of December 31, 1994: Thomas C. Woods, III, 5,100; Frank H. Hilsabeck,
17,500; James W. Strand, 11,900; Charles P. Arnold, 6,800; and Robert L.
Tyler, 12,300.
Note 2. Mr. Arnold is Senior Vice President-Network Operations of the
Corporation's subsidiary, The Lincoln Telephone and Telegraph Company, and
does not serve as an officer of the Corporation.
Note 3. Owns less than one percent of the Corporation's outstanding
Common Stock.
Note 4. The shares of the Corporation's Common Stock shown as
indirectly owned by Messrs. Woods and Wheatley are held as follows:
3,176,776 shares included in each individual's indirect ownership total were
held of record by Sahara Enterprises, Inc., as of February 28, 1995, in
connection with which Messrs. Woods and Wheatley each serve as Directors and
Mr. Wheatley serves as President and Chief Executive Officer. The balance of
Mr. Woods' indirect ownership total is held by his spouse, held in trust, or
held as a Co-Personal Representative of the Estate of Thomas C. Woods, Jr.
Note 5. The shares of the Corporation's Common Stock shown as
indirectly owned by Mr. Haessler include 242,432 shares held by Woodmen
Accident and Life Company, a mutual insurance company, of which Mr. Haessler
is President and Chief Executive Officer.
EXECUTIVE COMPENSATION
The Summary Compensation Table appearing on the next page shows the
compensation for the past three years for each of the Corporation's five most
highly compensated executive officers, including the Corporation's Chief
Executive Officer (the "named executive officers").
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
Annual Compensation Awards
Number of
Securities
Underlying
Restricted Stock All Other
Name and Salary Bonus Stock Options Compensation
Principal Position Year ($) ($)(1) ($)(2) (#)(3) ($)(4)
<S> <C> <C> <C> <C> <C> <C>
Frank H. Hilsabeck 1994 225,000 52,210 52,190 0 4,500
President & Chief 1993 196,167 52,211 52,189 0 6,040
Executive Officer 1992 164,825 28,818 28,782 9,700 5,035
and Director
James W. Strand 1994 154,000 22,872 22,848 0 4,500
President-Diversified 1993 146,000 26,400 26,400 0 4,380
Operations & Director 1992 138,750 19,500 19,500 7,900 4,162
Charles P. Arnold 1994 131,000 16,804 16,796 0 3,930
Senior Vice President- 1993 125,000 19,805 19,795 0 3,751
Network Operations 1992 119,000 14,422 14,378 6,800 3,571
Robert L. Tyler 1994 124,000 16,804 16,796 0 3,720
Senior Vice President- 1993 111,000 19,805 19,795 0 3,331
Chief Financial Officer 1992 105,000 13,218 13,182 6,800 3,151
Michael J. Tavlin 1994 101,000 12,015 11,985 0 3,030
Vice President- 1993 96,000 13,817 13,783 0 2,880
Treasurer & Secretary 1992 91,700 10,208 10,192 5,300 2,579
</TABLE>
(1) The 1989 Stock and Incentive Plan (the "Plan") is administered by the
Executive Compensation Committee of the Board of Directors (the
"Committee") constituted of members of the Board not eligible to
participate in the Plan, and permits the award of Short-Term Incentives,
Stock Options, Stock Appreciation Rights and Restricted Stock. The bonus
amounts shown reflect the cash bonus amounts paid pursuant to the Short-
Term Incentive feature of the Plan attributable to the fiscal years of
the Corporation shown. On April 26, 1989, the stockholders of the
Corporation approved the Plan.
(2) Pursuant to the terms of the Plan, a participant may elect to receive up
to forty percent (40%) of the amount of any Short-Term Incentive award
in Restricted Stock of the Corporation. Each of the listed individuals
has elected to receive the maximum amount. The number of such shares
awarded was based upon the closing price of the Corporation's Common
Stock as of December 31, 1992, December 31, 1993 and December 30, 1994,
respectively. In each year, the number of shares awarded was increased
by a multiple previously determined by the Committee, which was 1.5.
The dollar value of the Restricted Stock awards are attributable to the
Corporation's fiscal year as indicated. The number of shares of
Restricted Stock awarded and values thereof for each named executive
officer and the aggregate value as of December 30, 1994, are as follows:
Number of Restricted Shares
Name 1992 Award 1993 Award 1994 Award Aggregate
Value
Mr. Hilsabeck 2,214 2,821 3,070 $ 137,785
Mr. Strand 1,500 1,427 1,344 72,607
Mr. Arnold 1,106 1,070 988 53,788
Mr. Tyler 1,014 1,070 988 52,224
Mr. Tavlin 784 745 705 37,978
----- ----- ----- -------
Totals 6,618 7,133 7,095 $ 354,382
The restrictions against sale, transfer, pledge or assignment of the
Restricted Stock will lapse, and the awards have vested or will vest as
follows: 1992 Awards - February 1, 1995; 1993 Awards - January 31, 1996
and 1994 awards January 31, 1997. Restrictions will lapse sooner if the
participant dies, becomes disabled, retires or there is a change in
control of the Corporation during the period of restriction.
Dividends are paid during the period of restriction on the shares of
Restricted Stock to the executive officer holding such shares and their
voting rights may be exercised by the executive officer.
(3) The options shown for 1992 were awarded on May 1, 1992, and were
attributable to the performance of the Corporation during 1991.
(4) The Corporation maintains a 401(k) Savings and Stock Ownership Plan for
the benefit of its non-union-eligible employees, including the named
executive officers. Pursuant thereto the Corporation (a) has
contributed 1.75% of the employee's base salary in the form of the
Corporation's Common Stock for the employee's benefit (to the following
maximum base salary amounts: 1992 - $228,860; 1993 - $235,840; and 1994
- $150,000; and (b) has contributed on a matching basis, at the rate of
25% for each 1% of the employee's salary contributed to the 401(k)
account, up to a maximum of 1.25% of such salary contribution. Such
match is also made in shares of the Corporation's Common Stock.
The Corporation has in effect the 1989 Stock and Incentive Plan which
was approved by its stockholders and pursuant to which options to purchase
shares of Common Stock of the Corporation have been granted to officers and
other key employees of the Corporation and its subsidiaries in the past.
However, no options to purchase shares of Common Stock were granted in fiscal
year 1994.
The table on the following page sets forth information concerning the
exercise of stock options by each of the named executive officers during the
1994 fiscal year, the number of unexercised options existing at the end of
the year 1994 for each of the named executive officers and the 1994 year-end
value of unexercised options.
<TABLE>
OPTION EXERCISES IN FISCAL 1994
AND FISCAL 1994 YEAR-END OPTION VALUES
<CAPTION>
Value of
Number of Unexercised
Securities Underlying In-The-Money
Unexercised Options Options at
at 12/30/94 (#) 12/30/94 ($)
Shares
Acquired on Value
Excercise Realized Exercis- Unexer- Exercis- Unexer-
Name (#) ($) able cisable able cisable
<S> <C> <C> <C> <C> <C> <C>
Frank H. Hilsabeck 0 0 7,800 9,700 42,900 41,225
James W. Strand 0 0 4,000 7,900 22,000 33,575
Charles P. Arnold 7,200 55,800 0 6,800 0 28,900
Robert L. Tyler 0 0 5,500 6,800 30,250 28,900
Michael J. Tavlin 0 0 2,800 5,300 15,400 22,525
</TABLE>
The following table illustrates the annual pension plan benefit provided
by the Corporation's Pension Plan, as supplemented by the Executive Benefit
Plan, for eligible executive employees upon retirement at age 65, assuming no
optional forms of benefit have been elected. The Pension Plan is not
integrated with Social Security and is maintained for all employees.
<TABLE>
PENSION PLAN TABLE
Estimated Annual Pension at Normal Retirement
Age for Representative Years of Credited Service
<CAPTION>
Highest 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
Consecutive Service Service Service Service Service Service
Five-Year (34.875 (52.00 (59.375 (67.00 (74.875 (82.00
Average Percent Percent Percent Percent Percent Percent
Compensation Factor) Factor) Factor) Factor) Factor) Factor)
<C> <C> <C> <C> <C> <C> <C>
$ 90,000 $ 31,388 $ 46,800 $ 53,438 $ 60,300 $ 67,388 $ 73,800
120,000 41,850 62,400 71,250 80,400 89,850 98,400
150,000 52,313 78,000 89,063 100,500 112,313 123,000
180,000 62,775 93,600 106,875 120,600 134,775 147,600
210,000 73,238 109,200 124,688 140,700 157,238 172,200
240,000 83,700 124,800 142,500 160,800 179,700 196,800
270,000 94,163 140,400 160,313 180,900 202,163 221,400
300,000 104,625 156,000 178,125 201,000 224,625 246,000
330,000 115,088 171,600 195,938 221,100 247,088 270,600
360,000 125,550 187,200 213,750 241,200 269,550 295,200
(continued)
PENSION PLAN TABLE (continued)
Estimated Annual Pension at Normal Retirement
Age for Representative Years of Credited Service
Highest 45 Years 50 Years
Consecutive Service Service
Five-Year (89.125 (96.25
Average Percent Percent
Compensation Factor) Factor)
<C> <C> <C>
$ 90,000 $ 80,213 $ 86,625
120,000 106,950 115,500
150,000 133,688 144,375
180,000 160,425 173,250
210,000 187,163 202,125
240,000 213,900 231,000
270,000 240,638 259,875
300,000 267,375 288,750
330,000 294,113 317,625
360,000 320,850 346,500
</TABLE>
Compensation covered by the Pension Plan is a participant's salary, as
shown in the Summary Compensation Table on page 7 herein (whether or not such
compensation has been deferred at participant's election). Benefits are
based on a participant's average compensation for five consecutive years, or,
in the case of a participant who has been employed for less than five full
years, the period of his employment covered by the Pension Plan. Under the
Pension Plan, only salary as shown in the Summary Compensation Table up to
the limits imposed by the Internal Revenue Code is taken into account. The
1994 compensation limit applicable to the Pension Plan is $150,000.
Included in the information reflected in the above table are the
supplemental retirement benefits which the Corporation provides pursuant to
an Executive Benefit Plan for the benefit of Messrs. Hilsabeck, Strand,
Arnold, Tyler, Tavlin, and certain other executive officers. The Executive
Benefit Plan also provides pre-retirement death benefits and long-term
disability benefits. Pension benefits which exceed the limitations imposed
by the Internal Revenue Code are payable under the Executive Benefit Plan.
All pension benefits payable under the Executive Benefit Plan will be paid
outside the Pension Plan as an operating expense.
The named executive officers have the following years of service with
the Corporation and The Lincoln Telephone and Telegraph Company as of
December 31, 1994: Frank H. Hilsabeck, 27; James W. Strand, 21; Charles P.
Arnold, 43; Robert L. Tyler, 35 years; and Michael J. Tavlin, 8 years.
COMPENSATION OF DIRECTORS
Full-time officers of the Corporation or its subsidiaries do not receive
additional compensation for serving as members of the Boards of Directors of
the Corporation or its subsidiaries. No additional compensation is paid if
a full-time officer serves on any committee of such Boards of Directors.
Effective January 1, 1992, non-employees serving as members of the
Corporation's Board of Directors are paid: (a) an annual retainer of $7,200,
paid in monthly installments of $600; (b) an additional fee of $700 for
attendance at each meeting of the Board and any meeting of a Board Committee;
and (c) reimbursement of expenses incurred in connection with such meetings.
Non-employee Directors of the Corporation are not compensated for serving as
Directors of the Corporation's principal subsidiary, The Lincoln Telephone
and Telegraph Company. Total fees paid to Directors in 1994 were $165,100.
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
The Corporation has agreements with Messrs. Hilsabeck, Strand, Arnold,
Tyler and Tavlin which provide that the named executive officer is entitled
to benefits if, after a change in control (as defined), such executive
officer's employment is ended through (i) termination by the Corporation
other than by reason of death or disability or for cause (as defined), or
(ii) termination by the executive officer following the first anniversary of
the change in control or due to a breach of the agreement by the Corporation
or a significant adverse change in his responsibilities. As used in such
agreements, (a) "change in control" means (i) if any person is or becomes a
thirty percent beneficial owner of the Corporation or (ii) a change in a
majority of the members of the Board of Directors of the Corporation over a
two consecutive year period; and (b) "cause" means termination of an
executive's employment by the Corporation after a change in control based
upon willful and intentional conduct causing serious injury to the
Corporation, conviction for a felony or willful and unreasonable neglect or
refusal to perform the executive's duties. The benefits provided are: (a)
a cash termination payment of up to three times the sum of executive
officer's annual salary and his highest annual bonus during the three years
before the termination and (b) continuation of equivalent hospital, medical,
dental, accident, disability and life insurance coverage as in effect at the
termination. The agreements provide that if any portion of the benefits
under the agreements or under any other agreement would constitute an "excess
parachute payment" for purposes of the Internal Revenue Code of 1986 (the
"Code"), benefits are reduced so that the executive officer is entitled to
receive $1.00 less than the maximum amount which he can receive without
becoming subject to the 20% excise tax imposed by the Code or which the
Corporation may pay without loss of deduction under the Code.
In accordance with agreements pursuant to the Corporation's Executive
Benefit Plan, in the event of a change in control of the Corporation,
entitlement to benefits payable to the named executive officers shall become
vested, provided that such employees shall comply with specified non-
competition and confidentiality requirements of such agreements. The vested
amount shall equal 25% of average final compensation irrespective of the
employee's net credited service on the date of employee's retirement. If
after the change of control the employee's employment is terminated for
reasons other than death or retirement, the vested 25% of average final
compensation shall be payable on the later of his attaining age 60 or his
date of termination.
EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Executive Compensation Committee of the Board is responsible for all
aspects of the Corporation's compensation package offered to its corporate
officers, including the named executive officers. The following report was
approved by members of the Executive Compensation Committee.
COMPENSATION POLICIES. The Corporation's principal executive
compensation objective is to compensate executive officers in a manner that
will attract and retain the services of an outstanding management team and
provide incentives to motivate superior performance by key employees. In
light of that objective, the Executive Compensation Committee of the Board of
Directors (the "Committee"), which also serves as the executive compensation
committee for The Lincoln Telephone and Telegraph Company (the principal
subsidiary of the Corporation), has approved a compensation program for the
Corporation's executive officers consistent with the policies described
below. There are currently seven executive officers (including one person
who is an employee of such subsidiary of the Corporation).
To attract and retain employees, the Corporation's compensation program
provides a base salary and an overall compensation package that are intended
to be competitive and are based upon the following factors. First, the
Committee reviews the financial performance of the Corporation as compared to
the peer group of telecommunications companies (as shown in the Performance
Graph on page 13) which graphically illustrates returns on investments by
stockholders over a five-year period, including reinvestment of dividends.
Second, the Committee reviews competitive, legislative, regulatory and
operational issues which the Corporation has faced during the past fiscal
year, or will face during the ensuing fiscal year. In its discussions, the
Committee evaluates the proactive and reactive actions of the executive
officers concerning these first two factors and subjectively incorporates the
evaluation into its compensation decisions. Third, and most important to the
Committee's considerations, the Committee considers surveys of executive
compensation obtained from available sources. Such survey sources take into
account both the telecommunications industry and other industries nationwide.
The surveys include the five mid-sized telecommunications companies in the
Corporation's peer group, as well as a number of other similarly sized
companies in telecommunications or related industries. The 1993 and 1994
surveys indicated that the compensation of the Corporation's Chief Executive
Officer was significantly below the target objective. The target objective
is near the mid-point of the survey results after giving consideration to the
size of the Corporation compared to the size of the companies in the survey.
Certain other officers were also below the target objective. The Committee's
actions concerning salary level adjustments for these officers included steps
to more closely approximate the target objectives.
To provide incentives to motivate performance, the Corporation's
executive compensation program establishes a direct relationship between
compensation and the Corporation's performance and encourages executives to
acquire an ownership interest in the Corporation. Pursuant to the provisions
of the Plan, eligible executives, who have been chosen in advance by the
Committee, receive a portion of their compensation in the form of incentive
awards ("Short-Term Incentive awards"). The amounts of such Short-Term
Incentive awards are established in accordance with ranges of earnings and
return on equity realized by the Corporation as pre-determined by the
Committee. The minimum return on equity required to award short-term
incentives for 1994 was 15%. Actual results for 1994 exceeded that level.
In 1994, the Corporation's earnings and return on equity yielded an aggregate
short-term incentive pool of $307,274 or 22.0% of composite salaries for
eligible executives. The portion of such incentive pool received by an
executive is based on his or her position of responsibility and individual
performance.
Further, to align the interests of executives with stockholder interests
and to provide a means for the acquisition of an ownership interest in the
Corporation, executives are encouraged to elect to receive up to 40% of the
cash portion of the Short-Term Incentive awards in Restricted Stock of the
Corporation. If such an election is made, the Committee may increase the
stock portion of the award by a multiple not to exceed two times such stock
portion. For 1994, the Committee determined 1.5 to be an appropriate
multiple to be applied to the stock portion of the award to incent ownership,
and in view of the two-year period of restrictions. Finally, the Committee
may grant stock options under the Plan to key executives in amounts that are
competitive based upon market considerations, which are exercisable after
three years. No stock options were granted in 1994.
CHIEF EXECUTIVE OFFICER COMPENSATION. The compensation for Mr. Frank H.
Hilsabeck, President and Chief Executive Officer, reported for 1994 reflects
the application of the policies described above.
Mr. Hilsabeck also received a Short-Term Incentive award for 1994. On
December 14, 1993, the Committee adopted performance goals for the
Corporation for 1994 for purposes of the Corporation's Short-Term Incentive
awards. As a result of the Corporation's earnings and return on equity and
his performance in 1994, Mr. Hilsabeck received a Short-Term Incentive award
of $87,000 or approximately 28.3% of the aggregate award.
Consistent with the Corporation's desire to encourage acquisition of an
ownership interest in the Corporation, Mr. Hilsabeck elected to receive
Restricted Stock pursuant to the Plan to the maximum permitted of 40% of the
Short-Term Incentive award. The Committee had previously determined to
increase the value of the portion of the award used for the granting of
Restricted Stock by a multiple of 1.5, thereby enabling Mr. Hilsabeck to
receive Restricted Stock with a value of $52,190, as well as a cash award of
$52,210. As of December 31, 1994, Mr. Hilsabeck held unvested Restricted
Stock with an aggregate value of $137,785, including the 1994 award.
Mr. Hilsabeck also participated in other employee benefit plans
available to other executive officers during 1994, which the Committee
believes are competitive, including the Pension Plan, Executive Benefit Plan,
the 401(k) Savings and Stock Ownership Plan and life and health insurance
programs.
INTERNAL REVENUE CODE SECTION 162(m). Section 162(m) of the Internal
Revenue Code (the "Code") eliminates, subject to certain exceptions, the
deductibility of executive compensation to the extent that any executive's
compensation for any year exceeds $1 million. Exceptions to amounts included
in executive compensation for purposes of Section 162(m) involve various
types of performance-based compensation. As noted above, it is the Executive
Compensation Committee's policy to base a substantial amount of executive
compensation on the Corporation's performance. Currently the cash
compensation levels for the Corporation's executive officers fall
significantly below $1 million. In the event that in the future the annual
remuneration of any executive of the Corporation approaches $1 million, the
Committee will consider the various alternatives to preserving the
deductibility of compensation payments to the extent reasonably practicable
and consistent with its compensation objectives.
Members of the Executive Compensation Committee for 1994 were:
Duane W. Acklie, Chairman Charles N. Wheatley
Paul C. Schorr, III Lyn Wallin Ziegenbein
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Executive Compensation Committee are
identified above. Mrs. Ziegenbein, a member of the Executive Compensation
Committee, is the spouse of John H. Ziegenbein, of counsel in the law firm of
Woods & Aitken. Woods & Aitken acted as outside counsel for the Corporation
for 1994 for which it received fees of $229,257.
OTHER INFORMATION
On February 1, 1994, the Company entered into an Agreement (the
"Agreement") with Sahara Enterprises, Inc. ("Sahara"), then an owner of
approximately 16.6% of the issued and outstanding Common Stock, in connection
with a firm commitment underwritten public offering of 1,850,000 shares of
the Common Stock by Sahara (the "Offering"). The Offering closed on March
17, 1994, at a per share price to the public of $16.00. The Offering,
including the exercise of an over-allotment option for 136,200 shares of
Common Stock, yielded proceeds to Sahara, net of underwriting discount, of
approximately $30.1 million. Pursuant to the Agreement and concurrent with
the closing of the Offering, the Company purchased 250,000 shares of Common
Stock from Sahara at the offering price less 2 percent ($15.68 per share) for
future use in funding the Company's stock obligations under one or more
Company benefit plans. The Agreement also provided the Company with a right
of first refusal to purchase additional shares of Common Stock from Sahara
for 120 days following the closing of the Offering and required that Sahara
indemnify and reimburse the Company against payment of an amount not to
exceed the first $200,000 of the Company's out-of-pocket expenses in
connection with the Offering.
PERFORMANCE GRAPH
The following graph sets forth a comparison of the cumulative total
stockholder return by quarter, commencing December 1989 and ending December
1994, on an investment of $100 in (a) shares of the Corporation's Common
Stock; (b) shares of Standard & Poor's telephone company composite; (c)
shares of Standard & Poor's 500 company composite; and (d) shares of the
Corporation's telephone company peer group identified below. The cumulative
total market appreciation includes the cumulative amount of dividends for the
five-year period, assuming dividend reinvestment.
<TABLE>
<CAPTION>
Dec-89 Dec-90 Dec-91 Dec-92 Dec-93 Dec-94
<S> <C> <C> <C> <C> <C> <C>
Lincoln Telecommunications $100 $82 $77 $88 $130 $123
S&P 500 $100 $97 $126 $136 $150 $152
S&P Telephone Index $100 $95 $103 $113 $130 $125
Custom Composit Index $100 $85 $90 $108 $126 $130
(5 Stocks)
The 5-Stock Custom Composite Index includes: Alltel Corp., Cincinnati Bell Inc.,
Century Telephone Enterprises, Frontier Corp., and Southern New England
Telecommunications Corp.
</TABLE>
FILING OF REPORTS OF BENEFICIAL OWNERSHIP
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, the
Corporation's executive officers, directors and holders of more than ten
percent of the Corporation's outstanding shares ("Insiders") file reports (on
prescribed forms) of their beneficial ownership of the Corporation's stock
and furnish copies of such forms to the Corporation. Based solely on a
review of the copies of such forms furnished to the Corporation, or written
representations that no Form 5 was required to be filed, the Corporation
believes that, during its fiscal year commencing January 1, 1994, and ending
December 31, 1994, all Forms 3, 4 and 5 required by Section 16(a) to be filed
by Insiders were filed on a timely basis, except that Mr. John Haessler had
one Form 4 covering one transaction, which was filed late.
RELATIONSHIP WITH INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors of the Corporation, on the recommendation of the
Audit Committee, has reappointed KPMG Peat Marwick as the Company's
independent certified public accountants for the calendar year ending
December 31, 1995. This accounting firm has audited the financial statements
of The Lincoln Telephone and Telegraph Company (LT&T) continuously since
calendar year 1946, and has audited the consolidated financial statements of
the Corporation and its other subsidiaries since their respective dates of
incorporation, as well as LT&T. Representatives of KPMG Peat Marwick will be
present at the Annual Meeting of Stockholders with the opportunity to make
any statements they desire and to respond to appropriate questions.
OTHER BUSINESS AT THE ANNUAL MEETING OF STOCKHOLDERS
Management is not aware of any business which properly may be presented
for action at the meeting other than the matters set forth in the Notice of
Annual Meeting. Should any other matter requiring a vote of the stockholders
properly arise, the enclosed proxy gives discretionary authority to the
persons named in the proxy to vote on such matters in accordance with their
best judgment.
DATE OF RECEIPT OF PROPOSALS
All stockholder proposals intended for inclusion in the Corporation's
1996 proxy materials and for presentation at the Corporation's 1996 Annual
Meeting set in the Corporation's By-Laws as the fourth Wednesday in April, or
April 24, 1996, must be received by the Corporation (Attn: Corporate
Secretary) not later than November 20, 1995. In addition, the Corporation's
By-Laws establish procedures for stockholder nominations for election of
directors and bringing business before the Annual Meeting of the
Corporation's stockholders. Among other requirements, to bring business
before the 1996 Annual Meeting or to nominate a person for election as a
director, a stockholder must give written notice to the Secretary of the
Corporation not less than 90 days prior to April 24, 1996, or in the event an
earlier date is set by the Board of Directors within ten days after the first
public disclosure of the earlier date. The notice must contain certain
information concerning the proposed business or the nominee and the
stockholder making the proposal. Any stockholder interested in making a
nomination or proposal should request a copy of the applicable By-Law
provisions from the Secretary of the Corporation.
By order of the Board of Directors
LINCOLN TELECOMMUNICATIONS COMPANY
/s/ Michael J. Tavlin
Michael J. Tavlin, Secretary
Lincoln, Nebraska
March 24, 1995
