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[HTC LOGO]
Hickory Tech Corporation
221 East Hickory Street
P.O. Box 3248
Mankato, MN 56002-3248
Notice of Annual Meeting
Of Shareholders to be held
Monday, April 13, 1998
The Annual Meeting of the Shareholders of Hickory Tech Corporation, a
Minnesota corporation (the "Company"), will be held at the Holiday Inn
located at 101 Main Street, Mankato, Minnesota, on Monday, April 13, 1998, at
2:00 p.m., Central Standard time, for the following purposes:
1. To elect three directors to serve for ensuing three-year terms;
2. To approve the Directors' Stock Option Plan;
3. To confirm the Board of Directors' selection of Coopers & Lybrand L.L.P. as
the Company's auditors; and
4. To transact such other business as may properly come before the meeting or
at any adjournment thereof.
The Board of Directors has fixed the close of business on Friday, March 6,
1998, as the record date for the determination of shareholders entitled to
notice of and to vote at the Annual Meeting and any adjournment hereof.
By order of the
Board of Directors
Hickory Tech Corporation
/s/ David A. Christensen
David A. Christensen, Secretary
Mankato, Minnesota
March 17, 1998
IMPORTANT
IF YOU DO NOT PLAN TO ATTEND THIS MEETING, PLEASE VOTE, SIGN AND RETURN THE
ENCLOSED PROXY PROMPTLY, USING FOR THAT PURPOSE THE ACCOMPANYING ENVELOPE,
FOR WHICH NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. YOU ARE
URGED TO SIGN AND RETURN YOUR PROXY WITHOUT DELAY TO ENSURE ITS ARRIVAL IN
TIME FOR THE MEETING.
ADDITIONAL COPIES OF THIS NOTICE, THE RELATED PROXY STATEMENT AND ADDITIONAL
PROXY FORMS MAY BE OBTAINED FROM THE SECRETARY, HICKORY TECH CORPORATION, 221
EAST HICKORY STREET, P.O. BOX 3248, MANKATO, MINNESOTA 56002-3248. TELEPHONE
NUMBER (507) 387-3355 OR (800) 326-5789.
<PAGE>
HICKORY TECH CORPORATION
221 East Hickory Street
P.O. Box 3248
Mankato, MN 56002-3248
March 17, 1998
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MONDAY, APRIL 13, 1998
SOLICITATION
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Hickory Tech Corporation, a Minnesota
corporation (the "Company"), for use at the Annual Meeting of Shareholders of
the Company to be held at the Holiday Inn located at 101 Main Street,
Mankato, Minnesota, on Monday, April 13, 1998, at 2:00 p.m. (Central Standard
time) or at any adjournment thereof. All properly executed proxies will be
voted at the meeting. This proxy statement and the enclosed proxy card are
being mailed to shareholders on or about March 17, 1998.
REVOCABILITY OF PROXY
A shareholder's proxy may be revoked by a shareholder at any time before it
is exercised by filing a later dated proxy or a written notice of revocation
with the Company's secretary, or by voting in person at the meeting.
ANNUAL REPORT
The Annual Report for the Company for the calendar year 1997, including
financial statements, is separately enclosed in the envelope with this proxy
statement.
VOTING
Each shareholder of record at the close of business on March 6, 1998, is
entitled to one vote for each share of common stock held. As of that date,
4,542,672 shares were outstanding.
For each share held, shareholders may cast one vote for each proposal
identified on the proxy card. For each share held, shareholders may cast one
vote for each of three directorships to be filled at this meeting. If you do
not wish your shares to be voted for a particular nominee, please so indicate
in the space provided on the proxy card.
Abstentions and broker non-votes will be counted as present or represented at
the meeting for purposes of determining whether a quorum exists. However,
broker non-votes with respect to any matter brought to a vote will be treated
as shares not voted for purposes of determining whether the requisite vote
has been obtained and, therefore, will have no effect on the outcome of any
such matter. A majority of the shares present or represented at the meeting
is required for approval of the proposals.
ITEMS REQUIRING YOUR CONSIDERATION
The following three items in this proxy statement require your consideration
and approval:
1. Election of three directors for three-year terms. See page 3.
2. Approval of the Directors' Stock Option Plan. See page 13.
3. Confirmation of the selection of Coopers & Lybrand L.L.P. as the Company's
auditors. See page 15.
2
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ELECTION OF DIRECTORS
Pursuant to the By-Laws of the Company, the Board of Directors has
established the number of directors at nine. The By-Laws provide that the
directors are divided into three classes; each class of directors serves a
three-year term. Three directors will be elected at the meeting. A
directorship for a term expiring in the year 2000 remains vacant following
the expiration of a directorship and will not be filled at the meeting. The
terms of directors James H. Holdrege, Lyle G. Jacobson and Starr J. Kirklin
expire in 1998 and they are nominees. Proxies may not be voted for more than
three nominees.
The following table sets forth information, as of February 28, 1998,
including business experience during the past five years, as to the nominees
for election and as to the other directors whose terms of office will
continue after the meeting.
ROBERT D. ALTON, JR. has served as a director since 1993. His present term
expires in 1999. Mr. Alton became President and Chief Executive Officer of
the Company in 1993. Mr. Alton, age 49, is the former President of Telephone
Operations of Contel Corporation and was employed in various executive and
financial capacities at Contel Corporation for twenty-one years.
LYLE T. BOSACKER has served as a director since 1988. His present term
expires in 2000. Mr. Bosacker, age 55, is a management consultant and
President of CEO Advisors, Inc. Mr. Bosacker served as the Director of
Corporate Information Services for International Multifoods from 1991 to 1993
and as its Director of Corporate Information Systems Planning from 1987 to
1991.
ROBERT K. ELSE has served as a director since 1990. His present term expires
in 1999. Mr. Else, age 62, has been the President of EI Microcircuits, Inc.
in Mankato, Minnesota since 1984. EI Microcircuits manufactures and
assembles electronic circuit boards.
JAMES H. HOLDREGE has served as a director since 1992. His present term
expires this year and he is a nominee. Mr. Holdrege, age 59, has been the
General Manager of KATO Engineering Division, Reliance Electric Co. since
1984. KATO Engineering is a manufacturer of synchronous generators, power
conditioning equipment and associated controls.
LYLE G. JACOBSON has served as a director since 1989. His present term
expires this year and he is a nominee. Mr. Jacobson, age 56, has been the
President and Chief Executive Officer of Katolight Corporation in Mankato,
Minnesota, since 1985. Katolight Corporation is a manufacturer of diesel and
gas powered electrical generator sets and generator controls.
R. WYNN KEARNEY, JR. has served as a director since 1993. His present term
expires in 1999. Dr. Kearney, age 54, has been in private practice with the
Orthopaedic & Fracture Clinic, P.A., in Mankato, Minnesota, since 1972 and is
President of the Minnesota Orthopaedic Society. Dr. Kearney, a minority
owner of the Minnesota Timberwolves, presently serves as President of the
Mankato State University Foundation. Dr. Kearney is also a director of
Exactech, Inc. of Gainesville, Florida.
STARR J. KIRKLIN has served as a director since 1989. His present term
expires this year and he is a nominee. Mr. Kirklin, age 61, retired from
First Bank System, Inc. in February of 1996. Mr. Kirklin is now employed as
Director of Development for Mankato State University.
BRETT M. TAYLOR, JR. has served as a director since 1970. His present term
expires in 2000. Mr. Taylor, age 68, is the retired Chairman of Brett's
Department Stores, Co. and previously served as its President from 1971 to
1987.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE NOMINEES.
3
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SECURITY OWNERSHIP OF MANAGEMENT
Directors, nominees and the executive officers of the Company named under
"Remuneration of Executive Officers" own the following securities of the
Company as of February 28, 1998:
<TABLE>
<CAPTION>
Name of Amount & Nature of Percent of
Beneficial Owner Beneficial Ownership Common Stock
- ----------------------------------------------------------------------------------
<S> <C> <C>
Robert D. Alton, Jr. 21,725(a)(b) *
Lyle T. Bosacker 118,756(c) 2.6%
Robert K. Else 3,185(a) *
James H. Holdrege 1,435(a) *
Lyle G. Jacobson 8,023(d) *
R. Wynn Kearney, Jr. 23,936(e) *
Starr J. Kirklin 1,258(a) *
Brett M. Taylor, Jr. 28,427(f) *
Jon L. Anderson 1,589(a)(b) *
David H. Rowley 4,737(a)(g) *
David A. Christensen 7,679(a)(b) *
Bruce H. Malmgren 631(a) *
Asim Saber 400(a) *
All of the above and other executive
officers as a group (14 persons) 222,796(a) 4.9%
</TABLE>
- -------------------
* Less than 1%
(a) Includes shares which may be acquired within 60 days after February 28,
1998 through the exercise of stock options. The persons who have such
options and the number of shares which may be so acquired are as follows:
Mr. Alton, 10,417; Mr. Anderson, 334; Mr. Christensen, 3,747; Mr. Rowley,
334; and Mr. Malmgren, 267.
(b) Includes shares held in a trust under the long-term portion of the
Company's Executive Incentive Plan as follows: Mr. Alton, 1,436; Mr.
Anderson, 333; and Mr. Christensen, 632.
(c) Includes 113,702 shares held by Mrs. Bosacker.
(d) Includes 6,588 shares held by Mrs. Jacobson.
(e) Includes 3,531 shares held in a profit sharing trust and 4,261 shares
held in a family foundation.
(f) Includes 16,611 shares held in a partnership and 11,816 shares in a
trust for which Mr. Taylor is co-trustee.
(g) Includes 4,103 shares held in a family trust.
4
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OTHER EXECUTIVE OFFICERS
JON L. ANDERSON, age 45, has served as a Vice President since 1995. Mr.
Anderson has served as President of Collins Communications Systems Co. since
1994 and was its Vice President and General Manager from 1991 to 1994.
DAVID A. CHRISTENSEN, age 45, has served as Secretary since 1993, Vice
President and Chief Financial Officer since 1989, and Treasurer since 1986.
MARY T. JACOBS, age 40, has served as a Vice President of the Company since
1996, Vice President of Human Resources since 1998, and Director of Human
Resources from 1993 to 1997.
BRUCE H. MALMGREN, age 53, has served as a Vice President of the Company and
as President of National Independent Billing, Inc. since 1995. Mr. Malmgren
was Senior Vice President of Sales and Marketing and National Sales Manager
for Dataserv, Inc. from 1992 to 1995. Dataserv, Inc. provides technical
services for commercial personal computer systems.
DAVID H. ROWLEY, age 57, has served as a Vice President since 1995 and
President of Digital Techniques, Inc. since 1993.
ASIM SABER, age 43, has served as Vice President of the Company and President
of the Company's Telephone Sector since August 1997. From 1993 to 1997, Mr.
Saber was General Manager/CEO of Valley Telephone Co. in Texas. From 1990 to
1993, Mr. Saber was President of Virgin Islands Telecom, Inc. and Vice
President of Virgin Islands Telephone Co.
There are no present family relationships between the executive officers, nor
between the executive officers and the directors.
5
<PAGE>
REMUNERATION OF EXECUTIVE OFFICERS
The remuneration paid or accrued to the Chief Executive Officer and each of
the other four most highly compensated executive officers of the Company
whose aggregate remuneration exceeded $100,000 in 1997 is as follows: In
addition, partial year remuneration is included for Mr. Saber.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Award
------------------- -----
Securities All
Name and Underlying Other
Principal Options/ Compensation
Position Year Salary($) Bonus($)(2) SARs (#) ($)
-------- ---- --------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C>
ROBERT D. ALTON, JR. 1997 $221,550(1) $131,149(3) 5,500 $ 9,500(4)
Director, Chairman, 1996 $213,050(1) $148,568(3) 5,400 $ 7,923(4)
President and Chief 1995 $205,800(1) $113,740 3,486 $ 8,625(4)
Executive Officer
JON L. ANDERSON 1997 $110,800 $ 85,765 1,200 $14,508(6)
Vice President 1996 $105,000 $ 24,697 1,000 $12,082(5)
1995 $ 95,000 $ 43,910 N/A $ 5,456(4)
DAVID A. CHRISTENSEN 1997 $127,500 $ 56,748(3) 700 $ 7,644(4)
Vice President, 1996 $122,900 $ 72,510(3) 800 $ 7,211(4)
Chief Financial 1995 $118,500 $ 51,139 1,405 $ 6,511(4)
Officer, Secretary
and Treasurer
BRUCE H. MALMGREN 1997 $124,400 $ 53,889 1,000 $ 3,970(6)
Vice President 1996 $119,600 $ 64,314 800 $ 3,561(5)
1995 $110,100 $ N/A N/A N/A
DAVID H. ROWLEY 1997 $114,500 -0- 500 $ 6,604(4)
Vice President 1996 $110,000 $ 47,737 1,000 $15,488(5)
1995 $104,500 $ 64,333 N/A N/A
ASIM SABER 1997 $ 50,673(7) $ N/A N/A $30,358(8)
Vice President
</TABLE>
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(1) Includes deferred compensation of $9,800 in 1995, $10,145 in 1996 and
$10,550 in 1997, pursuant to a Supplemental Retirement Agreement with
the Company. Each year Mr. Alton accrues benefits equal to 5% of his
base salary. This accumulation of benefits will occur for a maximum of
ten years of service commencing January 1, 1993. Benefits are paid upon
termination of employment commencing on the earlier of Mr. Alton's 62nd
birthday or his date of death.
6
<PAGE>
(2) The Company and its subsidiaries have an Executive Incentive Plan whereby
key executives may receive additional compensation based on annual
performance and pre-established goals of the Company, its subsidiaries and
the individual executive. In addition to cash compensation, each executive
receives a performance award equal to one-half of the cash compensation. The
cash award and performance award credit are shown in this column. The
performance award is credited to the executive's performance account. This
credit can be selected to be a cash credit or a stock credit. The stock
credit is for the Company's stock and is held in a trust. If a cash credit,
the account is annually credited with interest equal to the rate for a ten
year Treasury Bond. If a stock credit, the account is credited with
additional shares equal to the dividends on the shares held in the account.
One-fourth of the performance account is vested immediately and an additional
one-fourth vests each of the succeeding three years.
(3) Includes awards actually granted under the Company's 1993 Stock Award
Program and distributed in 1996 to Mr. Alton of $38,038 and Mr. Christensen
of $15,375; and under the Company's 1994 Stock Award Plan which were
distributed in 1997 to Mr. Alton of $39,567 and Mr. Christensen of $15,614.
(4) Employer contributions to 401(k) Plans.
(5) Includes $6,157 contribution to 401(k) Plan and $5,925 in discretionary
Stock Award in 1996 under the Company's Stock Award Plan for Mr. Anderson,
$598 contribution to 401(k) Plan and $2,963 in discretionary Stock Award in
1996 under the Company's Stock Award Plan for Mr. Malmgren and $6,600
contribution to 401(k) Plan and $8,888 in discretionary Stock Award in 1996
under the Company's Stock Award Plan for Mr. Rowley.
(6) Includes $6,333 contribution to 401(k) Plan and $8,175 in discretionary
Stock Award in 1997 under the Company's Stock Award Plan for Mr. Anderson,
and $1,245 contribution to 401(k) Plan and $2,725 in discretionary Stock
Award in 1997 under the Company's Stock Award Plan for Mr. Malmgren.
(7) Includes salary since date of hire, August 18, 1997.
(8) Includes a $30,000 one-time payment at time of hire and $358 contribution
to the 401(k) Plan.
7
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value At Assumed
Annual Rates of Stock Price Appreciation
Individual Grants For Option Term ($)
----------------------------------------------------- ---------------------------
% of Total
Options
Options Granted To Exercise
Granted Employees In Price Expiration
Name (#)(1) Fiscal Year ($/Share) Date 5%(2) 10%(2)
- ---- ------ ----------- --------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Alton 5,500 43.7% $28.375 May 31, 2007 $98,313 $248,875
Anderson 1,200 9.5% $28.375 May 31, 2007 $21,450 $ 54,300
Christensen 700 5.6% $28.375 May 31, 2007 $12,513 $ 31,675
Malmgren 1,000 7.9% $28.375 May 31, 2007 $17,875 $ 45,250
Rowley 500 4.0% $28.375 May 31, 2007 $ 8,938 $ 22,625
</TABLE>
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(1) The options were granted at the fair market value of the shares on May
31, 1997. The options may be exercised for one-third of the shares after May
31, 1998, one-third of the shares after May 31, 1999, and one-third of the
shares after May 31, 2000. All options expire on May 31, 2007, and in the
event the optionee is no longer employed by the Company. All options vest
upon the occurrence of an Event (as described in the 1993 Stock Award Plan).
Shares acquired by the optionees are subject to rights of repurchase by the
Company in the event the optionee terminates employment with the Company or
wishes to transfer the shares.
(2) The exercise price was compounded at 5% and 10% over the ten year term of
the options. The resulting stock price was reduced by the exercise price to
determine the potential realizable gain at the assumed rates of appreciation.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options
Options at Fiscal Year-End At Fiscal Year-End
Name # $ (1)
- ---- -- -----
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Alton 10,417 10,262 $38,990 $66,392
Anderson 334 1,866 $ 2,338 $12,762
Christensen 3,747 1,701 $12,542 $10,094
Malmgren 267 1,533 $ 1,869 $10,481
Rowley 334 1,166 $ 2,338 $ 8,037
</TABLE>
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(1) Value of unexercised options equals fair market value of shares
underlying in-the-money options at December 31, 1997 ($35.125 per share),
less the exercise price per share times the number of in-the-money options
outstanding.
8
<PAGE>
LONG TERM INCENTIVE PLANS
AWARDS IN LAST FISCAL YEAR
Stock Award Programs (the "Programs") were implemented each year since 1993,
pursuant to the terms of the Company's 1993 Stock Award Plan. This Plan was
approved by the shareholders in 1993 and since amended. Each Program
established a number of shares that may be issued to the executives of the
Company contingent upon achievement of performance objectives over a
three-year period. The objectives are based on compound annual increases in
the earnings of the Company and its subsidiaries. The restricted shares
established in the 1995 Stock Award Program were distributed to the
participants in February of 1998.
<TABLE>
<CAPTION>
Estimated Future Payouts
Under Non-Stock Price-Based Plans (1)
-------------------------------------
Number of Performance
Shares, Units or Other Period
or Other Until Maturation
Name Rights(#)(1) or Payout Threshold(2) Target(3) Maximum(4)
- ---- ------------- ---------------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Alton 2,000 1 year 1,400 2,000 3,000
2,000 2 years 1,400 2,000 3,000
Anderson 400 1 year 200 400 600
400 2 years 200 400 600
Christensen 300 1 year 100 300 450
300 2 years 100 300 450
Malmgren 400 1 year 200 400 600
400 2 years 200 400 600
Rowley 400 1 year 200 400 600
400 2 years 200 400 600
</TABLE>
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(1) Under the terms of the Programs, shares will only be issued if the
Company and its subsidiaries achieve established goals of compound annual
growth in pre-tax net income for the three-year periods ending December 31,
1998 and 1999, respectively. This table assumes all financial objectives
being achieved and the Committee approving a payout for each participant.
(2) No restricted shares will be issued unless the Company and its
subsidiaries achieve the performance objectives. The number of shares in the
"Threshold" column indicates the minimum number of shares to be awarded if
the Company and subsidiary performance objectives have been achieved.
(3) There is a potential range of restricted shares established for each
participant under each Program. The range has a separate threshold and
target number of shares that can be awarded once the pre-established
performance objectives of the Company and subsidiaries have been achieved.
The number of shares in the "Target" column are the high end of this range,
without consideration of footnote (4) below. No shares under each Program
will be issued if pre-established performance objectives are not achieved.
(4) The Programs allow the Committee the authority to reward outstanding
individual performance by issuing restricted shares to an individual in an
amount not to exceed 150% of the number of shares the individual would have
received under the targeted level. The shares in the "Maximum" column assume
the Committee will issue 150% of the target number of shares to all
participants.
9
<PAGE>
COMPENSATION OF DIRECTORS
Directors received $350 for each Board and Committee meeting they attended
through May, 1997, and $500 for each Board and Committee meeting they
attended from June through December, 1997. In 1997, the Directors were paid
an annual retainer of $10,000. These fees are waived if the individual is a
paid employee of the Company. Directors have the option of receiving the
retainer fee in cash or shares of Company stock.
CHANGE OF CONTROL
The Company has Change of Control Agreements with the following named
executive officers: Robert D. Alton, Jr., Jon L. Anderson, David A.
Christensen, Bruce H. Malmgren, David H. Rowley and Asim Saber. These
Agreements provide that in the event there is a change in control of the
Company and termination of these officers, the officers shall receive pay for
the following number of years, unless they are released for cause, are
disabled or die: 2.99 years for Robert D. Alton, Jr., and two years for Jon
L. Anderson, David A. Christensen, Bruce H. Malmgren, David H. Rowley and
Asim Saber. If the officers are released within three years after change in
control, for a reason other than cause, death or disability, they shall be
paid a lump sum amount equal to their compensation for the designated time
periods. In the event of a change in control of the Company and the
simultaneous release of the officers, the approximate maximum amount of
compensation that would be paid to Messrs. Alton, Anderson, Christensen,
Malmgren, Rowley and Saber under their current agreements would be
$1,325,750, $381,425, $393,925, $437,340, $323,120, and $550,700,
respectively.
SEVERANCE PAY
The Company has an agreement with Robert D. Alton, Jr. that if he is
discharged by the Company, he will receive severance pay equal to 12 times
his then current monthly base salary. The current maximum amount payable
under this agreement would be $221,550. No payments will be made to Mr.
Alton if he is discharged for fraud, misappropriation of funds, embezzlement
or the commission of a work related felony.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During the fiscal year 1997, the Board of Directors held 11 meetings. The
Company has an Audit Committee consisting of Messrs. Else, Holdrege and
Kearney. The Audit Committee reviews internal controls of the Company and
its financial reporting, and meets with certified public accountants on these
matters; three meetings were held in 1997. The Company also has a
Compensation Committee consisting of Messrs. Bosacker, Jacobson and Taylor.
The Compensation Committee makes recommendations to the Board regarding
compensation for top management of the Company; six meetings were held in
1997. The Company also has a Corporate Development Committee consisting of
Messrs. Alton, Else, Kearney and Kirklin. The Corporate Development
Committee investigates potential expansion and new markets for the Company;
nine meetings were held in 1997. The Company does not have a nominating
committee.
10
<PAGE>
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The compensation program for executives is the responsibility of the
Compensation Committee of the Board of Directors. In 1997, this Committee
was composed of three outside directors, Messrs. Bosacker, Jacobson and
Taylor. Mr. Bosacker is Chairperson of this Committee.
The Board of Directors has established the following ongoing principles and
objectives for the Company's executive compensation program:
1. Provide compensation opportunities that will attract, motivate and retain
highly qualified managers and executives.
2. Link executive's total compensation to the Company's financial performance
and individual job performance.
3. Provide a balance between incentives focused on achievement of annual
objectives and longer term incentives linked to increases in earnings and
shareholders' value.
There are three elements to the compensation plan: annual base salary, cash
or stock bonuses (the "Executive Incentive Plan"), and longer term incentives
(the "Stock Award Plan").
Annual base salaries are somewhat influenced by the pay practices of
comparable companies so that the Company remains reasonably competitive with
what others are doing.
The Executive Incentive Plan has both an annual and a long-term component.
The Executive Incentive Plan rewards an executive with a cash bonus for
attainment of annually established financial objectives based on a
combination of revenue, earnings and/or return on equity. The individual
executive's performance is also factored into awards made under the Executive
Incentive Plan. In addition to the payment of a cash bonus, an account is
established for each executive equal to 50% of the cash bonus. This award
can be credited to a cash account or a stock account, at the participant's
discretion. If a cash credit is selected, the account is increased annually
based on interest equal to the rate of a ten year Treasury Bond. If a stock
credit is selected, the account is credited with additional shares equal to
the dividends on the shares held in the account. One-fourth of this account
is vested immediately and an additional one-fourth vests each of the
succeeding three years.
The Stock Award Plan allows the Company to issue restricted shares,
unrestricted shares, incentive stock options and non-qualified stock options
to officers of the Company. The 1997 Stock Award Program that was adopted
pursuant to the Stock Award Plan issued incentive stock options to seven
officers of the Company. The incentive stock options vest over a three-year
period and must be exercised within ten years of their issuance. Stock
options are designed to reward executives as the fair market value of the
stock increases. The 1997 Stock Award Program also establishes a range of
restricted shares that may be issued to each officer under the Program
contingent upon the achievement of performance objectives over a three-year
period. The objectives are based on increases in the earnings of the Company
and its subsidiaries.
The Committee applied the above-described principles and objectives in
determining the compensation of the Chief Executive of the Company, Mr.
Alton. In setting the 1997 salary, the Committee reviewed Mr. Alton's total
compensation program to make sure that it was closely related to the
performance of the Company in 1996. In establishing Mr. Alton's salary for
1997, the Committee specifically considered the satisfactory results of the
Company in 1996 as compared to targeted goals in the areas of annual revenue,
pre-tax profitability, return on equity and rate of growth. The Committee
also reviewed the compensation of the CEO to determine that the compensation
was competitive for similar positions in comparable companies and was
equitable for the Company and its shareholders.
COMPENSATION COMMITTEE
Lyle T. Bosacker
Lyle G. Jacobson
Brett M. Taylor, Jr.
11
<PAGE>
FIVE-YEAR SHAREHOLDER RETURN
PERFORMANCE PRESENTATION
The line graph presentation compares cumulative, five-year shareholder
returns on an indexed basis. The graph shows the value at each year of $100
invested in the Company's stock and the indexes at December 31, 1992 and
assumes the reinvestment of all dividends. The Board of Directors has
approved a peer group of four (4) independent telecommunications companies
which have been used for purposes of this performance comparison. These
companies were selected because they have a similar proportion of core
business in regulated telephone operations, a similar pattern of internal
diversification and moderate external acquisition activity. The companies
selected to be in the peer group are identified below. The following graph
compares the cumulative five year performance of the Company's common stock
to the S&P Composite and to an index of peer companies.
TOTAL RETURN TO SHAREHOLDERS
DECEMBER 1992 TO DECEMBER 1997
(Following are the tables in the proxy which describe the points of the graph.)
Annual Returns (Based on Dividends Reinvested Monthly)
<TABLE>
<CAPTION>
Return Return Return Return Return
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Hickory Tech 7.51 (1.17) 1.45 (8.93) 37.75
S&P 500 Composite Index 10.08 1.32 37.58 22.96 33.36
Peer Group Index Average 16.81 (3.74) 51.43 6.81 17.55
Indexed Returns (12/31/92 = 100)
</TABLE>
Value at December 31
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Hickory Tech 100 107.51 106.25 107.79 98.17 135.23
S&P 500 Composite Index 100 110.08 111.53 153.45 188.68 251.63
Peer Group Index Average 100 116.81 112.45 170.28 181.87 213.80
</TABLE>
Companies in selected Peer Group are:
Aliant Communications, Inc.
Cincinnati Bell, Inc.
Frontier Corporation
Southern New England Telecommunications Corporation
12
<PAGE>
APPROVAL OF HICKORY TECH CORPORATION DIRECTORS' STOCK OPTION PLAN
On January 28, 1998, the Board of Directors approved the Hickory Tech
Corporation Directors' Stock Option Plan (the "Plan"), subject to the
approval of the Plan by the shareholders of the Company at the 1998 Annual
Meeting. A copy of the Plan is attached as Exhibit A to this Proxy
Statement, and the following discussion of the Plan is qualified in its
entirety by reference to the full text of the Plan.
The purpose of the Plan is to aid the Company in attracting and retaining the
best available individuals for service as directors of the Company and to
provide additional incentive to certain non-employee directors of the Company
to serve as directors.
TERMS OF THE PLAN
The Plan provides for the granting of annual stock options to non-employee
directors if the Company meets certain performance criteria during a fiscal
year. If the Company obtains both consolidated return on equity of 15% based
on beginning shareholders' equity and a 10% increase in the Company's pre-tax
net income over the immediately preceding fiscal year, then eligible
directors will automatically receive an option to purchase 1,000 shares of
the Company's common stock at the fair market value for such shares on the
date of grant.
Assuming the Company's common stock is traded on the Nasdaq National Market
System or is listed on a stock exchange on the date of grant, the fair market
value of such shares is the average closing sale price on such system or
exchange during the five trading days on which there was actual trading
ending on the trading day on which there was actual trading immediately
preceding the date of grant of the option. If the common stock is not so
traded or listed, the Board of Directors determines the fair market value.
Option granted under the Plan have a term of ten years and may be exercised
by payment in full of the exercise price.
ELIGIBILITY
The Plan applies to non-employee directors only, and no director who is an
employee of the Company may be granted options under the Plan.
ADMINISTRATION
The Plan is administered by the Board of Directors. The Board of Directors
has the authority to establish rules for such administration, and
determinations and interpretations with respect to the Plan are at the sole
discretion of the Board of Directors, whose determinations and
interpretations are binding on all interested parties.
MAXIMUM NUMBER OF SHARES; RESTRICTION ON TRANSFERS
The maximum aggregate number of shares of the Company's Common Stock that may
be issued under the Plan is 100,000 (subject to adjustment pursuant to
certain anti-dilution provisions in the Plan). If an option expires or
becomes unexercisable for any reason without having been exercised in full,
the unpurchased shares that were subject thereto are available for future
grant under the Plan.
No option granted under the Plan may be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner by the individual to
whom it is granted, otherwise than by will or the laws of descent and
distribution. Each option is exercisable, during such individual's lifetime,
only by such individual.
13
<PAGE>
AMENDMENT; TERMINATION
The Board of Directors may amend, alter or discontinue the Plan at any time.
However, no amendment, alteration, suspension or discontinuance may be made
that would impair the rights of any individual to whom an option is granted
without his or her consent. In addition, any such amendment or termination
of the Plan shall not affect options already granted under the Plan, and such
options will remain in full force and effect as if the Plan had not been
amended or terminated.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE HICKORY TECH
CORPORATION DIRECTORS' STOCK OPTION PLAN.
14
<PAGE>
CONFIRMATION OF AUDITORS
Subject to the approval of the shareholders, the Board of Directors has
employed Coopers & Lybrand L.L.P., as the Company's auditors for 1998. No
representative of Olsen Thielen & Co., Ltd., the auditors for 1997, is
expected to be present at the meeting. Representatives of Coopers & Lybrand
L.L.P. are expected to be present at the meeting, will have the opportunity to
make a statement if they desire to do so and are expected to be available to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
CONFIRMATION OF COOPERS & LYBRAND L.L.P.
COMPLIANCE WITH SECTION 16 (a) OF THE SECURITIES EXCHANGE ACT
Section 16 (a) of the Securities Exchange Act of 1934, as amended, requires
executive officers and directors, and persons who beneficially own more than
10% of the Company's common stock, to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission and
to furnish the Company with copies thereof. Based solely on a review of the
copies of such forms furnished to the Company and written representations from
the executive officers and directors, the Company believes that all Section 16
(a) filing requirements applicable to its executive officers and directors were
complied with.
METHOD AND EXPENSES OF SOLICITATION
The entire cost of this solicitation will be paid by the Company. In addition
to solicitation by mail, officers or regular employees of the Company may
solicit proxies by personal interview, mail, telephone and telegraph and may
request brokers and other custodians, nominees and fiduciaries to forward
soliciting material to their beneficial owners at the expense of the Company.
PROPOSALS OF SHAREHOLDERS
Proposals submitted by shareholders must be received by the Company not later
than November 17, 1998, for inclusion in the proxy materials for the next
Annual Meeting proposed to be held in April, 1999. The By-Laws of the Company
provide that for shareholders to properly bring a proposal before a regular
meeting of the shareholders, the shareholders must submit a written notice to
the Secretary of the Company. The written notice must set forth: (1) the
names and addresses of the shareholders; (2) the class and number of shares
owned by the shareholders; (3) a brief description and the reasons for the
proposal; and (4) any material interest of the shareholders in the proposal.
AVAILABILITY OF FORM 10-K
Shareholders of record on March 6, 1998, may obtain a copy of the Company's
Form 10-K for the 1997 fiscal year, free of charge, by a written request to the
Company's executive offices directed to:
David A. Christensen, Secretary
Hickory Tech Corporation
221 East Hickory Street, P.O. Box 3248
Mankato, Minnesota 56002-3248
OTHER MATTERS
The Management does not know of other matters to come before the meeting.
However, if any other matters properly come before the meeting, it is the
intention of the persons designated as proxies to vote in accordance with their
best judgment on such matters.
IN THE INTEREST OF ECONOMY, YOU ARE REQUESTED TO VOTE, SIGN AND RETURN THE
ENCLOSED PROXY AT YOUR EARLIEST CONVENIENCE. ALL SHAREHOLDERS SHOULD SIGN THE
PROXY. (NO POSTAGE IS REQUIRED ON THE ENCLOSED ENVELOPE.)
By the order of
the Board of Directors
Hickory Tech Corporation
/s/ Robert D. Alton, Jr.
- ------------------------
Robert D. Alton, Jr.
Chairman
15
<PAGE>
EXHIBIT A
HICKORY TECH CORPORATION
DIRECTORS' STOCK OPTION PLAN
1. Purpose of the Plan. The purpose of this Hickory Tech Corporation
Directors' Stock Option Plan is to attract and retain the best available
individuals for service as Directors of the Company and to provide additional
incentive to the Outside Directors of the Company to serve as Directors.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Common Stock" shall mean the Common Stock of the Company.
(c) "Company" shall mean Hickory Tech Corporation, a Minnesota
corporation.
(d) "Director" shall mean a member of the Board.
(e) "Employee" shall mean any person, including officers and
Directors, employed by the Company or any parent or subsidiary of the
Company.
(f) "Fair Market Value" shall have the meaning set forth in
Section 7.
(g) "GAAP" shall mean generally accepted accounting principles in
the United States in effect from time to time.
(h) "Option" shall mean a stock option granted pursuant to the Plan.
(i) "Optionee" shall mean an Outside Director who receives an
Option.
(j) "Outside Director" shall mean a Director who is not an Employee.
(k) "Performance Criteria" shall mean, for a given fiscal year, both
(A) consolidated return on equity of 15% based on beginning
shareholders' equity, and (B) a 10% increase in the Company's pre-tax
net income over the fiscal year immediately preceding the given
fiscal year. The Performance Criteria shall be determined in
accordance with GAAP based solely on the audited financial statements
of the Company for the relevant fiscal years.
(l) "Plan" shall mean this Directors' Stock Option Plan.
(m) "Shares" shall mean shares of the Common Stock.
3. Shares Subject to the Plan. Subject to Section 10, the maximum
aggregate number of Shares that may be optioned and sold under the Plan is
100,000 shares of Common Stock. If an Option should expire or become
unexercisable for any reason without having been exercised in full, the
unpurchased Shares that were subject thereto shall become available for
future grant under the Plan.
4. Grants of Option under the Plan. On the date of the close of the
audit following each of the fiscal years in which the Company satisfies
the Performance Criteria, each Outside Director shall automatically
receive an Option to purchase 1,000 Shares at fair market value on the
date of grant. Each Option shall be for a term of ten years.
5. Powers of the Board. Subject to the provisions and restrictions of
the Plan, the Board shall have the authority, in its discretion: (i) to
determine the fair market value of the Common Stock; (ii) to interpret the
Plan; (iii) to authorize any person to execute on behalf of the Company
any instrument required to effectuate the grant of an Option granted
hereunder; and (iv) to make all other determinations deemed necessary or
advisable for the administration of the Plan. All decisions,
determinations and interpretations of the Board shall be final and binding
on all Optionees and any other holders of any Options granted under the
Plan.
6. Effective Date of Plan. The Plan shall become effective upon its
approval by the shareholders of the Company as described in Section 15.
16
<PAGE>
7. Fair Market Value. The fair market value of a Share shall be, in the
event the Common Stock is traded on the Nasdaq National Market System or
listed on a stock exchange, the average closing sale price on such system
or exchange during the five trading days on which there was actual trading
ending on the trading day on which there was actual trading immediately
preceding the date of grant of the Option, as reported in The Wall Street
Journal. In the event the Common Stock is not so traded or listed, the
Board shall determine fair market value.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. An Option
shall be deemed to be exercised when written notice of such exercise has
been given to the Company by the person entitled to exercise the Option
and full payment for the Shares with respect to which the Option is
exercised has been received by the Company. Until the issuance of the
stock certificate evidencing the Shares so purchased, the purchaser shall
have no right to vote or receive dividends or any other rights as a
shareholder. A share certificate for the number of Shares purchased shall
be issued to the Optionee as soon as practicable after exercise of the
Option. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued,
except as provided in Section 10.
(b) Death of Optionee. Notwithstanding Section 8(a) in the event of
the death of an Optionee, the Option may be exercised at any time within
six months following the date of death, by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or
inheritance.
9. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other
than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution or Merger.
In the event that the number of outstanding shares of Common Stock of the
Company is changed by a stock dividend, stock split, reverse stock split,
combination, reclassification or similar change in the capital structure
of the Company without consideration, the number of Shares available under
this Plan and the number of Shares subject to outstanding Options and the
exercise price per share of such Options shall be proportionally adjusted.
Such adjustment shall be made by the Board, whose determination in that
respect shall be conclusive.
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuance shall be made which would impair the rights
of any Optionee under any grant therefore made, without his or her
consent.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Conditions Upon Issuance of Shares. As a condition to the exercise
of an Option, the Company may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are
being purchased only for investment and without any present intention to
sell or distribute such Shares, if, in the opinion of counsel for the
Company, such a representation is required by law.
13. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares
available for issuance pursuant to this Plan as shall be sufficient to
satisfy the requirements of the Plan.
14. Option Agreement. Option may, but need not, be evidenced by written
option agreements in such form as the Board shall approve.
15. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company.
17
<PAGE>
PROXY/VOTING INSTRUCTION CARD
HICKORY TECH CORPORATION
221 EAST HICKORY STREET
P.O. BOX 3248
MANKATO, MN 56002-3248
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS ON APRIL 13, 1998
Messrs. Robert D. Alton, Jr. and Lyle T. Bosacker are hereby appointed
Proxies to represent and to vote on the reverse side hereof, all shares of
common stock of Hickory Tech Corporation, a Minnesota corporation, held by
the undersigned at the Annual Meeting of Shareholders on April 13, 1998, and
at any adjournment thereof. This proxy when properly executed will be voted
in the manner directed herein. If no direction is made, this proxy will be
voted FOR Items 1, 2 and 3. In their discretion, the Proxies are authorized
to vote upon such other matters as may properly come before the meeting.
THIS PROXY MUST BE SIGNED AND RETURNED IN ORDER FOR YOUR SHARES TO BE VOTED.
PLEASE VOTE, SIGN AND DATE ON THE REVERSE SIDE
THANK YOU
(continued, and to be signed on the reverse side)
- ------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR the following proposals:
ITEM 1. Election of Directors.
/ / FOR all nominees listed below / / AGAINST all nominees listed below
The nominees are: James H. Holdrege, Lyle G. Jacobson and Starr J. Kirklin.
(Instructions: To withhold authority to vote for any individual nominee, write
such name in the space provided below.)
ITEM 2. Approve the Hickory Tech Corporation Directors' Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
ITEM 3. Approve the Appointment of Coopers & Lybrand, L.L.P. as Independent
Auditors of the Company for 1998.
/ / FOR / / AGAINST / / ABSTAIN
Dated , 1998
-------------------------
--------------------------------------
Signature of Shareholder
--------------------------------------
Signature of Shareholder
All persons named on the stock certificates
should sign exactly as their names appear
thereon. The label shows the names according
to the Company records.
PLEASE SIGN AND RETURN PROMPTLY. THANK YOU.
